The idea of being your own boss and finding a potentially lucrative gap in the market is clearly too tempting to pass up, and as a result a staggering 100 million businesses are now launched every year, according to the GEM Global Report.
However, it’s definitely not plain sailing for these new-born startup companies. Unfortunately, it’s common knowledge that a disappointingly large proportion of them will go bust within the first few years. Although the exact fail rates vary depending on the source; some say around 50%, others say 90%, while the figures below from Statistic Brain are a bit more positive. However, whatever the real statistics are, it’s safe to say that many startups simply won’t make it to their first birthday.
While there are always going to be challenges involved with setting up a new business, there are things you can do in order to lay a solid foundation and protect it as much as possible. With this in mind, Global Database have put together a guide with some useful dos and don’ts to keep in mind when setting up your venture.
DON’T Rely on Trends
When it comes to choosing the product or service that your business will offer, don’t give too much weight to current trends. Fads come and go, and your startup could disappear along with them. Look for something that consumers’ really need; although being passionate about what you’re selling is great, ultimately you should remember that in order to be profitable your startup needs to appeal to have a certain mass appeal – passion projects do not become successful businesses if no one other than you is interested.
A recent study by CB Insights discovered that the top reason (42%) for startups failing is simply because there was a basic lack of market need for their product. In order to get around this, do plenty of research beforehand and talk to your target audience; put yourself in their shoes and look for solutions to the everyday challenges they face.
DON’T Set Unrealistic Goals
One of the biggest problems in startups today is the lack of realistic expectations and targets. Firstly, there’s the almost laughable belief amongst some founders that setting up their own venture is essentially a get-rich-quick scheme; something that any successful entrepreneur will know is usually far from the truth. Don’t let money be your main motivation for your business; focus on solving the problem that you’ve chosen and commit to thorough research and analysis to set realistic goals. This goes for your timelines as well; all too often startup founders are too impatient and eager to drive the business forward before it’s fully ready.
DON’T Go OTT on Perks
Given the often long hours and uncertain futures involved with working for a startup, it perhaps isn’t surprising that they usually have a higher staff turnover rate in contrast to established businesses; a Wall Street Journal article notes that startup attrition rates can be up to 15% higher. While there is a clear need to provide your staff with a positive work environment, don’t get caught up in the contest to hand out the most perks. This form of keeping up with the Jones’ has become a very expensive trend; last year Dropbox announced that they would be cutting back on their perks, after having worked out that they were costing the company $25,000 a year per employee.
There are plenty of other, much less expensive, ways to ensure your staff are more likely to stick around. Start by focusing on people who are passionate and create a friendly working environment where everyone feels listened to. Allowing your staff a greater level of autonomy in their everyday work lives is also a great way to make them feel valued, and you should also never underestimate the power of simply thanking your staff on a job well done. Gamification can also be great for motivation; turn your targets into a contest and enjoy the fruits of your employees’ competitive sides as a result.
Here are three more simple ideas for employee benefits as featured in the SHRM 2017 Employee Benefits Report:
Stripping your startup back to basics is not only important for keeping your costs as low as possible, it also makes it easier for you and your team to focus on your goals. Get back to the basics, ask yourself why you do what you do, and get rid of everything that isn’t actually helping your business to become sustainable. Meetings, long negotiations, irrelevant blog posts, time spent on weekend work — filter what you actually need and what actually helps, using the 80/20 rule. When it comes to your everyday organisation, make sure you prioritise correctly and get into the habit of identifying the most urgent tasks ahead of time. Break your activities down into steps to prevent yourself becoming overwhelmed.
DO use the Right Tools
In today’s technology-driven world keeping up to date is essential; your business could fail solely because you don’t have the right tech at hand. Not only does having the correct tools make your startup more efficient, it could also potentially be the difference between your target customers converting or not; for example, if you have a clunky website or lacklustre security tool. Do your research on what your competitors are using and keep an eye on updates in your industry.
When it comes to employing the basic resources your business will need to function efficiently, these will generally include a hosting provider, an email responder, and a payment gateway system. Employing the use of a contact database can also be extremely useful for startups; Global Database’s B2B directory offers a wealth of key tools such as email lists, detailed company details and digital insights, so you can easily reach out to thousands of potential customers in an instant, as well as taking an in-depth look at your competition.
DO Allow for Flexibility
Although having a detailed business plan is undoubtedly important, what is equally vital is ensuring that it can be adapted when the situation arises (and believe me, at some point, it will). It’s one thing to have an idea of how things will pan out, but when it comes to putting it into practice there are any number of things that could be detrimental to your startup if not dealt with efficiently. Keep a watchful eye on your analytics, talk to your customers about their experience with your brand and make sure you’re always up to date with both your competitors’ activities and what’s happening in your industry in general.
There are no guarantees when it comes to setting up a new business, but provided you have a problem-solving product and a clear vision coupled with realistic goals and the right tools, you will already be ahead of many of your contemporaries. It’s also important to accept that mistakes are inevitable, but can provide a great opportunity to learn and do the best for your business going forward.