You either make it, or break it.
Over 90% of startups fail. We all know that embarking on the route of building a startup is a taxing and time-consuming process. For most entrepreneurs, questioning the exact odds for success is not the top priority. As much as we all dream of striking it big on the first attempt, the chances of getting it right on the very first time is akin to striking the lottery. In the wake of a failed business, it is important to understand the mistakes that were made and what went wrong. But it is equally, if not more important to bring these lessons forward into future ventures.
So to help all the budding entrepreneurs, here are some valuable lessons we can take away from failed business ventures.
Focus on your core product/service
Once you take the plunge into the industry of your choice, your market research will no doubt lead you to discover many dozens of additional complementary opportunities that are relevant to your core product or service and could very well make you money. Mark Cuban, one of the most significant entrepreneur of our time, writes that it is easy for businesses to “drown in opportunity”. He further adds, “Every entrepreneur’s mind goes crazy with the new and exciting things she can do beyond the new and exciting things she is already doing.”
It is incredibly tempting to add on to what you are offering to your customers. And yes, it is important to be flexible to a certain degree, but straying too far from the original business model could be one of the biggest and costliest mistakes an entrepreneur could ever make. If you have to bring on board a new offering, validate the idea with customers. Surveys can tell if you are onto something, but entrepreneurs often fail to utilize this tool to its fullest potential.
Funding is time-consuming, but don’t put too much focus on it
While it is possible to start building a business with little to no capital, making it grow is another matter altogether. Money is needed to make things happen as there are numerous expenses involved in building a business, and ultimately some form of revenue is required. Sometimes (or most times), entrepreneurs have to actively seek out funding.
The process of fundraising will take up a significant amount of time. You could pitch to 50 to a hundred venture capitalists and not have anyone take your bait. Besides, how many people could you pitch to in a week? Although obtaining funding is important and it is a process that takes time, the endeavour should not distract you so much that you forget that your main focus is on your product or service. Aditya Mehta, managing director at Edgytal, writes that he once spent so much time securing funding that when there was finally investor interest, his product was way behind schedule which resulted in the investor’s loss of interest.
Tried and tested isn’t always the way to go
HomeAway and AirBnb are unicorn startups. Uber and Lyft are wonderful concepts. So how about we duplicate these ideas and be millionaires too? Sadly, it doesn’t work like that, yet this is what many of the failed startups do – by replicating original ideas, concepts and not improvise on them.
The success in one market should not be more than a light nudge. It should not contribute significantly to an entrepreneur’s decision on whether or not to start a business. Try to stay away from copy and paste concepts, unless you can clearly identify a problem or gap that is not being addressed and you are able to innovate on the original idea. Even so, the market research still needs to be done thoroughly, as though there is not already existing market proof out there.
Bootstrap and keep operating costs low
Many startups fail because of an oversight on expenditure after they receive funding. Especially after bootstrapping for some time, it can be intoxicating to receive a big check. Of course the funding should go into improving your manpower, technology and operations, but a fancy office and nice car for the founder can wait.
Continue to bootstrap even after receiving funding. Keep costs low in every area, and keep watch over all operating expenses. Negotiate and negotiate more. Being able to negotiate $10 over a $100 expense might not seem like much, but cutting 10% to 20% off over every expense could mean saving thousands of dollars in a month. All these thousands will add up to provide additional leeway when things get rough.
Know when to call it quits
It’s easy for entrepreneurs to get emotionally attached to their startup businesses, especially if it’s their first one. Even if things start to become unsustainable, some founders may feel like they have gone too far to quit, or feel emotional over the time and money that they’ve put in. So instead of making the hard decision, they stay on and put in even more resources to get back a sub-par return.
Be practical. If you see that customer interest isn’t picking up and things are no longer sustainable, make the call and walk away, as difficult as it may be. Acknowledge that things are not panning out as you expected, evaluate your actions and pull the trigger to prevent greater losses. An entrepreneur is someone that knows how to make hard decisions.
Regard failure as a strength and not weakness
Success is not the natural state of things. Failure occurs much more frequently than what you think. In fact without failure, one cannot truly understand success. And with enough time and failures under your belt, you will learn to become nonchalant about certain risks and difficulties that comes with starting a business.
We are all brought up to hold the idea that failure is bad and that if we fail it must mean that we are not good at that particular something. In the beginning, we may even take failure very personally, forgetting that it is relative and part and parcel of being an entrepreneur. The rest of the world could not care less about whether or not and how many times you’ve failed. It is only important to you. Remember that tomorrow is another day to get it right, and your future ventures will be stronger as a result of your failures.