Starting a business is risky. One study found that 25 percent of new businesses fail within their first year, and 50 percent fail by their fourth year. For U.S. venture-backed start-ups, another study found a more shocking figure--a failure rate of 75 percent. If you plan on defying the odds and creating a successful business, you need all the help you can get. Here are five tips:
1. Pick the Right Industry
There's a great book called Delivering Happiness by Tony Hsieh, the CEO of Zappos. The book describes how before Zappos, Hsieh created a company called LinkExchange that he sold to Microsoft for $265 million. Afterwards, he didn't know what to do with his time, so he became a professional poker player.
What he learned in Vegas was that his job was not to be the best poker player in the world. His job was to pick the right table. If he sat down against eight other professional poker players, he would get up and find another table with weaker players.
In order for your start-up to succeed, you need to have a strategy similar to picking the right table. It's crucial to choose an industry that is large and growing so that there will be a demand for your services.
2. Find a Scalable Way to Market Your Business
When I first started my digital marketing agency, I called advertising agencies, web development companies, PR firms, and consulting companies and convinced them to outsource their internet marketing to me. It was a very scalable method to market because at no cost, or for a small commission fee, I was able to build a network of people that were referring me leads. You must find your own method to acquire customers at a reasonable cost. If you can't do that, your business will struggle.
3. Build Credibility
When you start out, you have no brand awareness. My first client paid me $50 a month, but they were actually paying me so much more. I earned credibility, which opened doors to other clients and afforded me the ability to use my client's logos on websites and sales materials to gain legitimacy in the early stages. But don't just rely on your client relationships. Reach out to partners or earn industry certifications, which will grant you further legitimacy.
4. Be Incredibly Frugal
In my early days, I had five people working out of my 1,300 square foot apartment for two years. It wasn't easy; I had to sacrifice my personal space, but I knew rent didn't drive revenue. I invested the money I saved on rent in other areas that drove revenue, which was a key to my success. You don't need a swanky office, at least not right away. Instead, invest in infrastructure or technology. Any financial decision you make should increase your revenue or decrease your costs.
5. Be Vigilant About Hiring the Best Team
If you have a weak team, you'll spend all of your time supervising or doing their work. It's crucial to have people you can trust, so you can focus your efforts in areas that will build your business.
It's no different than if you are the general of an army. You have your left flank, center, and right flank. If your left flank is really weak, you have to spend all of your time improving the left flank. If you have three really strong flanks that can hold their own, then you can focus on strategy and positioning your troops for success. As General Douglas MacArthur said, "A general is just as good or just as bad as the troops under his command make him."