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You don’t want to lead a startup that folds after five years. You want to grow a company that can thrive in the good times and weather the bad. To do that, you need more than luck — you need battle-tested strategies that help strong companies survive.
Startups fail for all sorts of reasons. CB Insights did a study on some of the most common causes of startup death and discovered that market need and cash flow problems kill more startups than any other factors.
In almost every case, company leaders can keep their ships afloat with proper foresight and preparation. Whether that means killing a bad project before it tanks or adopting a new sales strategy, startups have the power to change their destinies.
The big shots on “Shark Tank” are deliberately choosy about where and why they invest. They know most companies struggle in the early days, which is why they look for businesses that solve problems, not products that need markets. Television’s most beloved investors also love entrepreneurs who understand the financial side of the equation. Even a great company with a hungry market won’t survive long without enough money to make payroll.
Successful startups understand when to go all-in and when to change course. Scott Litman and Dan Mallin, successful serial entrepreneurs in Minnesota, credit much of their success to their forward-thinking philosophy. The duo also runs the Minnesota Cup, the largest entrepreneurial contest in America. They, too, advise entrepreneurs to prioritize the needs of the market over the merits of the solution. Given their extensive experience, they also recommend that founders pivot quickly to a more promising idea if the first one loses steam.
Secrets to long-term startup success
With so many potential pitfalls on the path of entrepreneurship, startup leaders don’t have it easy. However, with a bit of planning and sensible decision-making, founders can jump the biggest hurdles and get their companies in position to succeed long-term.
1. Choose your friends (and investors) wisely.
Attitudes are contagious, meaning the people you surround yourself with have a big influence on your business success. Founders have to hustle. Friends who prioritize leisure over success are great, but if they don’t push you to be better, expand your circle to include more ambitious members.
Seek out people you admire, and connect with them. Attend conferences, and start conversations with people who display the right attitude. Don’t limit your networking efforts to potential customers or partners — savvy professionals can smell a pitch coming. Instead, look to make genuine connections with people who inspire you to be better in your personal and professional lives.
Do the same with investors. Money might be tempting, but if you take it from someone who has conflicting visions for your company, you will soon regret cashing the check. Hold out for investors who agree with your goals and want to help you achieve them.
2. Pick a good location and stay there.
Silicon Valley is great, but it’s not the only place in the world for startups to see success. Pick a home for your venture that has the financial resources, affordability, and top talent that you need. Consider setting up shop near a university to have better access to students entering the job market or to professors who are experienced in their fields. Also, choose a location where your services or products are needed. And it doesn’t hurt if local regulations favor new and growing businesses. Check out local networking programs, tax codes, and zoning regulations.
After you’ve set up shop, it’s key to stay put. “As soon as a startup hits the magic number of 20 employees, entrepreneurs inevitably get wandering eyes for big cities such as San Francisco, New York, and Chicago,” says Pat Riley, CEO of GAN. “The promise of metropolitan startup success is mostly a mirage.” Start local, and then leverage those connections to grow without abandoning your roots.
After starting up in a Manhattan apartment belonging to the company’s CEO, the leadership of Torsh was looking for a permanent home for the growing business. The company opted for an unconventional choice — New Orleans — noting the Digital Interactive Media and Software Development Incentive as one perk.
3. Give people what they need, not what they request.
People have vastly different ideas about what they want than their actions would suggest. When customers provide feedback on products or demand new features, don’t think of those words as guidelines. Instead, think about the customer needs behind the words, and use those needs to guide your decisions.
Solicit customer feedback across a variety of channels to get a balanced perspective. Use surveys, analyze customer activity, and reach out to customers directly. If you’re using surveys, remember to keep it short to increase the likelihood of customers filling it out without getting frustrated. Each question needs a purpose. And after you’ve asked for all of this feedback, organize it, act on it, and then follow up with customers who initially shared their opinions with you to gain insights on your actions.
It’s also important to have a team of people who can take customer feedback and interpret it. They can glean insight into what your customers might need not only today, but also in the future. You can’t buy a crystal ball (at least not one that works), but you can bring in a team of people who can help you see which way the wind is blowing. Nurture a strong product culture within your company. Talk to employees about the importance of iterating on good ideas, and reward people who take risks. Good problem-solving capabilities, not good solutions, keep companies relevant as consumer preferences shift.
Occasionally, a true stretch of unpredictable bad luck will tank an otherwise promising startup. In most cases, though, founders have the power to choose their own destinies. Consider these three strategies to ensure product-market fit, develop a strong network, and build your company upon a foundation that can sustain growth.
May 5, 2019 at 07:44AM
Forbes – Entrepreneurs