According to research from a Harvard Business School study, 75% of venture-backed startups fail. Data like this can be disheartening for any entrepreneur, but you don’t have to let your business become a statistic.
Creating success for your startup takes more than just passion and funding; it requires a specific and unique set of factors, from a well-defined business model to consistent cash flow and timing. There’s no way of knowing whether you’ll succeed, but you can work to create a greater chance of startup success.
Here are 4 tips from Medium to help you beat the odds:
1. Define the problem and understand your customers
Success takes time and even “overnight success” is the result of hard work and perseverance. If you want your startup to succeed, believe in its purpose. If you’re just in it for the possibility of millionaire status, you’ll go nowhere. Take these steps to define a relevant problem and ultimately solve it:
- Be specific. Be personal. Specify and understand the real-world problem you are trying to solve. Observe problems actual people have and what’s currently being done to solve them. Create products that people “need” rather than just “want”. Instead of chasing ideas, solve problems.
- Be honest. Be brutally honest with yourself and your team. Brainstorm everything that could possibly go wrong. Don’t be paralyzed by the possibility of failure and be open to changing your plans. Even if you have already started a business, reevaluate your goals and pivot if that’s what makes sense.
- Be bold. Instead of spending hours at the desk, get out there and validate your idea by interviewing customers. Do everything possible to understand:
(a) How important is the problem you are trying to address?
(b) Will people (whom you have actually talked to) actually pay to solve it?
Once you definitively know who your customers are and how you are fulfilling their needs, your chances of succeeding will skyrocket.
2. Assess the market and be open to changing plans
“Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.”
After defining the problem and connecting with potential customers (i.e. the people you’re solving the problem for), analyze the market as a whole:
- Who are your competitors and how does your solution differ from existing solutions?
- Is the market large enough to sustain growth?
- Is the market expanding or shrinking?
- Are there any barriers to entry?
- Is your business flexible and able to pivot if needed?
Take the time to analyze trends, talk to potential customers regularly, and remain open to pivoting if needed. The earlier you adapt to real-world situations, the lower your chances of startup failure will be.
3. Assemble a great team and learn constantly
As John Maxwell said, teamwork makes the dream work. Having a reliable and committed team is the most important part of a successful business. Sure, solo founders can be successful too but usually take much longer to do so.
“Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.”
- Establish a balanced team to help you brainstorm quickly, strategize brilliantly, and scale effectively. Founders often hesitate to delegate tasksbut even if you are a ‘jack of all trades’, find team members you can consistently rely on.
“Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.”
- A great team is incomplete without a great mentor. Take the time to nurture lasting relationships with advisors. Overall, coachable founders are infinitely more desirable to investors and more successful:
“Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.”
4. Scale wisely and avoid burnout
“Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.”
Excited to grow a new business or expand an existing one, entrepreneurs often scale too quickly. Then, they run out of resources or burn out. They realize, unfortunately too late, that they weren’t prepared.
To avoid burnout, pace yourself. Startups that scale too quickly fail the fastest:
“Startups need 2–3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.”
Before scaling, do the following:
- Analyze and understand market trends. Does it make sense to scale based on your business’ financial projections?
- Engage customers. Have you addressed their compliments and complaints? It is most important to satisfy existing customers.
- Maintain a solid business plan. Find concrete data to prove that expansion makes sense. Scale gradually and remain aware.
- Always be open to feedback.
- If you are seeking investment, understand what investors are looking forand move forward accordingly.
“Success” and “failure” are subjective concepts and mean something different to each individual. But sometimes, failure is a blessing in disguise. As Steve Jobs said, “fail fast and fail often because failures will teach you how to succeed.” Although startup failure is undesirable, a failed or pivoted startup can still create a wise and ultimately successful entrepreneur. So, believe in yourself, hang in there and take the right steps to turn your vision into reality!
Have you encountered any failures on your entrepreneurial journey? Let me know in the comments!
For more business advice, head to Medium.com.