7 Proven Steps Smart Entrepreneurs Take to Avoid Failure
How Doing Less Will Make You Do Justice to Your Startup
Does this sound like another clickbait headline?
Numerous articles preach what entrepreneurs must do. They glaze over the genius of Elon Musk, Warren Buffett, Jeff Bezos and Steve Jobs. You enjoy reading these wisdoms. They give you hope. Someday, you’ll run your business on the same principles as theirs.
But when you return to work, you get sucked into the Sisyphean chaos. You keep dousing fires, solving everyday problems (which you secretly know which occur again), and wait for new issues to arise. It’s like quicksand. The harder you try to free yourself, the more it sucks you in.
How long will you continue living like this? How long will you lose sleep, worrying about when (and where) will funds to keep you afloat will come from? Is this what you signed up? Don’t you deserve time off for yourself and your family?
More importantly, Is there a way out?
Enter Pareto’s Law
In 1896, Italian economist Vilfredo Pareto stated a law, according to which, in most cases, 80 percent results come from 20 percent causes. For instance, 20 percent issues cause 80 percent of your problems. In physical training, roughly 20 percent exercises have almost 80 percent impact on the trainee.
In business, around 20 percent customers contribute to 80 percent revenue. Microsoft noted that fixing 20 percent of the most reported bugs fixed 80 percent errors and crashes in a given system.
I’ve worked with startups and Small and Medium Enterprises (SMEs) for over four years. In this period, I’ve noticed that certain actions yield rich rewards for every entrepreneur over and over again. And I’d like to share them with you.
These 7 (20 percent) actions will make you, the entrepreneur, avoid failure and scale your business up without having to sell your soul to the devil.
1. Know What They Need
According to a report by CB Insights, no market need causes over 42 percent businesses to fail. The report highlights other issues for failure, like lack of funding and enthusiasm. If you join the dots, you’ll find most issues tracing back to the lack of market need.
You can avoid this deathtrap by engaging with your important customers: the 20 percent who contribute to 80 percent of your revenue.
While working on growth planning with a client, I asked him a question: why did customers buy from him? He said his customers preferred competitive (read ‘cheap’) prices and lower quality items.
But speaking to his top 15 percent customers presented a contrasting picture. They prioritized speed of delivery followed by quality. Professionalism ranked third and customization fourth. Price came a distant fifth.
We refined the client’s business model, profiled his top customers, and approached customers like them. The result was a 63 percent increase in sales within a year.
Takeaway: Approach your premium customers, ask them what they expect, and why. Accordingly, develop your Minimum Viable Product (MVP) to delight them.
2. Don’t Delegate Early On
Delegation is the shiny object which every entrepreneur chases. It makes her feel like she has arrived, like she’s in control of her company. But this delegation is what leads to mayhem early on.
In the initial stage, you must know the ins-and-outs of your business. Understand sales and accounting, and your product. Get your hands dirty instead. Avoid delegation.
When your startup grows into a small enterprise, you must design processes to streamline each function. Getting your hands dirty will teach you how each function works optimally. You can delegate mundane tasks like documentation and report generation, but not decision-making.
When the enterprise turns into an organization which functions on auto-pilot, you can delegate any task so long as you track the performance of the individual handling it.
Takeaway: As a founder, stabilize your startup before scaling up. Avoid delegation early on. Get your hands dirty, and you’ll enjoy remarkable success soon.
But how will you find time to get your hands dirty? By setting the right goals.
3. Set the Right Goals
Imagine eight people rowing a boat, each steering it in a different direction. The rowers will break their backs, but the boat will go nowhere. This is exactly why startups lose momentum.
Today, knowledge workers (including entrepreneurs) lack indicators to quantify their productivity. As a result, most workers turn towards an indicator from the industrial age: ‘visible’ work.
Answering emails, attending meetings, being available 24/7, and other ‘visible work’ are easy. But these tasks keep an entrepreneur on the hamster wheel.
Instead, set wildly important goals (WIGs) in key areas which will make your startup grow. These include customer satisfaction and retention, fixing your MVP’s bugs, shorter turnaround times, and getting traction for your products. Set ambitious goals for these metrics and ambitious deadlines to achieve them. This will save you from shifting focus on unimportant tasks and losing momentum along the way.
Make your team do the same. When everyone rows in the same direction, the boat will reach its destination faster, and with less effort.
