Improving Your Chances of Startup Success
You have determined that your business idea is viable and you are now seriously thinking of launching your startup. Apart from a good idea, there are several other factors that need to be aligned to make your business successful, and profitable in the long-run. This is especially true if you are doing this for the first time. This article will help you understand the other key ingredients (apart from a good idea) for building a successful business. It will help you make a realistic assessment of your ability to deliver on these factors before you make the decision to launch.
You have come up with an idea for a startup, researched and validated your idea, and figured out how you will fund it. You may believe that you are ready to incorporate and launch your company but you must first prepare and do your homework to reduce your chances of failure. It’s the successful execution that is often the difference between a successful business and a struggling one. As Thomas Edison said, “Genius is 1% inspiration and 99% perspiration.”
Let’s explore some of the key areas that you will need to pay special attention to as your launch your startup.
Critical Success Factors
A good idea alone is not sufficient
A CORE TEAM AND THE RIGHT CULTURE
There comes a point in the life of every business owner when you realize that you cannot do everything yourself. Perhaps you’re a professional web designer and need to hire a bookkeeper. Or perhaps your speciality is sales, but you know nothing about product development. Whatever your background, it’s essential to seek out people who possess skills complementary to your own.
The most important of these early hires is the initial core team: a small group of dedicated individuals who will build the company. According to startup guru Steve Blank, the two tests of whether someone belongs on a founding team are: “Do we have a company without them?” and “Can we find someone else just like them?” In addition to possessing typical entrepreneurial traits like tenacity, curiosity and agility, founders will need to trust and respect each other.
Avoid the temptation to give your founders fancy titles like “VP of Product Development.” You want to establish a culture of flexibility, rather than one where team members only do what’s in their job description. Perks like titles, expensive business trips and cash bonuses won’t attract the best people at this stage. Strive instead to create a culture where seniority is trumped by ideas. Growth and a sense of mission do more to galvanize teams than anything else.
With such high standards, it’s inevitable some of your early hires won’t match up. As a business owner, it is your job to fire these people as quickly as possible to stop the rest of your team from being held back. When you see someone underperforming, don’t waste time if it’s clear that the problem is beyond repair. Josh Coates sums up this point succinctly: “If they can’t keep up, you’ve got to let them go. That’s hard, but the more you can appreciate that that’s the reality ahead of time, the better off you’re going to be.”
PRUDENT FINANCIAL MANAGEMENT
With your team in place, it’s time to think about how you will deal with the financial aspect of running your business. If you are still thinking about how to fund your business, determine if external funding is the right approach. While the public’s perception is that a startup is always a high growth company funded with venture capital, the vast majority of early-stage businesses are funded from personal savings, credit cards and business loans. Businesses with larger capital requirements may need to consider external funding, which often comes with strings attached in terms of how much control you have over the direction of business development. If you want to seek external investment, you will need a minimum viable product or MVP, and hopefully, early customers to show investors that they will make a return.
Perhaps the most important aspect of financial management is being tight-fisted with cash. This is particularly true before you have obtained product-market fit; spending copious amounts of cash to scale up before finding this fit risks bankrupting your business. Treat the company’s money as if it were your own savings and be tight on salaries, investing in new opportunities only when there is a clear return within your current runway period. Only when you have found a winning formula with customers should you start to spend a little more.
On a day-to-day basis, you will need to familiarise yourself with basic bookkeeping principles, such as credit, bank statements, tax forms and accounts. If you opt to keep your own books, invest in professional accounting software. If you’re unsure of your ability to keep your books on your own, work with accountants. You could even combine these methods by using software from month to month and visiting an accountant every so often. Whatever solution you settle on, you must keep meticulous long-term records of business and tax transactions for official purposes.
To plan financially for the future of your business, get into the habit of creating annual financial forecasts and checking your progress against them on a monthly basis. To make your targets as quantifiable as possible, identify a series of performance metrics that you will measure each month. These metrics could relate to customer acquisition, headcount, revenues, or anything else relevant to your business’s financial health. Look at monthly reviews as learning opportunities and compare your predictions against what really happened.
