Every entrepreneur is under the impression that he or she has the best idea for a business — nobody has ever come up with something so clever, so appealing, so needed. But there’s a big gap between coming up with a great idea and executing on it successfully.
In fact, the failure rate of new businesses in the U.S. is downright demoralizing: About half of all startups fail within five years, and roughly 20 percent don’t even make it a year.
One of the biggest factors in stumbling and falling is scaling too quickly. Entrepreneurs’ perspective of where the market could grow often doesn’t line up with where the market currently is, fueling moves and investments that are premature — and may not pan out.
Boosting Your Chances of Success
So what can you do to increase your company’s staying power? For starters, hiring a diverse team has been shown to be a big indicator of success. That’s because having a variety of perspectives and backgrounds on your team can ensure you’re seeing the big picture, not simply what you’re familiar with or naturally attuned to.
Financial acumen is also a strength many successful founders share. The simple truth is that if a business owner doesn’t know how to manage money, it really doesn’t matter how much he or she makes — it won’t last long. Learning about balance sheets, P&L statements, payroll, and business taxes is essential for running a successful business; gaining a basic understanding of how business credit scores are earned, as well as how valuations are achieved, can be vital to earning funding.
But that’s not all your business needs to have a fighting chance — here are three other things you need to have locked down before your startup can grow.
1. Deep knowledge of your market
Entrepreneurs enamored with their own ideas can really get into the nitty-gritty of their offerings, knowing every color, size, or customization possible and carrying a laundry list of use cases. But knowing everything about your own product or service just means you’re an expert on what you do — you also need to become an expert on what the market’s doing and what your competitors are doing.
“While some entrepreneurs occasionally switch industries and find success, venture capitalists are more inclined to fund a founder or team who has worked in a specific industry for years,” explains Promod Haque, senior managing partner at Norwest Venture Partners, a venture capital and growth equity investment firm. “Founders with deep domain expertise in a particular field are typically more aware of customer needs, market opportunity, and the competitive landscape, which makes them more credible to investors.”
2. A vision that dares
When things get tough (and they will), the entrepreneurs who manage to make it through to the other side are the ones who have a deep passion for what they do, a vision of what they want — and a map for how they’ll get there. Entrepreneurship is not for the faint of heart, and it takes true dedication to a mission to make the ups and downs worthwhile.
“Vision is the vital energy that drives the entrepreneur, the founder, the co-founder, and his immediate team. Vision is what makes them dare: dare to explore, dare to challenge, dare to insist, dare to keep pushing, dare to have the determination to succeed,” says Juan Jose de la Torre, IBM’s digital transformation leader for the Middle East and Africa. “And vision is what creates and establishes the culture, which is the key component that gets softly shared between people creating and establishing norms.”
3. Data that makes the case for your business
To earn VC funding, partnerships, or any other type of investment, you have to be able to show others that the market is as eager to see you succeed as you are. Establishing how much interest there is for your offering — as well as how much people would pay for it, how long they need your product or service, and how you might build upon your initial relationship with customers — can tip an investor’s assessment from “interesting” to “necessary.”
Surveys, studies, and focus groups are all good ways to gather this data, but personalized conversations with people who’ve already bought into your concept can also yield great information. “Even if I went into a client and said this is not fully vetted yet, but I’d like your insight, they were always honored to have a first look,” says Anisa Telwar Kaicker, founder and CEO of Anisa International, a maker of applicators for high-end makeup brands like Laura Mercier and Estée Lauder. Their comments were valuable because “they would be the ones buying the product,” she adds.
Having a great idea is the first step to startup success, but it can’t be the entire foundation. Invest in establishing a true vision for your business, learning about the market, and proving there’s demand for your idea. Without these things, you can’t succeed, but with them, you just might.