Takeaway: Identify important actions for your startup to succeed. Set wildly important goals and deadlines for them, and work with your team to achieve them.
How will you identify the important factors which will dictate your startup’s success? By taking time off to ponder on them.
4. Take Time Off
In 2006, Dutch psychologist Ap Dijksterhuis led a team to conduct an experiment. The aim was to detect whether actively working through a complex problem yielded better results, or whether shifting to other actions let the subconscious mind mull over the problem.
The team gave subjects information needed to solve a complex car purchase. Half the subjects had to go through the information and make the best decision. The others had to solve easy puzzles after reading the information. They were then put on the spot to make a decision without time to think. The distracted group performed better.
Renowned music composer Steve Reich said:
“If I can get in a couple of hours of work, then I just have to have a cup of tea, I have to run an errand to get a little bit of a break. And then I come back. But those can be very fruitful pauses, especially if there’s a little problem that comes up. The best thing to do is to just leave it and put your mind somewhere else, and not always but often the solution to that problem will bubble up spontaneously.”
But this doesn’t mean multitasking or getting on social media. They’re not distractions which experts recommend. Spend time with your family and friends instead, or pursue a hobby. Get bored. Soon your mind will discover a plausible solution.
Takeaway: Give your mind a break. Let your subconscious sort through your most complex challenges.
5. Solve the Right Problems
The business owner of a trading company spent two hours every fortnight examining returned goods. If he delegated the task to an employee, the latter would make poor decisions. The work wound up right back on the entrepreneur’s desk.
But he was looking at the wrong problem. The problem wasn’t him wasting time checking returned goods. It was: why did goods get returned?
We identified issues like defective goods, customers’ inability to sell, incorrect orders, and more.
We addressed those problems at the root. We improved the process of Quality Checks. We trained the sales team to educate their customers and to check certain parameters before accepting returned goods.
The result? A 60 percent drop in returned goods.
Takeaway: A problem is the difference between the expected and current level. Solve the problem at the root. Address factors which influence it, and you’ll reduce rework.
6. Keep Learning
“By three methods we learn wisdom: First by reflection, which is the noblest; second by imitation, which is the easiest; and third, by experience, which is the bitterest.” — Confucius.
In their seminal paper on the role of learning in improving experience, Giada Di Stefano, Francesca Gino, Gary Pisano, and Bradley Staats defined learning as “a lasting change in knowledge generated by experience.”
As an entrepreneur, don’t be a rock — immovable and impenetrable. Don’t believe you know it all. Because, let’s be honest — you don’t. Instead, be a sponge. Absorb everything. Retain what you need and drain out the rest.
Successful entrepreneurs keep learning. They learn from their failures instead of blaming poor market conditions, lack of investment and talent, and so on.
But here’s the thing. Successful entrepreneurs learn from their successes too. They reflect on what they did right and what they could’ve done better. Then they apply learnings from their failures and successes to generate positive results in the future.
Takeaway: Learn from your successes and failures. Neither of them is permanent.
Shane Parrish recommends maintaining a daily journal to note down important decisions and their implications. Visit this journal periodically to remind yourself of lessons you’ve learned. This action will improve your decisions and your output.
7. Explain the W’s
At CF Braun Engineering Company, Carl Braun had a rule for communication. He called it the five W’s. You had to tell who was going to do what, where, when and why. If an individual wrote a letter instructing someone to do something but didn’t tell why, he could get fired. If he did it twice, he would get fired for sure.
If you explain the reason behind an activity to others, they understand it better. According to bestselling author Robert Cialdini, people like reasons for what they do. Giving people these reasons can increase their compliance by up to 93 percent.
Takeaway: Make it a rule to communicate the ‘why’ along with the ‘what’, even if it’s obvious. This won’t just improve communication. It’ll also bring clarity in your own thoughts and decisions.
You’re never ‘done’ as an entrepreneur, unless you’re dead. It’s always a game of ‘you’re-getting-warm-you’re-getting-cold’.
Your product is not what your startup offers. It’s your startup itself. Your role is to foster a culture of learning and development, and enhance your own learning. It’s to empower your employees act in line with your startup’s values. Make your startup delight your customers consistently, with minimum involvement from you.
Focus on the important. The seemingly urgent will take care of itself. And you’ll build a company which you and your employees will feel proud of.
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