6 Vital Decisions You Must Make to Succeed
What's the difference between those
who succeed and those who fail? The answer lies in these six decisions.
If you want to turn your great idea for a start-up into a real
business, it won’t just happen because you want it to. In fact, the odds
that you can succeed are stacked against you. And while you’re trying to beat
those odds, you will be putting your reputation, the time of your co-founders,
and possibly the cash of your friends and family at risk of loss.
Over the past two years, I have been
interviewing start-up CEOs--about 180 at last count--in a quest to figure out
what makes the difference between the few who succeed and the many who fail.
You can read the result in my new book, Hungry Start-up Strategy: Creating
New Ventures With Limited Resources and Unlimited Vision, coming out in
November.
Here’s a hint for you: It all
depends on how well you make six vital decisions.
1. Set goals
When you start your venture, you
will probably have nothing to offer the people you will try to recruit. Yet I
talked to many company founders who were able to recruit outstanding people and
raise capital from some of the most prestigious of venture capitalists.
To do that, these founders set three
kinds of goals. The first--for recruiting others--was a mission that gave the
new venture so much meaning to those recruits that they could not resist.
The mission will only get you so
far, though--you will also need a long-term goal for investors, something like
going public in five years or finding a corporate acquirer. And you will need
to set short-term goals that will help you learn what you need to do to grow
without burning through your resources.
2. Pick markets
If you can set goals, you’re far
from out of the woods. After all, you need to figure out who will use or buy
your product. And to do that, you will need to pick the markets that you’re
going to target.
Two hints for picking the right
market--you have to have a personal passion for solving that market’s problem,
and the customers in that market must see your product as a compelling answer
to a problem that none of your competitors are solving.
3. Raise capital
It goes without saying that everyone
has bills to pay. So if you are going to hire people or buy supplies, you will
need money. But where can you get it?
The best place to look initially is
probably your customers. If you can get them to pay you more for the product
than it costs you to build it--and cover your fixed costs--you are going to be
in a good position. You might also try to get your suppliers to extend you
favorable payment terms. If neither of those suffices, you can try tapping your
own bank account or your credit cards.
You can probably forget banks unless
your start-up has some kind of collateral that the banks can seize or sell if
you don’t repay.
And I’ve found that you may want to
match your efforts to raise money from other people (friends and family, angel
investors, venture capitalists) to the stage of your start-up’s development,
moving up that ladder as you ramp your sales.
4. Build the team
You can’t do it all yourself, but
resist the urge to hire friends unless those friends have skills in areas
critical to your venture’s success that complement your own. I found that the
most successful ventures do a great job of dividing up the work that must be
done among the most talented people. And they create a culture that binds them
all together to focus on shared goals.
5. Gain market share
To grow, you must get customers to
use your product and eventually pay. But I found that many customers are afraid
to get too dependent on a start-up that could go out of business and leave them
in the lurch.
To overcome that, you have to offer
the customer what I call a quantum value leap (QVL), a product that solves a
problem that customers care about better than the competition, and to give that
solution away. If that QVL actually delivers, those early customers will tell
all their friends. And you can eventually upgrade the product and start
charging customers to use it.
6. Adapt to change
You might think getting those five
decisions right would be enough, but you would be wrong. That’s because
customer needs, technology, and competitors all evolve, and the very success
you achieve by making those first five decisions well could doom your venture
to destruction.
Unless you can adapt to those
changes--seizing new opportunities and guarding against evolving threats--your
customers will flee and your venture will decline. I found that winning
ventures follow three approaches to keep this from happening--one of these is
to craft a vision of the skills at which the start-up must excel and to make
acquisitions and strategic hires to close the capability gap.
If you want to beat the odds and win
in the start-up game, you must make these six vital choices the right way.
Otherwise, you’ll let down yourself as well as your co-founders, customers,
investors, and employees.
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