As I look at startup companies all over the world one sad fact seems to be evident. I’m sorry to say that most fail in the first year.
The sad part is because startup company founders work their tails off and make many personal sacrifices for their dream. Countless hours are spent and opportunities missed while they pursue what they think will be the Next Big Thing.
But… Unfortunately after around a year most founders find themselves sitting around a table trying to decide if they want to continue slogging along without paychecks while they are racking up more debt.
And… There is always that potential investor just on the edge of solving all their problems with a big check. In most cases more money won’t necessarily solve any real problems. The money is just a temporary Band-Aid.
So what kind of New year’s resolutions could startup founders commit to that might raise the probability that their startup will be a success?
Here are four potential New Year’s resolutions for startup founders:
1. Resolve to only create products and/or services that will be compelling for potential customers next year not last year.
So many startup ideas I see would have been great back in 2012 and completely successful back in 2010. Unfortunately the concept is a little stale right now. If an idea is already out there and gaining any type of traction startups can probably save a lot of future grief if they keep looking for another idea they can dedicate their lives to for the next few years.
Look for ideas that will get people excited in 2016. Why so far out? Because it will take you at least that long to get wheels under your idea.
How do you know if an idea will be great in 2016?
For now I will leave the full explanation of this to a future article. But… You will know a great idea when you see it and when you show it to others and you see genuine excitement.
2. Resolve to make sure your idea can make money.
This may seem like a no brainer but most startup teams get so wrapped up in the bits and bytes of their idea that they do not focus on the actual potential profitability of the product/service.
How much of the product/service do you need to sell to cover the cost of operations?
When the answer to this question is such a high number that you would need to have the entire working population of China as customers then you need to rethink your business model.
When the answer to this question involves a $20 million launch marketing budget just to get to break even you will probably have a hard time scraping up that money unless you have a very rich uncle.
If you think you will make up for a lack of traditional revenues by selling advertising, think again. Just to get your product/service in front of enough eyeballs to generate enough advertising dollars to significantly move the needle will take a large marketing budget and a very compelling offering.
Can your product/service make money?
You will need to intimately understand your customers wants, needs, pain points and what they will spend for your product/service. You will need to either make them money, save them money, or be lots of fun to compel them to spend their hard-earned cash.
Run the numbers before you start on your journey. Be sure you can sell a reasonable amount of your product/service. If the numbers don’t work out, so what… Move on to another idea.
3. Resolve to spend investor’s money like it is your own.
When I would go shopping with my kids they would frequently point out something they wanted. It could be candy, a toy, or some sugar heavy breakfast cereal. They really needed it and now. So I would tell them okay they could get it but the money would come out of their allowance.
All of a sudden my kids didn’t need it anymore. Its amazing how people spend differently when it is their own money.
When you finally get the seed or follow on capital needed to launch your startup remember to always spend that money like it is your own cash. Yes, I mean every single penny should be spent like it is your own.
Only spend money that will make a significant difference in your company’s future (or present) profitability right now. Demand the most bang for your buck.
It may seem harsh but cut out the cappuccino bars, sushi dinners, swanky furniture, Uber Rides, and high priced office space. Save those expenses for after you are raking in cash and have shown your investors a profit.
4. Resolve to decide what you want from your startup company before you begin.
Before you begin your startup journey take a few minutes to think about what you actually want from the experience. Talk to a few friends about it. Write it down. Tape it on your bathroom mirror so you see it every morning and night when you brush your teeth.
It could be independence, being your own boss, working with your best friends, changing the world, or just the adventure of running a company. Whatever it is you want be sure you are laser focused on those goals. Everything you do should be put through this important filter because a year or years from now if you are not true to what you want no amount of financial success will really matter. On the other hand if your company does a crash and burn but you got what you wanted you will be a real success.
An example of how I see startup founders get tripped up on this one is when they want to be their own bosses but they end of giving away controlling interest in their companies after several rounds of raising capital. If you own less than 51% of the company you are not your own boss.
And most of all… Do what you love because that may be all you get out of the venture.
Too many startup founders charge into their companies without taking a few hours, days or even weeks to at least map out the basics. These four New Year’s resolutions should prove very valuable when starting the essential thought processes, conversations and research needed to raise the probability of your startup’s success.