Startup companies require innovation, creativity and vision, but this alone is not enough to guarantee success. Many Startup companies fail for very simple, practical reasons, such as team chemistry or funding. So before you begin your startup venture, read these tips on vision, teamwork, funding and finances so you can start as you mean to go on, and avoid bankruptcy.
You must have a vision before you begin your startup venture. However it is just as, if not more, important that you never forget your customer, and never push your vision at their expense. You must be flexible.
This does more than ensures you don’t alienate your market; it can also help you create the best product that you can. It may be a cliché, but problems, and failure, really are opportunities in disguise. ‘Slack’, the instant messaging tool for business, for example, was the result of founder Steward Butterfield’s failure to create a new multiplayer game. Instead of giving up, or sticking rigidly to his vision, he adapted the part that was working, the messenger, and the rest is history!
Another common problem, inspired by the perception of Silicon Valley culture and success, is arrogance. Many people model themselves on the image of various ‘big names who didn’t play by the rules’, like Steve Jobs, Bill Gates and Elon Musk. These men have definitely carved their names into history, but through the strength of their ideas. Flat-out arrogance will get you nowhere.
Interestingly, there has been a lot of recent buzz surrounding a shift in Silicon Valley culture. The Holder report on Uber released this summer, which has resulted in the indefinite leave of their difficult ‘big name’ CEO, Travis Kalanick, who is now being sued by one of his investors, is being touted as a turning point for the region. Similarly, the resignation of David Bonderman, a partner at private equity firm TPG, for a sexist quip, and the firing of a Google engineer over his ‘diversity manifesto’ demonstrates a change in culture which could see arrogant attitudes tolerated even less.
Your first step should be to find the right co-founder. And yes, you do need one. Convincing someone to join you on your venture will speak volumes as a vote of confidence for investors. Very few successful startups manage with only one founder. That being said, some fail through having too many voices, and it is recommended that you settle on two, or maybe three, founders.
Your founders should not be ‘yes men’, they should complement you and your skills. If you don’t understand all the details of your product, or its industry, you will definitely need a co-founder who does. Or maybe, you could do with someone with business experience, such as an experienced CEO. They need to balance you out, and you need to be honest with yourself what your weaknesses are. Ultimately, it is most important that you share a vision, and they are not simply after a pay out, otherwise you could be causing tension down the road.
The people you hire are vital to a successful startup, so it is not an area that you should take lightly. Your aim is to have a reliable team who you can delegate tasks to and a large part of this is hiring the correct people for the correct job. For example, some founders delegate cash flow management to their assistants, who then go on to damage the business through over-ordering and early paying. Cash flow management is best left to an accountant. If you are in doubt about successful hiring strategies, you should provide extra training, or hire an outside advisor.
As you get bigger, document your processes and vision for new employees to ensure that they will continue your work, even if they don’t have the exact same experience or abilities that you do.
After you have your founders, and possibly your initial team, assembled, you are going to need funding. According to Martin Zwilling, founder and CEO of ‘Startup Professionals’, the most common misconception here is that you will be able to get money from the bank. In reality, banks are the least likely benefactors for startups. This means you are going to have to be creative.
Zwilling notes that the most important thing to remember when you are looking for initial funding is that, at this stage, it is more about selling yourself, than selling your product. As such, it would be expected that you will be putting some of your own savings into the company, after all, how can you expect someone else to have faith in you, if you don’t have faith in yourself? This means it could be necessary to put your idea on hold while you build up savings.
This could be a blessing in disguise, however, as it is not generally recommended that you up and quit your day job on a whim. You may need three-years of living expenses saved just to survive life before you make a profit. You could start slow and work alongside your day job to make sure you can still afford to eat, and saving up some capital to invest in your own venture should be part of that.
But other than that, you can turn to a huge number of creative financing opportunities, such as personal credit lines, friends and family, peer-to-peer lending, crowdfunding, and many others. Angel and Venture Capital Investors are not usually the best option at this stage. This is because brand-new companies pose too much of a risk, and they would prefer to see evidence of a proven business model, with existing revenue and customers.
After all that work, your initial surge of revenue will feel amazing. But, don’t let yourself believe that you are now a success. This is the last pitfall of setting up your own startup company, you need to separate your profitability from your cash flow so you don’t spend all your initial revenue and investment at once on a large customer base. Business health is not simply how much money is coming into the company, but how profitable the company is. Once that initial revenue is gone, it will be harder to find more revenue later on, so spend it wisely.
To keep on top of your profitability, document all your profits and losses from the get-go, even when they are small enough to be memorable. Hopefully, they soon won’t be, and if you don’t have a system in place, it can get on top of you.
As well as this, keep an eye on growing overhead costs. Once you start to grow, you will need to pay for greater insurance, office admin, taxes, customer support and transportation needs. If you don’t review your prices to keep in line with your overhead costs, you may find your profit margin eroding.
Ultimately, nothing is guaranteed when you start your own business. Your ideas, vision and passion could be perfect, but the smallest slip-up at the early stages could make your company a failure. Do lots of research and take as much advice as you can find, and you will increase your chances of success.