Failure is so common among entrepreneurs that it's not only accepted, it's celebrated as a learning experience. I've failed several times in my life. I've gone from millionaire to broke several times. It's the life of an entrepreneur. Just because I have failed doesn't mean that I'm a bad person or a failure in life.
Even the most well-known and well-respected entrepreneurs, like Bill Gates, had business ideas that didn't pan out before finding success and have been in similar situations. And while there is some truth in the idea that you can learn something from failure, it's also unacceptable to continue to have the dismal stats that startups still garner: Nine out of 10 startups close up shop.
Why is this statistic so unacceptable?
Because in most circumstances it's avoidable.
CB Insights has been examining more than 100 failed startups and has discovered that the main culprit in most cases was that there wasn't a market need for their business idea. What? As Erin Griffith perfectly, and directly, states in Fortune:
"That should be self-evident. If no one wants your product, your company isn't going to succeed. But many startups build things people don't want with the irrational hope that they'll convince them otherwise."
If you want to avoid becoming another failed startup, you need to make sure that your business idea is a winner in the first place before putting everything on the line.
What's the market like?
One day the light bulb goes off and you believe you just had a million dollar idea. It's such an amazing idea for a business that you can't believe it doesn't already exist. Unfortunately, there could be one very good reason it doesn't exist: There isn't a market for that idea.
That's not to say that you shouldn't think outside the box. It means that instead of pushing a supposedly revolutionary product that people may not want, consider improving an existing product that already has a market. There's less risk involved and it's much cheaper to launch because it's easier to test.
As Inc. columnist Stephen Key put it, "You don't need to reinvent the wheel to create an impactful, lucrative idea." Look for ways to be innovative in a market that already exists and make it better.
Richard Branson also echoes this opinion. "The reality is that very few businesses invent a market for their products and services," he says. "Many, however, go on to reinvent markets by filling gaps with standout offerings."
Are you solving a problem?
Entrepreneurs are told that they should solve a problem and not build a business. That's easier said than done because you may be focusing on a problem that doesn't matter to a lot of people. When I sat down with renowned entrepreneur Jeff Hoffman for Inc.com, he said when entrepreneurs encounter a problem they first ask:
"'Does this bother anybody but me?' And if the answer is, 'Yes, it seems to bother everybody, this is a real problem,' then the second thing they say is, 'Is there a solution that maybe I just don't know about?'"
Hoffman suggests that if you want your business to solve a problem, you should:
Whether it's going to a local diner, attending an industry event, creating a landing page to test conversion rates, or setting up a crowdfunding campaign, it's essential that you find out from your customers if your idea solves a problem in their lives--and if they're willing to pay for the resolution.
Is it easy to understand?
When you explain your business idea to friends, family, potential customers, and investors, do they walk away knowing exactly what you offer? Or do they sit with a confused expression? If they don't know what your business is all about then why would you expect it to become successful? Practice putting your business or business idea into two or three sentences. That's about the attention span of most people.
Take Dollar Shave Club. It delivers quality razors to customers through a monthly subscription at price that is below retail. It's a simple business plan that anyone can understand.
If you have a complicated business idea, it's going to be a tough sell for customers and investors, which can determine whether or not it's a winning idea.
Is it sustainable?
Tapping into a trend or fad may be good for a quick buck. But over time, customers are going to get tired of the business. Your idea should be one that not only provides value but is also flexible enough to meet the changing demands of customers, along with having room to grow and potential for improvement and innovation.
Blockbuster was once successful. But the streaming-video revolution from services like Netflix and Amazon proved that the rental movie business model wasn't sustainable. Apple, on the other hand, has become a tech juggernaut thanks to introducing sleek products that are based on technological advances.
What other tips would you recommend?