At least twenty percent of small businesses fail in their first year. The number of failures surpasses fifty percent at the five-year mark. Less than a third of startups make it to the ten-year mark. A large number of business failures are preventable, too. Outlined below are five key lessons to build your startup.
Know Your Central Purpose
You can find plenty of advice on how to write a mission statement or define your core values. Also, ask yourself, why are you in business? What is the very reason why your business was started? Don’t start a startup without knowing your central purpose, whether it is selling designer clothing or making the best cupcakes in town. Once you know this purpose, you can then determine what the best business model would be to achieve that objective.
Do Your Market Research Before You Do Anything Else
Far too many startups fail because they skip conducting basic market research. Some businesses launch without verifying that there is demand for their service. For example, they may start a business without making certain that there are people who would pay for their product is. Others launch a business without making sure there is enough demand to sustain a business. Another common mistake is failing to do understand their customer and their expectations. If you launch with a product that costs more than customers will pay, you won’t be able to sell enough products to pay the bills. If you don’t market to your ideal customer, sales won’t be as good as they could be, too. If you already work in marketing, you may want to further your business education so that you can do this research on your own. This way the data remains proprietary, and you can earn more as a marketing analyst or business consultant while you refine your business plan.
A surprising number of startups fail because they burn through their cash before they have enough income coming in. Start lean. Hold on hiring assistants or sales staff until you have enough work to justify hiring them. Hire contractors for given projects instead of hiring full-time employees. For example, you should hire market researchers to do initial market research before you launch but wait to hire full-time marketers unless you have a business plan that requires it. Hire IT staff to set up your website or optimize your site’s
Try to start your business as a side venture and test out your business model before you try to grow the business. For example, you should consider selling your recipes as a catering business or running a food truck before you open your first restaurant. Set up a fundraiser to pay for the design and manufacturer of your first design rather than coming up with a whole product line. Starting small and lean gives you greater agility if you need to adjust your business model or go in a whole new direction.
On the flip side, avoid the mistake of giving away equity instead of paying people for their assistance. Do it too often, and you’ll lose the ability to make decisions quickly. You’ll also limit your ability to sell equity to raise capital.
Don’t Try to Do It All
Don’t try to do it all yourself. Too many small businesses fail because the founder focuses on marketing but fails to keep up with accounting. Going into debt while you have unpaid invoices will cost you dearly, and the resulting cash crunch kills a lot of startups. Therefore, you may want to hire a part-time bookkeeper. Don’t be afraid to hire a CPA to create profit-and-loss statements or run professional reports that investors must see in order to take you seriously. Failing to get expert legal advice causes problems, too, whether you started the business without a founders’ agreement or didn’t get vendor contracts reviewed by an attorney before you signed.
Focus on the Customer
You can find tons of advice on how to build a great corporate culture or maximize morale. However, this doesn’t matter if your customers aren’t happy with the product or your organization’s performance in delivering it. Focus on the customer. Ensure that your checkout process is seamless and error-free for consumers rather than using a minimum of IT resources. Give customers a great experience, especially if you’re running a retail business.
Note that this requires you to know what your customers expect from a business like yours and then meeting or exceeding their expectations. You can ensure that this happens by asking customers for feedback and following and engaging with the customers’ discussions on social media. You might need to hire someone to do a social listening analysis to understand what customers really think of the brand rather than basing your opinion on the average rating given by the few who respond to your surveys.