How to Create a Successful Start-up

I mostly talk about marketing and social media in the posts on these pages and frequent readers expect high-quality, insightful posts to help them make their marketing sizzle. I hope you’ll forgive today’s digression into how to create a successful start-up, and, don’t worry, I’ll loop around to digital marketing over the course of this post.

Just to give you a little background, many of my clients are start-ups, as is Hausman & Associates, so much of my advice comes from practical experience. I also worked with the Small Business Administration helping start-ups navigate the myriad uncertainties that are necessary to create a successful start-up.

First, let’s talk about what we mean when we talk about a start-up business. There’s a difference between lifestyle businesses and start-up businesses.

A lifestyle business works to supplement or replace the owner’s income. There’s no real intention to grow beyond the capacity of the owner and, later, maybe family.

Start-ups are decidedly different because the owner(s) plan for significant growth, which not only supports the founder and investors but the entire economy through job growth. You see, It’s start-ups that create 70% of all new jobs in our economy — making them the engines of progress.

Planning to create a successful start-up

I know, we’ve all heard of successful businesses whose plan consisted of scribblings on the back of an envelope or a napkin. Face it, start-ups that don’t plan in great detail fail in huge numbers.

Lack of planning accounts for many of the 80% of start-ups that fail within the first 18 months. And, a napkin doesn’t count as planning. That doesn’t mean you need to develop a 300+ page business plan, but it does mean you think deeply about what you’re planning. Face it, even though guys like Zuckerburg didn’t have a grandiose plan written in great detail, they had a great idea and devoted serious efforts toward developing that idea before doing much more than testing the waters. Facebook started with a tiny base of students from a handful of universities. Later, during the rollout and funding stages, you can bet business plans were written in great detail.

By the same token, founders married to your business plan often ignore opportunities that lie outside the anticipated business deals. Adobe almost went under in the early days because they’d envisioned selling a bundle of computer technology along with their software, according to Charles Geschke — one of the founders. It turned out ignoring their original business model was the best decision they ever made.

Fail fast

Failing fast seems like a description of what NOT to do when starting your business, but it’s great advice.

If you think about it, why waste time and money developing a start-up business that doesn’t meet the needs of some group of consumers better than existing products? Find out early that consumers don’t like your offering and save yourself the expense and aggravation. Armed with that knowledge, focus efforts to create a successful start-up that consumers do like.

How do I fail fast? Good question.

You fail fast by floating your idea and seeing how folks (prospective customers, investors, and the media) respond to your ideas. For instance, when Zappos wanted to find out if anyone would actually BUY shoes online, they created a simple e-commerce site to see whether their idea met consumers’ needs. Of course, we all know the answer, but the important issue is they tested the waters before developing an expensive website, buying inventory, and marketing their baby.

I worked as CMO for a tech start-up a few years ago. It was a great experience even though arguments over direction finally tanked the company. We all loved the idea, but we needed to see how users would respond before investing a lot of time and money building the product. So I set up a few opportunities with target groups to show them what we had using a prototype that simulated the actual product we planned to create. I sat with prospective consumers and collected comments as they navigated the prototype.

I also sent messages through Facebook and Twitter inviting friends and followers to view the prototype to provide feedback. Luckily, the feedback was overwhelmingly positive (in fact, we’ve yet to find someone who didn’t want the product), so the development team went to work coding. Unfortunately, that’s where things broke down and the final MPV wasn’t what consumers said they wanted. Fail.

The point is, we gave the product an opportunity to fail. If potential users couldn’t understand what we were doing, didn’t want it, felt it didn’t offer anything unique or felt it would be too complicated to use, we had the information needed to fix the product to meet their needs without losing much in terms of investment. By producing something different from the prototype that failed supported the value of using a prototype first.

Now, I’ll be the first one to admit that consumers often don’t know what they want. That’s why asking them is a really bad idea and not a good way to adequately test interest. Imagine if Zappos had simply asked folks if they wanted to buy shoes online.  Zappos wouldn’t exist as consumers can’t envision something they never saw. In my house, that would mean a lot of unhappy shoppers.

Fail fast, but don’t just ask people what they want — show them what you have to gauge interest. That’s why prototypes are so valuable when you create a successful start-up.

Management failures

While many businesses fail because their products aren’t unique, solve a problem that folks don’t really care about, or fail to communicate to consumers effectively, many fail because the founders/ leaders lack the skills necessary to nurture the start-up to success.

I once worked with a tech start-up with everything going for it — good funding, unique product, growing market, strong partners — but the founders were an utter failure at managing the business. First, the two founders didn’t know how to manage employees from various levels and backgrounds, especially hourly employees who needed different motivation (and level of supervision) from the sales force. Second, they tried to micromanage everything — even firing the head of IT because he ordered a different desk for his workers than the one picked out by one of the founders. Turnover rates were high, employee satisfaction was in the toilet, and inefficiencies abounded.