DEEP UNDERSTANDING OF CUSTOMER NEEDS
Even with a great team and solid financials, your company will struggle without a strong understanding of customer needs. How do you acquire this information? By repeatedly exposing yourself to the harsh, direct feedback of the market. Engage with customers individually and find out whether they are interested in buying the solution you offer. This kind of marketing is indistinguishable from sales: you are talking to a small group of people interested in your specific product, not a broad audience who is largely indifferent. Marketing like this can be hard, demoralising work. Mediocre founders often prefer to go to conferences and meetups to shield themselves from the unpleasant truths they’ll discover if they talk to users.
Your aim in these customer conversations is to acquire as much information about your clients as possible. Strong sales are driven by knowing how paying for your product or service benefits your clients’ lives, so you want to make sure that this information is easily accessible to your employees. Reflect on questions like:Who are your clients?
- Who are your clients?
- How old are they?
- Where do they work?
- What is their budget?
- When do they buy?
- How do they buy?
- Why do they buy?
- Who do they buy from?
- What do they think about your competitors?
- What do they expect from you?
- Why do they need you?
- Who is responsible for the purchasing decision? (in B2B sales)
- How large a company are they? (in B2B sales)
Armed with this information, your next move should be to create one or more Unique Selling Propositions, or USPs. Every business needs to understand why their customer buys from them and not the competition. For example, a website selling 3D printers might offer free delivery, a 10% discount to customers in a given geographical area or an unusually comprehensive range of printers targeted at the hobbyist market. Note that you can have different USPs for different types of customer. As your business grows, return to your USPs on occasion to ensure that you stay up to date with market developments.
“One trick ponies” rarely become enduring businesses. Entrepreneurs must focus on building a business which can adapt to change. Only then can they create sustainable market value. As well as continually checking your USPs, it’s important to keep innovating and iterating to stay ahead of the competition. Hold the perspective that the status quo can always be improved upon.
In an interview with Open Forum, Bismarck Lepe, CEO of Wizeline, expressed his mindset as follows: “One should never accept that things are the way they are because it’s the optimal way of doing things. Everything should be challenged – and when you’re right, that’s where there’s big opportunity.” In practice, this means that successful businesses need to constantly be enhancing their product offering according to the feedback they receive from the market.
ESTABLISHED REPEATABLE BUSINESS PROCESSES
To give your business the time it needs to innovate, it is essential to develop repeatable processes for the aspects of your operations that do not change from day to day or month to month. If you are constantly reinventing every aspect of your business and not reusing methods which have already proven successful, you will quickly run out of energy and money. If you have to have to do anything more than once, figure out the most effective and efficient way to do it and then do it that way all the time.
Formalized processes and procedures for your business will save you considerable time and money by increasing the overall efficiency of your organization and improving the quality of product and service delivery by your staff. It’s important to create processes, procedures and standards for all of your key business activities. Depending on your individual business, these may include sales practices, product or service delivery procedures, customer service policies, customer billing procedures, staff performance evaluations, etc. With standardized procedures, your customers are more likely to have a consistent experience and become repeat customers resulting in improved bottom line for your business.
You should consider formally documenting your standard operating procedures and implementing training programs so that your employees run your business in the way you want them to. That way, even if someone is sick, operations will continue to run smoothly because the person taking over will know what to do.
Effective business systems like these free up your time as a business owner. Instead of spending your days struggling to stay afloat, establishing set processes will give you time to think about the bigger picture: where you want your business to head and the steps required to arrive at your goal.
Successful business owners appreciate that there is much more to setting up a startup than coming up with a new idea. Together with a team whose skills complement their own, they go to great lengths to understand customers’ needs and establish a culture of humility, openness and respect. Careful financial planning ensures that the business has the resources it needs to grow and innovate faster than the competition. By putting standardized processes in place to address day-to-day business tasks, entrepreneurs can ensure that their venture will deliver its services and products with consistent quality and efficiency.
For general topics on how to plan and grow your startup, see our Startup Mentor section. For specific details of how to launch and manage your startup in Singapore, see our Launch in Singapore section.