An interesting article appeared in The New Yorker (May 19, 2014 issue) entitled “Epic Fails of the Startup World.” The author, James Surowiecki, asserts, “It’s never been easier to build a product and start a company.”
Copious investment capital but stiff competition is making success elusive
In his article, Surowiecki points out that this is because there are a number of angel investors now appearing on the scene, along with the new phenomenon of crowdfunding, both of which are viable sources of capital.
Unfortunately, the article also warns that success is still very difficult and competition is fierce. Not surprising, because good news and ideas travel fast and new ideas have little time to establish a beachhead!
So this gets us back to the essence of the article: the entrepreneur, the risk taker. (I also learned from The New Yorker article that the term “entrepreneur” comes from the 18th century Irish-French economist Richard Cantillon who defined it as a “bearer of risk.”) This is that type of person who understands that starting a business is risky yet believes he or she has the necessary skills, self-confidence and ego to get through potentially tough times.
So what are the alternatives for the entrepreneur, this “bearer of risk”?
There are those who tumble into their new venture doing little to prepare for the tasks ahead. Some are very successful, make all the correct intuitive decisions and reap the rewards…sometimes because of great skills and sometimes just because of dumb luck. And there is the vast majority who fail because their thought process or lack thereof is all too apparent.
And then there are those who attract new venture funding because they are serial entrepreneurs with a proven successful plan and a process to steer them through. And while success is not guaranteed, a well-thought-out process mitigates or reduces risk of failure.
No one is capable of compiling a list of fail-safe how-to’s that is not specific to any one project or venture, and it would be silly on my part to do so. However, here are eight things you probably should think about before putting together a start-up:
8 things to consider when embarking on your first or next venture
1) What separates you from the rest? At Simon Associates Management Consultants (SAMC), we talk a lot about Blue Oceans: doing something that is preemptive…something that finds or defines new markets. By doing so, at the very least you can bide some time and fine-tune your venture as it rolls out.
2) Profitability is a crucial part of your business plan. Any business plan should include a revenue and profit plan. Perhaps not in the short term but certainly at a finite stage. Looking back a dozen or so years ago, during the dot.com mania, there were plenty of companies that received funding. However, they were unsustainable because the business proposition was faulty.
3) Numbers say it all. Stay close to the numbers. At SAMC, we preach creating a dashboard that ties to your objectives. What does it take to build a successful business? How do you measure these objectives? This will allow you to stay the course if you are successful. Looking at the numbers will also become an early indicator if things are not as bright as you anticipated.
4) You can’t do it without good people. Hire good people and motivate them. Successful leaders tap the best…the brightest…the smartest and driven. The wrong people can doom you to failure or cause you to miss the simple solutions that separate success from failure. Figure out how to make your staff your partners who can share in your success, because it takes more than one person to build an organization.
5) Having sufficient dollars to get your venture off the ground is critical. Make sure you are adequately financed, since nothing ever goes as planned. Have adequate reserves so that when blips occur in your timing, your venture is not further compromised because of inadequate cash flow.
6) Make sure you have someone to talk to. Hire good professionals. However, I am not saying the most expensive ones are the best. Rather, I am suggesting that you hire professionals who are experienced and can provide appropriate advice on a wide range of potential issues.
7) See, feel and think. I once had a partner who saw the world only through his own eyes, not the eyes of the customer. You must go out and observe. Listen to what your customers and potential customers are saying…don’t sell. By listening, you might begin to understand their needs and help them find solutions to their problems.
8) What is the culture of your organization? There is no “right” culture but you need to stand for something. And those values should be common to all who work there. Not agreeing to common values can be disruptive to everyone in the company.
So there you are. Some of my thoughts!
My final advice: before diving in, step back and do the necessary critical thinking
It is pretty easy to start a company. There are plenty of templates. And there is plenty of money around for the right ideas. Just don’t waste time, energy and money without thinking about all the critical issues on your way to becoming a successful entrepreneur. Good luck!