The Billionaire Way: 3 Questions to Guarantee Startup Success

Mindset. Billionaires have conditioned themselves to think differently. They ask the right questions. Do you? Let’s find out.

Roughly 543, 000 new businesses are started each month in the United States alone (Forbes). The majority of these companies extinguish after the first year, and the majority of those that remain fail to attain Facebook-like success. Even of the 95% of businesses that do well, but never see $100M in revenue, I would argue they failed to sufficiently answer these three questions. Of course, before we even get to that point, founders must answer whether they even want to become a billion dollar company. If yes, continue on.

Why This Business is Right for You (Fit)

Entrepreneurial success stems from a myriad of reasons. Thankfully, we can boil the most impactful reasons down into a pyramid. The first corner of our pyramid is fit in the business you’re building. Are you doing it for the right reasons? Will you enjoy the life you’re creating?

Jon Nastor likes to ask his Podcast guests why they chose to become entrepreneurs; whether they knew they couldn’t work for others, or if they had an idea that they simply couldn’t live without creating. I argue that in order to be unimaginably successful, you have to answer each of these well. When you ask yourself if your business is right for you, ask yourself if you’re driven (a reference to Daniel Pink’s book, Drive). What I mean by that, is does your business meet the criteria for you to be fulfilled. If not, I seriously doubt that you’re going to want to work the long hours, sacrifice relaxing with family and friends, or change unproductive habits that you’ve grown accustomed to living by.

How do we answer whether you’re driven by your business — By asking yourself a few questions: Do you have a sense of autonomy, i.e., are you able control what you work on? This becomes increasingly difficult if you have demanding clients, problem clients that demand fixes or modifications, or scrupulous venture capitalists (VCs). Do you have a sense of mastery, i.e., can you achieve a state of flow (http://bit.ly/1FyImIr) by conducting you’re day-to-day business because of your competence and understanding of what your goals are? Do you have a sense of purpose, i.e., do you feel like your idea is world-changing, an absolute necessity, or feel as if you would work on it regardless of your living conditions?

Given these questions, if you cannot honestly say that you experience autonomy, mastery, and purpose in your business, I argue that while you can still be successful, your probability of massive success will be significantly hindered. Answer yes and ready to move on? Let’s do it.

Why People Want What You’re Building (Desirability)

How desirable is your product/web-app? Have you tested it? What metrics are you using?

While it’s easy to assume that people will want what you’re building, because, well, that’s why you’re building it, we cannot fall victim to self-assurance or circular logic. Here is where we find the second corner of our pyramid; desirability.

This is no trivial topic, and there are countless books written on this, but I’ll give you the cliff notes. Tim Ferriss argues that he prefers investing in companies that “scratch their own itch”, as it were, and that’s excellent starting advice. If you’re building something for yourself, that’s 1 user/customer. While that’s nice, let’s shoot for at least 2.

There are a number of ways to provide a determination as to the desirability of your startup, but I’ll stick to three for now.

Most importantly, the product must be either 10x better than its predecessor or competition, or offer something completely new and unique. Ensuring this guarantees that it will be unexpected and credible, in the words of Chip and Dan Heath in their book Made to Stick. Consumers suffer transition stress when they shift from one product to another, and making your product 10x not only eases that stress, but makes your product preferable. Those people may even spread the word of your product.

When people make the shift to your product or service, their action contributes to both their perception of themselves as seen in the eyes of the peers, and how their peers actually perceive them. Leveraging this knowledge, we must build our products to have a public awareness to them, i.e. a social heuristic associated with your product. Steve Jobs was acutely aware of this when he helped design the Macbook, and ruminated on how the Apple logo should appear — upside down to the user, and upright to onlookers, or vice versa? He chose the former due to his awareness of the public effect. When products are made public, people make associations of character with those products, and elect to use those products based on association.

With these assumptions being met, it then becomes imperative that you test. This is where Eric Ries’ Lean Startup principles come into play. The faster you prove or disprove your assumptions of desirability, the sooner you can move onto more features, or your next product. Testing can be conducted a number of ways.

1. Crowdsourcing: If people are willing to donate to your cause, they’re almost certainly willing to use it, or pay for it.
2. Ask around: Present your idea as a topic you appear disconnected from, and await inquiry for further information. No inquiry is a likely sign that you should move onto the next person.
3. Make presales or garner a user group: The Foundation podcast loves this option — before you build anything, make sure that it’s a viable business by having people pay for the first generation in presales. Alternatively, get a signup list going of people that would like to use the product once its ready.

Harnessing these together drastically improves your probability of success by coupling usability with social association. Desirability comes from a great many factors, but these get you off to a great start. For more information, I would recommend reading Made to Stick, as referenced earlier, or Hooked, by Nir Eyal. Once we’ve established that this is the right arena and that you’re developing a desirable product, it’s important to focus on growth.

How Your Business Blooms (Growth)

Business growth is very closely related to desirability, as it is a derivative function of it, yet it remains its own corner. Without sustained growth, any business will find it difficult to continuously increase revenue. There are two strong predictors of growth that can be detected very early on. Google is notorious for its application of these concepts, so I guess they’re OK measuring instruments.

Does your product pass the toothbrush test? What does this mean? Will the average user access or consume your product at least twice a day, and preferably more? Google loves this metric, and for the right reason. If you’re users are likely to your product more than two times a day, they’re likely to form a habit out of it, which is extremely powerful (read The Compound Effect by Darren Hardy for more information).

Is your viral coefficient greater than 1? While this is only one growth mechanism, it’s the easiest to harness (if you can manage). What this basically asks is for every additional user, is that user inviting one or more people to use your product? Even if you have a viral coefficient of 1.01, you will continuously grow.

While the toothbrush test is easy to estimate, the viral coefficient will most likely require usage data. However, if you can say yes to the other two corners of success, your probability of success in this corner goes up as well.

Underview

As I’ve said in previous posts, this blog is only focused on developing massively successful and transformative businesses. If you can honestly tell yourself (and your cofounder) that you have fit, desirability, and growth potential, then you’re better off than 95% of other startups.

I’m in the process of building my business, and I’m documenting everything I learn along the way to help others build their businesses. I hope you find what I’ve outlined to be useful, and I would love to help you if you have questions. Thank you for your time, attention and readership.

May you find happiness in knowledge.
 Thom