You've done it. You've left that stiff corporate job for something you actually believe in. In fact, you still remember the exact cross streets you were driving by when you realized that it was time to follow your dreams. But now, it's time to get serious.
How do you follow these dreams of yours without ending in that notorious crash and burn?
My very first company, a health and fitness magazine focused on positive body image, was a prime example of a great idea with no business model. I did it simply because it was something I believed in, not because it was going to be a money maker.
Turns out, although my intentions were good, a company cannot exist without funds.
I eventually sold the company, but if I had the chance to go back in time, I would definitely have taken advice from, well, all five of the points below. Things are easier in retrospect, right?
In a recent study, 101 startups were surveyed on their reasons for folding. The top 20 are defined in the study, but let's focus on the top five--they're something you should definitely keep an eye on.
Here they are:
1. No market need.
A lot of founders might create a solution to a non-existent problem, and that's when they have problems finding customers. This is why market research and proper questioning is so important before launching your company.
In addition, it's crucial to decide beforehand how you want to grow within the market and what that success looks like to you. A problem in your city might not pass on to another city or area. Are you okay with that or do you want something more scalable?
2. Ran out of cash.
Ah, this one sucks.
Things are not cheap and they usually end up costing more than your projections. If you're building out into retail or hiring a large team, don't forget to budget a miscellaneous column for nitty gritty things you may have overlooked -- like an extra cleaner, employee benefits, or that unforeseen permit.
The best way to make sure this doesn't happen is to research, research, research. Write a business plan. Lean out your startup needs and save the wants for version two. Plan for extra cash needs but plan it out so that the chances you'll have to dip into there are lower.
And if worse comes to worst, know your options to obtaining more cash -- loans, family and friends, or lines of credit are all possibilities. In fact, it's probably better to find pre-approval for these options before you need it.
3. Not the right team.
Hiring is one of the hardest parts of running a business. One wrong hire could end up with bad PR, loss of a client, or negatively affecting the rest of the team. Be sure you implement a standard interview and hiring process that that touches on all of the skills they should have and follow proper hiring protocol.
It's common to overlook a bad hire as well, so be sure to arm yourself with knowledge on what to do if worse comes to worst.
4. Get outcompeted.
This takes us back to the first point. In your research phase, know exactly who your competitors are, what they offer, how you differ, and how they execute their customer experience. Regardless of what you offer, it should be unique and unapologetically you.
5. Pricing/cost issues.
An Inc. guide on pricing your products says this:
"Pricing your product usually involves considering certain key factors, including pinpointing your target customer, tracking how much competitors are charging, and understanding the relationship between quality and price."
Begin by acknowledging those three things and you'll be well on your way to a successful pricing strategy. The most important thing here is to be flexible.
Know exactly how much leeway you have and be open to attempting different models -- what works may end up surprising you.