You might hear about successful startups so often you think the odds are on your side. But it’s quite the opposite. According to recent data, just half survive five years or more, and only a third make it to 10 years. Starting a business is a risky proposition.
In fact, for the first time in 35 years, the failure rate of U.S. businesses outnumbers the creation of new businesses. According to the U.S. Census Bureau, 400,000 new businesses are started annually — yet more than 470,000 close down each year. It seems startups are failing even faster than new companies can be created in their place.
By all appearances, startups die by a thousand tiny cuts: lack of capital, challenging market, bad hires, etc. The list of potential problems is endless — and a company can quickly spiral downward without even knowing what went wrong.
In a survey of failed business founders, 42 percent cited “lack of market need” as the top reason why their business did not make it. This was followed by “running out of cash” and “not having the right team.” These are valid problems; many businesses fail to find that sweet spot between product, market, capital, and employees.
But let’s look at these problems more closely — they are not as different as they might appear. If you trace all three reasons back to their origins, you will find one thing in common. Do you know what it is?
If your startup is in trouble and headed nowhere, there is only one way to save it. And that is by revisiting your core strategy and ruthlessly scrutinizing the customer value you are providing.
Prior to Aha! I was the CEO of two successful software companies that were acquired by publicly traded companies. Like other founders, I also survived a few close calls along the way. Here are several lessons I learned that you can apply to your own business.
Start with your vision
Your vision sets the direction for where you business is headed. It also determines whether your business will thrive or fail. Take time early on to polish your vision, analyze your strengths and weaknesses, define the marketplace. These key pieces of your vision will provide a true-north for the rest of your strategy.
If you are not a natural goal-setter, you can become one. Define a few short-term goals that align with your strategy, and then create the steps needed to achieve them. Goals give your daily work purpose. There is so much to get done in startups that you will forget why you are working on specific tasks. Having a goal-first approach helps align your small, daily actions with the reason why you built your startup in the first place.
Solve one problem
Startups often feel like they are flying blind; there is much to get done in very little time. But trying to multi-task by solving all problems at once is guaranteed to lead you off course. Instead, identify the one problem you want to solve for customers and align all of your actions towards achieving that goal. You will quickly find that when you focus all your efforts on solving one problem, additional problems will present themselves.
At Aha! we are interruption-driven and respond to requests with urgency. We do this because answering people while requests are still fresh aligns with our most deeply held values. Our customers know they can count on us to offer crucial guidance.
Many startups waste too much money on the wrong things. If you are running out of cash — or have yet to receive any — you must make some tough decisions. These choices might be painful now, but will likely be best in the long run. Be stingy with your budget early on. Spend money only when you absolutely must, and prioritize what will create the most value for the business.
Treasure your time
Time is your most precious resource. And there are many ways you can spend your time as a founder. By far the best way you can spend it when your business is in trouble is refining your strategy and goals. Time and experience has taught that this approach wins in the long run. Clear your schedule so you can focus your time, attention, and energy on what matters most.
There is no doubt about it. A lack of strategy in the beginning will lead to failure at the end.
The most successful entrepreneurs know where they are going and have a clear plan to get there. So, resist the temptation to do everything at once. Instead, focus on achieving what matters most.
Once you develop a clear vision for your business, you will see the opportunities and challenges ahead. This will help you breathe easier. You might even beat those stiff odds and become a startup success story.
How would you save a startup headed towards the deadpool?