Startups are not just about innovative ideas; the idea is important but it is not everything
Not every startup is successful. Not every startup gets funded. Not every business turns out to be profitable.
Starting and running a business itself is a science. The rules, however, are fairly flexible. Something that works for one startup under certain circumstances might ruin another startup in different circumstances.
Generally speaking, there are five basic rules that are must for the success of any startup.
1. If it doesn’t drive you, do not do it
There is nothing better than converting your hobby into a startup. It feels great to do what you love to do and get paid for it. As much as 54 per cent of the small business owners reported that they started their business to be their own boss. One in every six businesses is powered by a hobby.
Turning a hobby into a startup is one of the best things you can do in your life. It will convert the dull and boring 9 to 5 routine into an exciting 9 to 9 routine wherein you do not feel exhausted.
A startup that is backed by your hobby outperforms businesses that are started just for the sake of having a business or a source of income.
Zymurgorium is a startup that generated GBP10,000 in funding. The founder, Aaron Darke, did nothing special but converted his hobby and passion into a business. Being a student of zoology and someone who loves experimentation, he found a new technique of making mead with honey.
The question is how to know if you are about to do is what drives you.
Mark Cuban says if you have an exit strategy, then you are not pursuing your passion. It makes sense.
It is natural. If you love doing something, you will never ever think of quitting it. If you love playing tennis, even if you lose 20 matches in a row, you will not quit playing tennis, right?
Same is the case with a hobby-turned-business.
2. Respect your target audience and customers
A hobby turned into a startup can fail if you do not respect and love your target audience and the customers. Once your business is up and running, only customers can take it forward.
Walt Disney summed it perfectly: “Do what you do so well that they will want to see it again and bring their friends.”
This is one reason why you should love what you do because this is the only way you will love your customers and everyone else linked to your business.
Anthony, the owner of The Watch-Collector, is a perfect example. He buys luxury watches from people in Yorkshire. He is a watch collector and not an entrepreneur, but he knows how to respect his customers. He will meet you personally at your preferred place to buy your watch, he allows multiple options for his clients to sell their watches, and he does everything he can to reach you even if the deal isn’t finalised yet.
This attitude converts small startups into billion-dollar companies. Whether it is a US$5 customer or a US$5,000 customer, respect them the same way.
Things get tough when you are managing a large business with several employees and multiple teams. This is the time when the focus of the business moves away from the customers and the target audience. This is what brings us to the next rule.
3. Build a team — a good one
Don’t try to be a jack of all trades. You cannot do everything yourself.
According to a recent study, the success of a business is linked to the experience and the size of the team. Large teams with right experiences outperform smaller teams. The individual characteristics of the founder are of secondary importance.
Lynn LeBlanc, the owner of award-winning startup Hotlink, says that one of the most crucial mistakes founders make is that they totally rely on their products and business strategy, however ignoring their teams. With this attitude, your startup will not go a long way.
Hiring the right people is the real art here.
- Hire people with the right experience.
- Refrain from hiring interns and fresh graduates.
- Stay away from hiring friends who do not bring any value.
- Hire people who are passionate about the project.
4. Keep the structure flat
Go for a limited liability corporation as it can be formed quickly, easily, and without much investment. Keep the organisational structure flatter instead of hierarchical as it keeps the teams connected and things work smoothly.
The idea is to keep it simple. Nothing fancy needed, initially. You must work with your team, and sit with them in the same office. This is how it will work – transparent and instant communication among everyone in the organisation.
Decision making with a flat organisation is not a big deal. There are several benefits of having a flat organisational structure including, easier communication and decision making, as well as better performance and productivity.
5. Do not go without a plan
Do not wait for funding, as not every startup can expect to get funded. The probability of getting a venture capital fund for a startup is less than 0.05 per cent.
Come up with your own plan to generate sales and to make money. If your plan is to get funding, you are doing nothing but wasting time.
Create a plan as to how you will convert the business idea into a product and how you will market it to generate funds. The sooner you do it, the better it is.
Once your business starts making money, that will be a nice time to look for funding options since 97 per cent of venture capital funding goes to the post-startup. It is obvious that an investor will be more interested in funding a business that is generating money and is making sales instead of a mere business idea.
Conclusion
Startups are not just about innovative ideas. The idea is important but it is not everything. It is a complete business that has to be taken care of and must be nurtured.
A startup idea is just the beginning of a lifetime journey.
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