Every startup owner dreams of creating a successful business. A business where he is the decision-maker, the game changer and the originator of the next big thing. Launching a new business seems the path to freedom, fame, and fortune.
However, a big success doesn’t come without big challenges.
In fact, most new businesses are vulnerable and fail even before they get off the ground. Around 50% of startups and small businesses fail within the first year of their inception. The lucky ones which manage to survive during the initial year are still vulnerable. Data shows that 95% of startups close down their businesses within the first 5 years.
So, the chances of having a long-term successful business are bleak — mere 5%.
To be within the 5% survivors, you must avoid the mistakes, and learn from people who have walked the path before.
Working with startups and business owners gave me a chance to analyze the entrepreneurial way of thinking with a fresh perspective. Regular interactions with entrepreneurs allowed me to see some mistakes that entrepreneurs and startup owners make by sheer ignorance.
Here are some statements which I often get to hear during meetings and conversations with the startup owners…
“Today I got a unique idea!!! It’s going to revolutionize the world.”
“Let’s start working on it right away. We need to hurry up. “
“Focus on assets that bring sales — revamp the website, launch a sales funnel, create webinars, be super active on social media platforms with posts, videos, live training, create blog posts around the product…”
“Set up a small team on building the product. Anyway, the product does not matter much. Sales strategy is all that matters. With the right sales strategy, we can sell anything!”
“Why should I listen to anyone?”
Surprised? As a customer, you should be! And as an observer I was!
Let’s dissect these statements one by one.
1. “I got a unique idea”
Entrepreneurs think — Success is guaranteed if they have a unique idea.
The reality is — Idea plays just a small part in your entrepreneurial success. Doesn’t matter if it’s unique or not. In fact, you don’t always have to reinvent the wheel. A not-so-unique idea can also be a recipe for success — if presented with innovation that provides better value to customers.
Even if your idea is unique, that doesn’t guarantee success. The idea that solved your problem, doesn’t necessarily solve a genuine market problem. You need to validate it with your potential customers, assess the product/market fit, carry out the competitor analysis and many other things.
Case in point:
Was Facebook the first social media site? Of course not! We all know how successful it is. The same is the case with Uber, Apple and many others which were not unique business ideas but they made themselves the best in their respective fields.
2. “We need to hurry up”
Entrepreneurs think — They need to hurry up to beat the competition and reach the coveted $1 million revenue mark.
The reality is — Startups which are in a hurry to outrun the competition and launch the product often miss out on important details, stray away from the purpose and commit big mistakes. In a hurry to get the first sales, they even skip to validate the market and check if they’re building the right product.
This false urgency is also fuelled by the underlying urge to reach that magic number of $1 million revenue (ARR) or having a six-figure deal quickly.
Case in point:
An excellent example of impatience to launch the product without evaluating the market demand and practicability is Google Wallet. It was launched much ahead of its time resulting in a big loss. Google could handle that kind of loss, but as a small startup owner can you take that risk?
Just like the premature product launch, falling behind the schedule also has severe implications. The key is to strike that right balance and discover the timing that is just right for you.
3. “Start building the product right away”
Entrepreneurs think — Their idea is so brilliant that the moment they build the product/service customers will show up magically.
The reality is — customers don’t care and don’t even know that you exist unless you tell them. Instead of building a product that no one wants, you need to invest in market research to understand the demand for your product/service. Instead of building a full-feature product, create an MVP with the most important features and quickly test your idea in the market before investing further.
Case in point:
One example of a company that failed to build a good MVP and test its hypothesis is — Standout Jobs, a recruiting portal, now known as Crunchbase. Standout Jobs wasted a lot of resources without checking the market demand through MVP. The result — it ended up with a product no one wanted.
4. “With good marketing, I can sell anything”
Entrepreneurs think — Marketing is all that matters. It’s possible to sell even a crappy product with aggressive marketing efforts.
The reality is — With so much information available at our fingertips, customers are so well aware that they don’t fall into the trap of your marketing effort without considering the quality of your product/service.
Case in point:
Consider the case of Microsoft’s Zune MP3 player launched in competition with Apple’s iPod. Microsoft marketed it aggressively but did not bother to add anything new. As a result, customers rejected it over Apple’s iPod, as there was nothing new for them in Zune. Even the aggressive marketing efforts of Microsoft failed to convince the customers.
5. “I can handle everything”
Entrepreneurs think — They can run a one-man show. They don’t need skilled people to do the job. If needed, they can manage with friends and family.
The reality is — Although as a startup owner, you might need to wear different hats and be a multitasker, no startup can grow if it is run by a single person or a bunch of people who don’t know the job well. The poorly chosen team does more harm than good. If you do not hire the right people who are qualified to do the job, you are putting your business to a big risk.
Case in point:
A recent article on startup failure post mortem mentions the failure of a promising startup named Untitled Partners. The company was into the business of fractional ownership of fine art. One of the major reasons for failure was bad hiring decisions and a series of wrong hiring.
“Leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats.”
— Jim Collins, Author of the book ‘Good to Great’
6. “Why should I listen to anyone?”
Entrepreneurs think — They are the boss and they don’t need to listen to anyone.
The reality is — You need to listen to people if you want to succeed. Sure you can think of yourself as your own boss, but you are answerable to your investors, employees, co-founders and all the customers who want to trust you. As a startup owner, you are also learning. Source of learning can be your team members, customers or other stakeholders. So avoid being bossy, break the communication barriers and let the free flow of information and discussion take place.
Case in point:
The case of Netflix, when it dared to overlook it’s customer’s desire in 2011. It divided it’s DVD and streaming business. It also surged prices. The result? A whopping drop in the number of subscribers coupled with a fall in stock price.
7. “I will not stop until I make this idea a success”
Entrepreneurs think — If it’s not working, they need to keep trying harder. Anyway, nothing goes as per plan.
The reality is — If your efforts are not able to bring customers, then think where you need to change. Do you need a structured change in your approach? Is your product not able to meet the customer ‘s needs? Are you targeting the wrong market? There is nothing wrong with pivoting and doing a course correction.
Case in point:
One good example is — Instagram, which started as Burbn. Burbn was not successful. It was a complicated app with loads of features that were rarely used by anyone. A little analysis showed that the only feature people were actually interested in was the photo-sharing one. That’s when the creators of Burbn decided to focus on just this feature and make it a simple app for photo sharing. That’s how Instagram was born.
If you are an aspiring entrepreneur or someone who’s new into the game, there are many good lessons to learn from other’s mistakes.
“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”
— Warren Buffett
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