Good managers practice servant leadership; meaning they are cheerleaders who encourage their employees to succeed and celebrate their performance. Servant leaders also coach employees to acquire new skills and learn from their failures. Servant leaders remove obstacles and obtain the resources needed for success.

Find me the money

Many small businesses still bootstrap (grow through internal financial resources and careful husbanding of resources) because they want to control their own destiny rather than turn control over to outside investors. Owners take out a second mortgage, max out their credit cards, and beg from family and friends. New crowdfunding sources such as GoFundMe also help provide small pots of money to create a successful start-up.

Other founders envision a faster startup and growth phase, so they seek venture capital. Venture capitalists often want too much stock and control over the company that might hamper growth. Also, venture capital firms often have different goals (short-term ROI) than founders (sustained growth), creating tension that’s bad for business.

Angels offer a less controlling option for start-ups, but they often invest relatively small amounts of money that might strangle growth.

Changes in US finance laws now allow microfinancing commonly called crowdfunding. As part of the JOBS Act (Jumpstart Our Business Startup Act), businesses turn to start-up funds through sources such as Kickstarter. To see a list of crowdfunding sources, go here.

Even with funding, most businesses still require some element of bootstrapping — meaning they’ll have to find ways to do what needs doing without hard cash. Bootstrapping not only allows businesses to retain more control and profits from your business, but it also keeps you close to customers and allows for fast pivots when the goal, markets, or objectives change. Bootstrapping keeps a start-up agile.

Here are some methods of bootstrapping:

Equity instead of cash

As you create a successful start-up consider hiring employees based on barter rather than cold, hard cash. For instance, instead of getting my normal fee, I’m getting stock options. Risky, I know, but with a substantial upside. Trading equity for services may work well, especially in hiring the very expensive talent needed to develop and market the product. Be careful, however, or you’ll be in the same position as with a Venture Capitalist — owning too little of your own stock and giving up too much control over direction.

Barter

Some businesses are willing to barter their services. For instance, at Hausman & Associates, I sometimes barter marketing services for website development, legal, or something else I need. For instance, I traded SEO services to a handyman I needed to fix my laundry room after a flood.

Networking

Networking is a great way to create a successful start-up.  Not only is networking a great way to meet co-founders, but you can also find mentors, get training, and meet potential customers. Meetup is the best bet for my money.

Interns

Hiring interns (or getting their help in exchange for college credit or experience on their resume) may mean getting high-quality talent at an affordable cost. If interns represent your target demographic, you’re getting a twofer — management help and customer insights.

Outsourcing

Outsourcing is a more cost-effective means to get things done in your business rather than hiring full-time employees. At Hausman & Associates, we also hire talented folks on an ad hoc or part-time basis. This allows us to size up potential employees, while keeping our costs down. New websites like Fiverr, Upwork, and other freelance options match people with skills to businesses with specific, short-term needs, such as website design, copywriting, or other skills available in the gig economy. It’s a win-win that supports low-cost corporate needs while providing extra income or independence to gig workers.

Social networking

Social networking is a very cost-effective tool for marketing your start-up, getting valuable feedback on your business model, and connecting with the media and finding partners. At Hausman & Associates, we have our own dedicated social platforms, but we also use the extensive network of our founder, Angela Hausman. Personal Facebook profiles, as opposed to business pages, have advantages making them very desirable additions to your social networking plans.

At Groupsurfing, The Iota Project (a media company dedicated to issues of singularity and transhumanism), and other clients, we share messages on both their own social networks and those belonging to Hausman & Associates.

Set strict priorities

When you attempt to create a successful start-up, you’re like a one-armed paper hanger with way too much to do and too little time to accomplish everything. Often, you end up running around putting out fires with too little effort going into thinking strategically and doing those things critical for your long-term strategy. It’s tempting to do whatever task demands your attention at the moment. As the old saying goes, the squeaky wheel gets greased.

That’s a recipe for failure.

Instead, set priorities and tackle both long-term and short-term tasks by setting priorities. If you find you spend most of your time in crisis mode, rather than continue, stop to analyze why you’re constantly moving from one crisis to the next. Then fix the issues contributing to that situation.

I’m a little OCD, so I set up tasks using software such as Basecamp or Trello to ensure I manage long-term projects as well as day-to-day operations. I use PERT charts (see below) to ensure I’m making progress toward completing projects on schedule.

Final thoughts on how to create a successful start-up

Trying to create a successful start-up isn’t easy. It means sleepless nights, long hours of work, missed opportunities for family and self, and other sacrifices. But, a successful start-up not only improves your finances, but it also fuels the economic engine. And, having your own business provides a sense of accomplishment and freedom that many crave.

If you want to learn more about how to create a successful start-up, check out more posts on this site and scroll down to the infographic below.

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