Statistics show that nine out of ten startups eventually fail. Yes, startups can be extremely risky ventures. If you are a savvy entrepreneur willing to put in the time, effort, and learning required, your startup can be amongst those that meet that 10% success rate.
An important factor in growing your business is ensuring you have the proper support and foundation to thrive and bank on in trying times. Without strong pillars of business, your startup growth might stall out. Even for those startups that do manage to get off the ground, the Small Business Administration reports that 50% of new business don’t make it past five years, and only one third make it 10 years. If you’re looking for longevity, you’ll want to make sure you have a firm grasp on the four aspects of the business that can affect your growth. If these elements are well-developed, your business is more likely to become the one in ten that manages to succeed:
Building the Right Team
A company is only as good as the team behind it. A successful startup understands that it is a team effort to build a company hence recruiting, training, and bonding with the right team is crucial. Whether you’re looking for a partner, executive, or are expanding with a full support team, you want to attract people by creating a culture of positivity and working towards your vision and mission. The more direct and substantial your goal, the more you will attract talent who believes in the same values.
Take Neil Patel’s story, for example.
This renowned entrepreneur hasn’t always seen success, and one of the reasons was due to clashing business partners. Patel made the mistake of not building the right team. First, two of his business partners were married to one another, which created unnecessary fights and debates (not to mention an unfair dynamic in the partnership).
Then, when the inevitable fallout happened, the relationships between partners ended on negative terms, and Patel had the unfortunate job of having to tell other interested parties and investors that the business was going downwards thus ruining relationships he’d forged along the way. A business partnership that lacks trust and understanding can stall a startup, and it is a crucial business rule to remember.
Team roles and responsibilities should also be clearly defined. It’s common in startups for team members to wear many hats, but knowing what all those hats are is critical. Knowledge sharing at this stage is paramount, so everyone involved is working with the same information.
Tools like an online knowledge base software can help spread knowledge within the team as well as share updates about your evolving policies, tools, or products. Online technical documentation software can help teams collaborate and work on projects together. Sharing necessary information and details in a centralized knowledge base will not only create a well-informed team, but it will also develop trust and reliance on one another which will eventually result in positive growth.
Managing your Cash Flow
It’s essential for a startup to have a strong cash management strategy. Not knowing your numbers can severely hurt the growth of your business. In fact, over 80% of companies shut down because of inadequate cash management.
In Neil Patel’s experience with his failed startup, in addition to partner issues, another reason he claimed for failing was poor money management. In Neil’s case, he says, “not only did my business partner and I support the business, but we also had to pay for living expenses. This can really add up when you factor in 4 or 5 kids to be fed in addition to team members. We were losing thousands of dollars every month, and it was adding up very quickly.” Yikes.
Understanding how to spend your money properly is essential for growing a startup. A lot of new startups think that they can acquire funds and spend as they need, assuming they can always ask for more money. In fact, funding is much less commonly available than many think – the numbers show that investors provide less than 1% of funding for startups. This means that your company should have a steady cash flow strategy for staying in business that doesn’t rely on investors.
This often means contributions from friends and family, plus your own personal funds. Spending slim and bootstrapping will prepare your startup for the worst and will help your company grow meaningfully.
Knowing Your Customer
If you don’t have a deep understanding of your customer base, then you’ll never be able to provide the kind of value that will want customers to keep coming back. By identifying your ideal customer, you also improve your targeting, marketing, and possibly, the product or solution you are providing.
However, knowing your customer is much more than just identifying them. Once you have your perfect clientele, you need to keep them around by providing exceptional customer service and support. Poor customer support is a major reason why customers leave businesses for the competition.
An effective (and cost-effective) way to provide customer support is by integrating an online knowledge base or live chat software into your company’s website. If customers are lost on your site or have an issue that needs to be resolved, redirecting them to a chat interface provides a personal touch as well as instant access to the information they need.
The Demand for your Product
According to Fortune, one of the main reasons that a startup fails is that it “makes a product nobody wants.” In fact, 42% of startups claimed that the lack of need for their product was the primary reason for the failure. Your team, your cash, and your customer service don’t matter if no one needs, likes, or understands your product.
Sometimes creators can become irrationally delusional in assuming they can convince the market that they want and need their product. While there is some merit to this Steve Jobs famously said, “Some people say give customers what they want. But that’s not my approach. Our job is to figure out what they’re going to want before they do”. – many entrepreneurs live by this mantra.
A realistic approach to your product will save time, cost, and energy, and it will ensure that you are creating an executable solution to a real problem. This also means understanding your competition inside and out and knowing what specifically sets you apart from them, as well as being able to articulate and sell that advantage for growth opportunities. Once you discover your secret sauce, your growth will be inevitable.