Too many entrepreneurs look for that one magic bullet — an exciting new technology, maybe, or their very own determination to make the world a better place — to override any shortcomings of their startup model. Yet, magic bullets aren’t sufficient to assure business success. If the parts of your business aren’t expertly developed and aligned, even the best dream shall be in jeopardy.
Common failures I see along these lines include: solutions which are “nice to have” however don’t address painful issues; a business model that lacks a way for bringing in revenue; and a founder who has turned a blind eye toward his or her competitors.
Such failures ignore the fundamental business parts investors look for before committing to a startup. Here is my list of those parts, which each entrepreneur wants to develop before charging into the marketplace with high hopes and (sadly) a business that may doubtless wander away in the throng.
1. An experienced and skilled team on board
Even the best solution won’t rise above the crowd unless it’s driven by an equally outstanding team. Actually, most investors will assert that the team is more essential than the solution in startup success. They look for a balanced mixture of people with complementary skills, expertise and determination.
2. A big and growing market opportunity
Investors look for startups which may address giant markets, which means those larger than a billion dollars and growing at double-digit rates. Small markets tend to change more rapidly with the economy,and could also be more simply influenced by fads and competitors with recognized brand names.
3. A concentrate on a selected market phase
As a startup founder, you will not have the marketing resources or brand recognition to appeal to all shoppers. As an alternative, find and quantify the specific demographics of the subset that your solution best fits, and target all of your options and messaging to those customers. Targeting multiple segments virtually all the time weakens your business.
4. A close to-term customer value proposition
Customers buy solutions with value that’s quantifiable to them today, which means value which, compared to existing offerings, is half the cost or offers twice the productivity. Long-term value propositions to society, or paradigm shifts in technology, generate interest however don’t close sales in the time-frame your startup wants to survive and prosper.
5. Sustainable competitive advantage
Each solution has competitors and alternatives, or it has no market. Thus, it wants a bonus to rise above the crowd, similar to a patent and logos, distinctive market positioning or support from business partners. Too many competitors or a product with minimal differentiation makes a startup risky.
6. Solution production and support
In case your product is hardware, you want manufacturing, quality management and inventory. In all cases, you want customer support, formal processes and coaching in place. As an entrepreneur, ensure you recognize your direct and indirect costs, staffing necessities, margins and metrics to ensure these parts are in place.
7. Product distribution or service delivery
Physical products typically require access to existing distribution channels. Website and smartphone solutions often require referral partners and value-added resellers. In case your scope is international, country-specific variations and translation are doubtless required. Smart startups have these in place early.
8. Validated pricing and a sufficient revenue stream
Pricing wants to be set before rollout, based mostly on the value delivered and the competition; pricing also wants to be tested with real customers. Free products might sound engaging, however each business requires a minimum of one revenue stream to survive. An understanding of return-on-investment potential is crucial to all founders and investors.
9. An innovative marketing plan
Word-of-mouth marketing is often simply an excuse for no marketing and no money to spend. In the real world, marketing initiatives that go viral cost big money and energy for his or her innovation and execution. Investors look for specifics on sales channels, marketing collateral, social media initiatives and customer incentives.
10. An understanding of cash-flow necessities
Many startups fail due to an excessive amount of success too early, without the cash or investors to cover subsequent costs for manufacturing, inventory and receivables. Ensure your monetary projections quantify the timing and amounts of cash infusions from investors. This can lead to investor-return calculations and exit strategies.