Startup Darwinism says that as new startups get funded, others go the way of the do-do bird. Here are five keys for growing a startup to make sure your new business survives.
5 Ways to Overcome Startup Darwinism and Turn Your Startup into a Success Story
An interesting report suggests that as more and more startups get funding, more will have to die. While we are not so sure that it’s a zero sum game, we have five tips for growing a startup to help you strengthen your new business.
A day seldom passes that business media sites don’t announce the launch of a new startup or the demise of others. Happily for entrepreneurs today, there are many private and public investors standing at the ready to provide funding for a wide variety of different types of promising new startups.
Lest you think that startup failure is something that only happens to other entrepreneurs, consider these words from Forbes contributor Neil Patel cofounder of some little startups you might have heard of called Crazy Egg, Hello Bar, and KISSmetrics. In an article titled 90% Of Startups Fail: Here’s What You Need To Know About The 10%, Patel says, “Nine out of ten startups will fail. This is a hard and bleak truth, but one that you’d do well to meditate on. Entrepreneurs may even want to write their failure post-mortem before they launch their business.” Bleak, indeed.
If startup funding were enough to ensure success, the failure rate would be much lower. So given adequate funding and – presumably – a business plan worth pursuing, why is it that so many startups fail? The short answer is: Burn.
Burn refers to the speed at which a startup exhausts its resources. Most startups that fail do so because they burn through their resources faster than they replenish them through sales or additional capital put in by investors. Even fast-growing startups can suffer from burn, when high sales still do not translate into adequate cash flow.
So what is a growth-seeking startup to do?
5 Keys to Growing a Startup Without the Burn
- Stay focused.
Before a startup actually starts up, entrepreneurs are burning the midnight oil. Working with intensity and single-minded focus, they are building the business model, writing the marketing plan and selling their idea to investors. Once the startup actually launches, and there are a thousand different directions the startup could grow, it’s easy to lose focus and try to move in too many directions at once. Stay focused; work the business plan you sold to investors.
- Plan for contingencies.
The road to success is rarely a straight line or a smooth road. Your business plan should have contingencies and triggers built in that will prompt you to shore up areas that are slipping, reduce expenses, expand marketing – whatever the best course correction for the situation. Without contingency plans based on thinking through possible scenarios, when trouble strikes you might not have enough time to come up with a solution on the fly.
- Milk your cash cow.
Most businesses, and even most startups, don’t come out of the gate offering just one product or service. Before you open your doors or launch your ecommerce site, you should have a good idea of which products or services are likely to be your cash cows, your most popular entry points for customers, and your most profit-generating offers. These are the products and services that you should spend most of your time and resources in promoting during the startup phase to be sure that you get your business off the ground. Save pet projects and harder-sells for later on in the game.
- Set Aside Money for Marketing
You know you need money for equipment, inventory, staffing and a long list of other items, but if you don’t purposefully set aside money for marketing your startup you may find that you build it and no one comes – because no one knows about your business! Some of the marketing costs you may want to plan for include:
- Point of sale (POS) merchant services with loyalty and rewards programs built in
- Direct mailer or door hanger campaign in targeted neighborhoods
- An attractive website that produces conversions (sales, reservations, bookings, form submission for lead generation, etc.
- A “soft opening” to spark interest in your business, get early reviews and test your staffing and systems
- A PR event such as getting local celebrities to try your products or services, or attend your soft open or launch
- YouTube reviews
- Videos that explain your products/services, include early testimonials, etc.
- Social media account set up, sponsored posts, paid ads and boosted events
- Email marketing – and so on
The more interest you can generate in your business before the doors even open, the faster you can go from launch to profits sufficient to sustain and grow your business.
- Don’t go it alone.
Many entrepreneurs are independent by nature. They have had dreams and ideas that they had to pursue on their own, they’ve had to write their own plans, build their own websites, design their own business cards and clean their own bathrooms. They are used to going it alone. Before you launch your startup, get a mentor on board who has business (and preferably startup) experience who can give you good advice and help you shorten the learning curve when it comes to business tasks like bookkeeping and accounting, taxes, marketing, merchant services, human resources and more. The less time you have to spend on administrative tasks and busy work, the more you have to focus on activities that will grow your startup more quickly.