A business starts with someone’s bright idea. This idea is a passion for which a business opportunity presents itself. The entrepreneur has a vision of what the future looks like and then works doggedly to realise their dream by developing the idea and business opportunity into a new organisation. The products and services are what the owner believes are necessary and therefore expectations are high that the business will succeed.
Unfortunately the statistics show a different story. A note delivered to me this morning highlighted that according to Forbes Magazine, 80% of first time businesses fail within 18 month. The statistics that I have from the ABS are a little less dramatic but do show that the survival rate of SME’s after 4 years of trading is only 60%. Certainly not what the prospective entrepreneur wants to hear.
I have touched on several of the stakeholders, in previous blogs (and their roles in making businesses successful) but feel that the recognition of the work, research and investment that the business owner or designated manager undertake is seriously underestimated by all other than the incumbent. The owner is the reason for the business, has the passion for the business and is totally responsible for the success or otherwise of the business. Without this person, there is no business, there are no jobs and there is no contribution to the betterment of our society.
So how can the business owner/manager share their vision, pass on their ideas, their passion and their products & services and translate that into a dynamic and growing business?
Bill Gross is the founder of Idealab, a business incubator in the USA and is very focused on new ideas. His research into successful and unsuccessful startup identified 5 critical aspects that new businesses should focus on to improve the chances of success. These were in order:
- Timing
- The Team
- The Idea
- The Business Model
- The Funding
Timing accounted for 42 percent of the difference between success and failure. The team and how the team executed the idea came in second, and the differentiability or the uniqueness of the idea came in third. While the Business Model and Funding were important, in Bill’s experience, if the first 3 criteria were satisfied, the other 2 followed. Admittedly this research was done on a small sample of about 200 companies, but the organisations did range in size and included some very large companies such as Uber, YouTube & LinkedIn.
(If you are interested in viewing his short presentation please click on Start Up Success.
Think about this for a moment, the team, the idea and the execution of the idea all matter. But timing may matter more. Look at whether your prospective customers are really ready for what you have to offer them. If you are passionate about a product/service you will want to push it forward. By not considering the timing, you may risk launching a product or service that the market is not ready for. That then means a lot of work for the start up entrepreneur, establishing the market and readying it before the products can be introduced. This is likely to require a completely different set of skills from those the prospective business owner has or is passionate about. Are you able to devote your energies to establishing that marketplace?
In 1943 Thomas Watson who was the president of IBM said, "I think there is a world market for maybe five computers." To reinforce that, again as late as 1977, Ken Olsen, founder of DEC said, "There is no reason anyone would want a computer in their home." These are statements that have been consigned to the Hall of Infamy for the wrong reasons, as today our computers, laptops, tablets and phones are essential tools to run our business. To be fair, when these statements were made, the technology was not available and the market not ready for what we now have. Timing was the issue here.
If you are a business beyond the startup phase and believe you have the timing right, the relevance of Bill’s work is then to ask yourself, do you have the team that will allow you to grow your business? Are the products and services you offer differentiated or unique enough? Both point to the question of your Competitive Advantage. Have you identified you competitive advantage and are you using that competitive advantage to allow your growth to continue?
