Startup Your Startup
Everyone seems to have a startup these days. In fact, individual venture capital firms receive more than 1,000 proposals a year. Though at least 90% of startups fail, startups seem to be more prominent than ever. Knowing this, why would smart people quit their jobs to start one? The same reason talented singers drop out of school to play small-time gigs: The love for the journey, the possibility of fame and fortune, and the need for a thrill.
If you’re reading this, you’ve probably at least considered founding a startup. If you’re looking to take the next step, read on. Though the statistics are scary, “doing it right” can help minimize your chances of failing given that you have a great idea.
Why do startups fail?
According to CBInsights, the main reason startups fail is an inability to read market demand. This is followed by exhaustion of cash flow, mismatched team, and being outcompeted. Though there are other issues that affect startup success (pricing/cost issues, user friendliness, lack of business model, poor marketing, ignoring customers, mistiming, loss of focus, disharmony, pivot gone wrong, etc.) the ones mentioned above are some less obvious ones that, if addressed early, can dramatically alter your startup’s chances of success.
Inability to read market demand
Overestimating or even underestimating market demand can lead to disaster for your startup. According to a Harvard Business Review article, forecasting total market demand can be broken up into four steps.
Define the market.
Divide total industry demand into its main components.
Forecast the drivers of demand in each segment and project how they are likely to change.
Conduct sensitivity analyses to understand the most critical assumptions and to gauge risks to the baseline forecast.
Exhaustion of cash flow
In order to avoid having a cash flow problem, there are a few things you can do. This Entrepreneur article goes into more detail, but we’ve consolidated them here.
Know your break-even point
Maintain a focus on cash-flow management
Build and maintain a cash reserve
Hire an accountant or expert to manage funds
Collect receivables immediately & offer discounts to collect payments early
Extend payables where possible
Spend only on essentials
Don’t hire until you need to
Take advantage of cloud storage and technology
Mismatched teams
The most qualified person for the job isn’t always the most qualified for the team. In another Harvard Business Review study, researchers found that the best teams have a healthy balance of both soft skills and hard skills. Intelligence and ability are essential, but without charisma, a shared vision, and passion for the startup, teams can be doomed to fail.
Being outcompeted
Though this issue is hard to predict, there are steps you can take to prevent it.
Taking advantage of NDAs is one of the most basic ways of preventing leaks and protecting your intellectual property by storing it in a secure space can help prevent early stage copycats.
A robust analysis of the market and market trends can also keep you from being outcompeted – if you have even the slightest inkling that someone is already working on your idea, you have three options: 1) Pick a new idea, 2) Develop yours faster, or 3) Wait until they enter the market and then improve upon their idea.
You’ve laid the foundation for your startup… Now what?
Though the above recommendations are by no means exhaustive, taking steps to fail-proof your startup can avoid feelings of “what-if” or regret down the line. Once you’ve made a 100% attempt at fail-proofing your startup, what are the basics that will set you up for success?
Gather a team of people you think will work well together and whose skills and passion match the call to action.
Protect you and your team’s personal actions by forming the business as a Corporation or LLC.
Consult marketing resources to come up with a name that will stick with your business
Create a great product, but don’t shave the yak. Launch as soon as you can.
Create an elevator pitch, detailed pitch decks, and impressive demos for investors, and make sure to actually schedule investor meetings!
Secure capital.
Determine and follow-up with any permits or licenses needed to run your business.
Insure your startup.
Agree on the details of your relationships with your co-founders (hint: get it in writing).
Obtain a tax ID & set up clear accounting and bookkeeping systems.
Create robust employee, contractor, client, and vendor agreements.
Build confidentiality into every part of your business.
Hire an unbiased third-party (such as a consultant or attorney) to look for blind spots.
Overwhelmed? That’s okay. Paul Graham, the founder of Y-Combinator, said:
“It’s hard to do a really good job on anything you don’t think about in the shower.”
Being nervous to start means you care, and the best way to shake those nerves is to do that damn thing!
If you’re ready to take the first step, set up a free discovery call with us here: http://stamercoaching.com/contact and see if it’s a fit. We work with entrepreneurs to build confidence and offer strategic advice for business projects, and we’d love to work with you. We’ll help you work through all these steps and launch your idea.
Sliding-scale pricing options are available for startup projects.
Warmly,
Anne Stamer
President and CEO
Stamer Coaching & Consulting