“The common rule of thumb is that of 10 start-ups, only three or four fail completely. Another three or four return the original investment, and one or two produce substantial returns. The National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail,” according to Wall Street Journal reports.
Yet VC’s like Marc Andreessen have publicly noted that there is no rational reason for it. We have the talent, we have the ideas, and there is plenty of market demand for smart products and killer services. Our current economy has enough space to accommodate the growth of one hundred times more startups into fully-scaled, sustainable businesses.
Is the startup success story fated to be like a Hollywood wonder, where only a few actors in LA finally make it to the top?
Possibly. But maybe it’s because too many people are clinging to old business beliefs.
Teaching Old ‘Business Beliefs’ New Tricks
Now, if you’re a relatively young startup founder, it’s strange to think you can have “old” business beliefs. It seems like something reserved for silver-haired COO’s at Fortune 500 companies, rooted in traditional business practices from decades of experience.
But first-time entrepreneurs do have old beliefs. They come during those “I have no idea what I’m doing” moments, when to find an answer to a new question or challenge, they fall into the trap of Googling or getting counsel from peers — both of which result in a mountain of startup advice that doesn’t apply to the problem.
So, what do they do? What any human would: they turn to their own experience for answers. And that is where the dangerous moment comes … when old, life adages are not only false, but when clinging to them blocks their chances of success.
Here are a handful of ‘old’ business beliefs that could be killing your startup:
Follow my vision.
Ever hear the one about the executive who surrounded himself with “Yes” people? He always felt confident in every business move, but all those yes-es caught up with him in the end when the customer said “No.” Too many entrepreneurs rely on generic market research or common assumptions to confirm their vision and seemingly “no-brainer” solution. If you have honest conversations with the customers whose problems you are trying to solve, you’ll learn what people really want, not what you think they want.
Figure out what you need, then ask for it.
In business, this means pricing a product based on the sales margins you need in order to make the profit that will work on your balance sheet. Ignore that me-first instinct. Instead, work backwards and first find out how much a customer will pay. For instance, at last year’s Lean Startup conference, Lit Motors explained how they built a simulated dealership experience just to find out if their product had a viable market. When 15.7% of showroom visitors put money down on the spot, they knew they could move forward with their pricing strategy.
© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.