5 checks every founder should use to make sure their startup doesn’t fail

Published in

Startups, Entrepreneurs & VCs

7 min readJan 23, 2016

Ask the majority of new startup entrepreneurs what their ultimate goal is for their business, and they will probably say that it would be the day they IPO or get bought out by a big player.

The first time that happened to me, I felt like I ruled the world. All that hard work, the blood, sweat and tears were worth every moment. It was the most amazing time… until it all failed. Overnight (or at least it felt like overnight), everything we’d worked for just disappeared.

‘Welcome to the entrepreneur club!’, one investor told me. ‘Don’t worry... This will happen to you a few more times before you finally figure it all out.’

What he meant was that the best lesson for any entrepreneur is failure. And he was right. The experience made me better in every aspect, and the memory kept me grounded when the next big buyout opportunity came knocking on my door. But does every person have to go through this experience to learn from it? As powerful as it is, the smart answer is no. The lessons I learned back then, and the ones I continue to learn every day from other entrepreneurs can be applied to any new business to avoid a catastrophic demise (or at least reduce the probability of it happening).

So, you’ve identified a gap in the market, amassed a strong team and are ready to do business… finally.

Yet your fledgling company is struggling to get off the ground. Everyone knows a high majority of startups eventually fail, so you need to do everything possible to ensure you retain that edge over your competitors, don’t run out of money and remain focused on your goal.

1. Market Need

Is the startup solving a real problem
Do you understand your customers? Do you speak to them? Is your business providing a unique, scalable solution to their problems? The first thing I will look at when presented with a pitch is the real market for the product. Is the product a ’nice to have’, or a ‘must have’?

You need to create a compelling value proposition before anyone will buy anything from you. Look for your customers pain points, and then count how much of the market feels this pain, and finally, how many of them are willing to spend their resources (ie. money) on it.

2. Finances

Plan and record everything. And don’t run out of cash.
In the crucial early days where money is tight, your capital will only stretch so far. You need to record absolutely everything. Note down every single expense, right down to tea bags, in a spreadsheet. One of the main reasons attributed to a business’ failure is that they run out of money, so by carefully recording everything you can identify areas where you are spending the most, and keep a handle on your finances.

Think about where you want to be and what your aim is in terms of revenue every month, and note this down too. Having a concrete number to work towards will help you to guide your spending more carefully. And know your metrics. If you haven’t memorised your cash position, run rate or revenues, then even luck won’t be able to help you stay afloat.

Pay your people
It’s also important to make sure you have enough money to pay your team’s salaries, even before any money is brought in by customers. You need your team to keep your business afloat, and would feel the loss in more ways than one if they were to leave your business because you can’t afford to pay them.

3. Competition

Don’t lose sight of the market
As entrepreneurs, you will have seen what other businesses were doing before you started yours and thought, ‘I can do that better’ — so don’t lose sight of them. Don’t forget to keep an eye on what they’re doing, so you can always have an advantage over them and retain your competitive edge. The last thing you want is for another company to look at what you’re doing and drive you out of the market, so always try to stay ahead and relevant to your audience. As they say to investors in the stock market, ‘don’t invest based on where the market was yesterday — invest where the market will be tomorrow’.

Don’t let rejection stop you
All startups have to fight to get the clients and customers they need. Without the solid reputation that comes after years of doing business, it can be difficult for others to put their trust in you. No matter how many rejections you get, just persevere; your tenacity will pay off eventually.

4. Your Team

Ensure you have the right people on board
I’ve written about this before and having the right people, skills and experiences in your startup team is crucial. VCs don’t just invest in your product. They invest in your team first, and then your product.

Finding the right skills and experience is the first step, but hiring the best won’t get you anywhere if the people can’t work well together. There’s a reason people say that startup teams are cliquey — they spend long hours working hard, sharing the majority of their days on a coordinated purpose, and adopt the ‘tribe’ mentality. Putting in the wrong person can destroy your tribe.

Maintain harmony within your team
Work hard to cultivate good, harmonious relationships with your team members. More man power driving your business forward means you’re more likely to succeed, so you don’t want to alienate anyone during what is probably the most difficult period of your business. Put the effort into maintaining strong relationships and high morale, and your team will remain faithful to you and your company.

Embrace feedback from your advisors
Entrepreneurs are known to have their head up in the clouds. They undervalue risk and overvalue their potential. It doesn’t take much to become tunnel-visioned and lose perspective. Use advisors, whether it’s your coaches, mentors or venture capital investors. They are focused on the success of the business, so let them give you feedback and use their experience and knowledge to validate your strategy.

But a note of warning. Don’t take bad advice from the wrong people. Every person you ask will have some sort of advice for you. So ensure that the source of your information is qualified. But more importantly, use your own brain. A lot of decisions made in business are not rational or logical. Sometimes it’s ok to go with your gut. Just don’t ignore the hard data. When it shows something isn’t working, then make sure you do something about it.

5. Purpose

Always keep your goal in mind
It’s important to constantly remain focused on what your business’ original aims were, as it can be easy to become distracted. Think about the reasons why you wanted to start the business in the first place, and plan where you aim to be in a year’s time, five years’ time and so on. With clear aims in mind, your business will always be heading in the direction you want it to go.

Staying alive

Your business may have made it through the initial phase of inception and growth, and it may now be propelling itself forward. This is the point where founders think they can take a step back and spend their days on the golf course. But the challenge now changes from creating a business, to holding onto a business. And that is much harder. Use the key points in this article to stay ahead and avoid the pitfalls that crush the majority of startup companies.

If you do find yourself in a position where your startup has failed, then I proudly welcome you to ‘the club’. To stay in the club, you need to spend some time understanding what went wrong. It’s the only thing that will stop you making the same mistakes again, and give you a level-up on all of those new startups that are vying for you market-share next time you get on the startup field.

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