How to increase your chances of startup success
According to statistics from various sources, only half of small businesses achieve startup success after its first four years. That means there is roughly a fifty-fifty chance that you’ll make it when you embark on a new venture. If you are an entrepreneur or investor, you probably want a higher confidence rate.
This post first looks at why startups fail and what makes them successful, then proposes a technique to help increase your probability of success.
Why startups fail
In trying to find an answer to this question, the only conclusive and consistent result I could find that there are many different reasons. Each source seems to have reasons.
One study stated that the majority of failures were as a result of scaling too fast, another blames incompetence, with a study by CBInsights, mentions no market need for the product or service delivered as number one reason for failure. Yet another common reason is running out of funds, with loads more reasons, including childhood programming.
The conclusion? There are many factors that play part in the success or failure of a startup. It is not a simple linear equation where you can easily follow cause and effect. Rather, it’s a complex eco-system where even the best players still don’t know all the answers.
Why startups succeed
Like the failures, there are a lot of varying reasons why startup success is achieved. Yet, one reason that popped up more often than others, is whether you’re trying to do it alone or have a partner. Turns out that two heads are indeed better than one!
The reason I believe is linked to a term called selective attention. Daniel Simons, a prominent Professor of Psychology famous for his work in the field of visual cognition, conducted an experiment to show our blindness to things that should be obvious.
A group of people wearing either a white or a black shirt passes a ball between them, constantly moving around. The viewer must count the number of passes by people wearing white shirts only. Afterward, they’re asked whether they saw the gorilla. About half of respondents didn’t notice the gorilla stop in the middle of the group before walking away.
It seems that we simply don’t see what should be obvious. Not because we’re not skilled enough, or building the wrong product, or run out of funds, simply because our visual system is more limited than we realize.
Having a partner for your startup thus increases your field of vision, allowing you to see more. With different people focusing on different aspects of the business, you increase your likelihood of success. One person might be good at finances, another at marketing, but chances are that even the most brilliant among us, aren’t good at everything needed to succeed at running a business.
It’s rather a matter of the most talented juggler, the one who are able to balance many different balls, who is best equipped to make it work. Knowing this, how can you increase your chances of success?
Get a partner. If you don’t have a partner or still have some blind spots, grab a piece of paper and pencil and read how to use the success map.
The success map
The success map was designed specifically to help increase your vision. Based on the balanced scorecard, it provides a visual map for you to define what success would look like for the different stakeholders. This map then serves as a barometer to guide your decision making and measure success towards your goal.
Each quadrant represents the needs of the key stakeholders or aspects of your business, with an actionable short-term goal in the centre. Using sticky notes, each participant firstly adds what it would look like when the goal is reached from each perspective, then measures are implemented and monitored.
Step 1 – What is your short-term goal?
A vision without actionable short-term goals is as bad as not having any vision at all. The first step is to identify a short-term goal or milestone.
The questions you can ask yourself if you don’t have a specific goal in mind yet is what you want and by when. Refrain from going into the details of the how for now. Only focus on what you would like to achieve, the workforce will figure out the best way how to get it done.
For example, “Deliver a usable Minimal Viable Product (MVP) by 30 April 2017.” might be the goal of a new startup who wishes to receive feedback from customers and start marketing their new product.
Keep it short. Keep it simple. Keep it actionable.
This is your north star, and every subsequent question will be linked to this goal. Whenever you take an action, no matter how big or small, keep asking yourself whether what you are doing brings you closer to this goal. If the answer is no, don’t do it.
Step 2 – What is your value proposition?
Your biggest stakeholder is the customer, as without anyone to buy your product you don’t have a reason to exist. Thus it makes sense to start by focusing on how best you can meet your customer’s needs.
The customer quadrant aims to answer the following question: “How would you know you are successful when you look at your customers?
How many customers do you have? How happy are they? How big is your market share? are some of the questions you can answer here to elaborate on your goal.
Once you’ve determined what success looks like from a customer perspective, you can more easily define how to measure this.
Step 3 – How motivated are your employees?
Without a customer, you don’t have a business, but with demotivated employees, your productivity will soon be lower than the expense to keep the business running. When your employees are happy, your productivity soars, and you attract the best talent in town, which all adds up to a more profitable enterprise.
The next quadrant looks at what you need to do to ensure that your employees are motivated and productive.
Questions you can ask is whether they have all the tools to perform their work well? Do they have all the knowledge and access to information they need? Do they have a stress-free, conducive environment to work in? Are they empowered to make decisions and changes? How meaningful do they perceive their job to be? Do they have the ability to learn and grow in their role or in the company?
Again, once you’ve defined what a happy workforce will look like, define how you will measure it.
Step 4 – How efficient are your processes?
I’ve seen many great companies invest in the most expensive tools, just to slow down or halt productivity. A tool does not guarantee efficiency. Simplicity and effectivity are however a recipe for success. The less time you have to figure out what the next step in your process is, or why you are doing it, the more time to spend on productive activities.
But the process quadrant is more than simply automated tools, it is also a reflection of the health of the communication within the organization and the relationships between different roles or departments.
This quadrant focuses on how well you are able to hand over the baton between different team players, without letting it fall.
Questions you can ask yourself is how long does it take to deliver a product or feature? How many features can you deliver per week? How much of the time spent on delivering the product is productive?
Look at the entire flow throughout the organization rather than trying to optimize one area alone. The biggest waste and slow down in most companies are often caused by handovers between different teams.
Keep the measures simple and as manual as possible. If you have to wait for a computer to calculate the results or have to spend extra time to input the data before you can get an answer, simplify your measures. It’s better to have a few, simple, accurate measures available immediately than a lot of complicated measures that you don’t have available when you need it.
Step 5 – How profitable is your business?
Even when you have the happiest customers and most motivated employees, if you’re not making money, you don’t have a business. The drive towards a more human workplace does not mean that profitability is not important anymore.
This quadrant focuses on the needs of the shareholders, and what the business needs to survive financially.
The only two questions that are really important from a business owner point of view is what is your return on investment, or how long will you have to wait before you recoup the money you invested? And how much money are you making? What is your cost per product or service? And how much profit do you make on each item?
Another valuable question is how much money you have on hand each month. It doesn’t help much if you have a lot of income due to you but you’re not able to pay the bills, or that most of your money is tied up in long-term investments or assets that you can’t convert to cash easily and quickly. In order to survive, you need enough cash on hand.
The rest, like the expenses or the revenue, is a detail to start looking at once these main indicators show warning signs.
Once you’ve completed the exercise, make sure you use it regularly. Each time you need to make a decision, ask yourself whether this will bring you closer to your goal. Will it positively or negatively impact the different factors that contribute to success?
Give it a try and let me know what you think! Upload an image of how you used it and what you thought about it on Twitter including @funficient in your post.
I, the owner, have the rights to use these images. Featured image courtesy www.unsplash.com