Tuesday, October 15, 2013
16 Ways to Build a Business Not a Startup
There is a perfect storm for Start-up failure. The combination of the cultural shift towards entrepreneurship, the trendiness of tech start-ups, the removal of barriers to build products, and government policies has created an oversupply of start-ups. Starting a start-up is easy, building a business is hard.
Here are a few golden rules for business building:
1 - Invest in your business – don’t take angel money too early, self fund your business. If you can’t do this then I’m sorry, you shouldn’t take the risk of launching business.
2 - You must inspire others – as a leader and founder, you must have the unique ability to walk on water and have others buy in and throw caution to the wind and join your business before it makes much feasible sense.
3 - Recruit the best – don’t settle for second best. Do whatever it takes to land the best. Recruit and incentivize others that are better than you.
4 - Develop a business plan – get out and interview your target customers, research the competitive landscape, develop an immediately addressable market that will pay you money for your product or service. Freemium models seldom work. 5 - Don’t develop founderitis – be realistic on what your company is worth. Be realistic in aligning your ownership percentage with others that will be vital and instrumental in your success. Offering 2% of your start-up to someone who is going to be helpful is too stingy.
6 - Focus – you can’t do this part-time. If you can’t afford to work on your business full-time then you shouldn’t be an entrepreneur.
7 - Bootstrap – build a monetization strategy that kicks in before your own invested capital runs out. In order to land larger rounds of angel and VC money, they want to see that someone sees value in your product or service and is willing to pay you.
8 - Don’t be broke – if you want to build a business on only sweat equity then I’m sorry, this isn’t the right time for you to start a business. We must have barriers to entry or the market will continue to be flooded with early-stage start-ups that believe closing an angel round for $500k is a success.
9 - Don’t rush at the beginning – take your time. Properly evaluate the playing field. Test your theories before taking other people’s money. Build and recruit a dream team. Ask yourself the tough questions and make sure after 6 months, you still are as passionate about the idea as you were the first day you conceived it.
10 - Develop a market leader – address a large market by solving a major pain point. Don’t copy other people’s ideas just because they’ve had some success. Don’t mash a few ideas together and call it unique. If there is already a clear winner in your field that is solving your problem then, move on.
11 - Focus on revenue – the number one reason for start-up failure is that they don’t develop a business where a customer exchanges cash for your product or service. 11 out of 12 start-ups will fail within 2 years. You’d have better odds for success opening a popular restaurant franchise but heck, that would require substantial start-up capital (please see point #8).
12 - Don’t rely on the ecosystem – Although it is important to identify support systems and leverage your network within the start-up ecosystem, avoid relying solely on the ecosystem. They are not going to do your work for you and it is easy to forget that your local startup ecosystem is a tiny blip on the larger global business ecosystem. They extend the runway of failure but they don’t often shorten the runway to success. Seek out key relationships but don’t waste your time distracting yourself from the job at hand by “networking” and enjoying the free pizza and beer.
13 - Follow-up – be nice to everyone you meet and follow-up like crazy. Sometimes it takes the squeaky wheel to get the grease. Many don’t follow-up and this automatically separates you from the crowd. You will be surprised what comes from diligent follow-ups.
14 - Fill your gaps – know what you are good at and find the best people to fill your gaps. Don’t try to do it all. Building a business is not all about learning. Learning is what you can do as an employee. Getting shit done is what needs to happen when building a business.
15 - Attitude – you must have a happy and positive attitude. Get lots of sleep and eat healthy. Have a balanced life. There’s more to life than burning the candle at both ends. You must exude confidence and project an attitude of success. Lose the ego. Nobody wants to help arrogant people.
16 - Don’t build for an exit – build a sustainable business. Don’t get caught up in the hype of an early, pre-revenue “acquihire”. They are too few and far between and if nobody buys your start-up, you’ll just end up having to turn it into a real business anyways.