5 Business Lessons Entrepreneurs Often Ignore When They’re in Love With Their Product
Most aspiring entrepreneurs are convinced that their idea and passion are so great that failure is not a possibility.
They relate quickly to one of the big successes out there today, including Facebook, Airbnb, or Snap, and can give you a dozen reasons that they are in the same category. It’s a good way to get some inspiration, but not an accurate representation of reality.
As a startup advisor and angel investor, I tend to focus on the much longer list of ways your startup can fail, based on my own experience and inside knowledge from peers who you will never see highlighted on the Internet.
I’m convinced that you can learn more from failure than success, so it pays to take these as lessons to improve your success odds before you start:
1. Creating a new technology doesn’t make a business.
Based on my experience, creating a new business is at least as difficult as creating an innovative solution, and it takes a knowledge of finance, operations, customers and the marketplace.
If you don’t have all these interests and skills, even your most “disruptive” products will likely fail.
For example, the personal motorized scooter Segway was announced as disruptive technology way back in 2002, but is still not a successful business. Despite the technology, the fears of pedestrians and government regulations strangled the business.
2. If there is no competition, there is likely not a market.
Every potentially successful product has competition, or an alternative, or customers with no interest in change.
If you really believe your idea has no competition, perhaps you haven’t looked, or there is no real business. Competitors arrive rapidly these days, so make sure you look often.
I often hear funding pitches on “nice to have” products, combining the features of several known winners, such as Facebook and Twitter. In fact, there are no competitors for this combination, but people rarely pay real money or incur change for nice-to-have solutions.
3. Focus on doing one thing well rather than many things.
Don’t try to be all things to all people. You will likely confuse your target customers, and do everything poorly, because of the limited resources of a startup.
Later, as you scale the business, is the time to add products or service offerings that customers demand to make the business more robust.
For example, Uber built their initial success by simply connecting people looking for intra-city car rides via a smartphone app. Only later did they expand this offering to multiple classes of cars, Uber for business use, package delivery, and even freight hauling.
4. Plan to and assemble the right team, including co-founders.
Building and running a business is not a solo operation. You need skills in finance, operations, and marketing to supplement product development, and more hours of work than one person can manage.
A team with the right skills, chemistry, and culture makes all the difference in business.
I find that most investors invest in the team, more often then they invest in an idea. If you have the right team, you will be able to execute effectively, multiply the impact of your solution by an order of magnitude, and build relationships with customers quickly.
5. Calculate your projected costs, and double the amount.
Both the business and your solution will take more time and money to develop than you expect.
Entrepreneurs always assume everything will go right the first time, and it never happens. Count on at least one required pivot, and several crises that you could never anticipate.
Can you believe that Facebook, for example, required an investment of nearly $350 million before turning cash-flow positive? Even the best entrepreneurs tend to underestimate their requirements, and finding emergency funding is very costly.
There are many more lessons to be learned by listening to advisors, and peers who have gone before you. Even if you fail on your first startup, you should wear it as a badge of courage and lesson learned, rather than be devastated.
Both Bill Gates and Steve Jobs experienced early failures, but obviously never gave up. Your legacy will be how far you have travelled, rather than where you started.