8 minute read
6 things to know before starting a startup
Updated on September 12, 2020 by Jasmeet Singh
Nine out of ten startups fail.
This statistic is overused to the point that it has become a cliche, but it serves as a stark reality check that most startups fail, statistically speaking.
Does that mean you should give up on your idea and stop reading this blog now? Of course not. All that means is that you need to do everything you can to ensure your business has better chances of success.
The world of entrepreneurship is full of unpredictable challenges, but there are steps you can take to build a resilient business. Planning is vital as it helps you chart out a road map for your venture and keeps you focused from the beginning, leaving little or no room for unexpected disappointments.
Yet, many founders don’t take planning seriously. Why?
It can be easy and convenient to assume that once you initiate your startup, everything will fall into place. Although optimistic, this is hardly the case.
The truth is, startup founders have to invest a significant amount of time researching, conceptualizing, and planning vital aspects of their business before executing them.
So if you aspire to start a successful startup venture, you have to focus on the crucial factors that form the basis of a solid business plan.
Every startup founder should know these 6 things before starting a business:
- Your business idea: Will it work and how will it last?
- Customers: How will they react to your product/service once launched?
- Online Marketing: How are you going to put your startup in the spotlight?
- Reputation: How are you going to tackle the good, the bad, and the ugly?
- Income and Expenditure Model: How strategic and cost-effective are you?
- Potential Risks: How are you going to battle the hurdles?
Your business idea: Will it work and how will it last?
As an entrepreneur, your startup idea may seem flawless to you. But will the market accept your idea?
Product-market fit is a crucial yet commonly ignored attribute of a successful business. In fact, 42% of businesses fail because of the lack of market need for the product.
So before you start your startup, consider the feasibility of your product or service.
Identify if it has a demand or if it fulfills a particular gap in the market. Who are your competitors and how does their business perform?
If you are set to sail in a completely new venture, it’s great as long as you know it has the potential to sell and an audience to buy your idea. Introducing a Minimum Viable Product (MVP) is an excellent way to start without wasting resources.
You need to be specific and clear about what is unique about your startup idea and the problem it intends to solve.
Here are a few questions to ask yourself when determining market need for your product or service:
- How are you going to articulate the idea to potential investors?
- How are you going to design your sales pitch with your business idea?
- How are you going to differentiate your product/service to attract customers?
Customers: How will they react to your product/service once launched?
If cash is the lifeblood of any business, customers are the heart of it, ensuring its continuity.
You need them to survive in the market. So before you initiate your startup, it’s vital to know your target customers and their expectations, preferences, and behavioral patterns.
Here are a few ways to get to know your potential customers before starting a business:
- Research your potential customer base. Formulate the persona of your target customer.
- Research competitors to gather essential demographic information.
- Check social media for reviews, opinions, and even suggestions put forth by customers - these can help you create a better product or service before you even launch.
With proper customer research, you will figure out if they will be open to trying your product, pay the price you set and are willing to engage with your brand. Learning about them also helps you determine how to approach them, communicate effectively, and improve retention rates.
Once you understand your customers, you can move on to the next step and conceptualize the customer experience. You can refine it and update along the way, but having a skeleton map is essential to understand the bigger picture.
Online Marketing: How are you going to put your startup in the spotlight?
Once you have figured out your customer base, focus on the best ways to reach out to them, and how to gain more visibility.
The simplest way to reach more target customers cost-effectively is to learn how to set up an online business, as well as how to implement an online marketing plan effectively.
While there are countless ways to execute your marketing strategies online, it’s essential to figure out what best reaches your target marketing persona. Is it through social media, email campaigns, pop-up advertisements, or everything together? Hint: It's probably not everything together.
Have you identified your marketing mix yet, which is a combination of product, price, place, and promotion?
Without a clear strategy, your startup can end up wasting money on the wrong channels, without acquiring customers.
The type of marketing strategies that you use will depend on your customer profile, the nature of the product, and the kind of industry.
Reputation: Star-ratings and reviews are especially important early on
85% of customers trust online reviews as much as personal recommendations, and nearly 50% of customers claim they need at least a 4-star rating before they choose to do business with a brand.
Your online reputation can make or break your startup, and don’t doubt it for a split second. The world has watched how great companies like Uber and Facebook have lost revenue due to bad online reputation.
For startups, a few bad reviews are enough to stunt their growth, or doom the business for good.
Maintaining a good reputation is crucial in this digital age, where news can spread fast in a short period. Investing in efforts to build a solid reputation is less costly compared to the risks imposed by a negative image.
Unfortunately, many startup owners tend to sidestep on this factor, believing it as a secondary objective. However, it is a top priority and should be treated as such.
So focus on how you intend to build and manage your reputation from the beginning. Here are some essential points to note:
- Provide an exceptional customer experience where each customer feels acknowledged and respected.
- Respond promptly to customer queries to reduce the chance they'll complain online.
- Pay attention to both positive and negative reviews online and engage with courtesy - never while angry.
- Maintain the quality of your product or service consistently.
- Portray accountability by owning up for any mistakes that happen on your part.
Income and Expenditure Model: How strategic and cost-effective are you?
Mismanagement of funds and faster burn rates are reasons why many startups fail. Even million-dollar businesses can fail because of not building a strong income and expense model.
It’s easier to fall prey to purchasing goods that are of no real use to your business when you have sufficient money at the start, and by the time you realize the mistake, you are debt trapped.
Make sure that you are on top of your expenditures by:
- Researching and planning how you will fund your startup
- Implement a plan to generate consistent revenue
- Manage income with efficacy
Prepare a model that outlines your sources of income and funds you have raised through investment and determine the expenses you will be financing with them.
Leave out some funds for unexpected miscellaneous expenses that you might have to bear when you run the business. Overall, focus on how to avoid extravagant spending and be thrifty until your startup qualifies for scaling.
Potential Risks: How are you going to battle the hurdles?
For startups, hurdles come at the most unexpected times. Take COVID-19 as an example that brought the entire world to a standstill within a couple of months.
So let me ask you a question: How prepared are you to handle risks?
Risk is an element firmly embedded in entrepreneurship. Every startup idea involves a risk factor. But what matters here is to identify them and determine how you are going to navigate through them to achieve your objectives.
You can start by learning about the industry of your startup in detail and understand potential threats and obstacles in it. Do ample background research, and if possible, seek advice from mentors in the industry. Then move on to risks associated with your product or service correctly, and analyze how they are dealt with by your competitors if possible.
Once you figure out the chances and develop contingency plans to deal with them, they can appear less threatening.
Long-term thinking, pragmatic decision-making, and prompt responses can help you overcome hurdles. Calculating risks would also teach you that not every opportunity should be embraced as a golden opportunity and caution is a necessary precaution.
It’s essential to include both internal and external risk factors to gain a conceptual understanding. Perform a SWOT analysis by identifying your inner strengths and weaknesses and external opportunities and threats.
Working through the 6 categories outlined in this blog will produce a better entrepreneur who is well equipped to mitigate the risks that can pop up while starting a new business venture.
Don’t let your startup be one of the nine startups (out of 10) that fail after starting.
Instead, reduce the chances of failure by preparing yourself better by following the tips/ provided in the article.