Peter Cohan | Inc
What’s the difference between those who succeed and those who fail? The answer lies in these six decisions.
If you want to turn your great idea for a start-up into a real business, it won’t just happen because you want it to. In fact, the odds that you can succeed are stacked against you. And while you’re trying to beat those odds, you will be putting your reputation, the time of your co-founders, and possibly the cash of your friends and family at risk of loss.
Over the past two years, I have been interviewing start-up CEOs–about 180 at last count–in a quest to figure out what makes the difference between the few who succeed and the many who fail. You can read the result in my new book, Hungry Start-up Strategy: Creating New Ventures With Limited Resources and Unlimited Vision, coming out in November.
Here’s a hint for you: It all depends on how well you make six vital decisions.
1. Set goals
When you start your venture, you will probably have nothing to offer the people you will try to recruit. Yet I talked to many company founders who were able to recruit outstanding people and raise capital from some of the most prestigious of venture capitalists.
To do that, these founders set three kinds of goals. The first–for recruiting others–was a mission that gave the new venture so much meaning to those recruits that they could not resist.
The mission will only get you so far, though–you will also need a long-term goal for investors, something like going public in five years or finding a corporate acquirer. And you will need to set short-term goals that will help you learn what you need to do to grow without burning through your resources.
2. Pick markets
If you can set goals, you’re far from out of the woods. After all, you need to figure out who will use or buy your product. And to do that, you will need to pick the markets that you’re going to target.
Two hints for picking the right market–you have to have a personal passion for solving that market’s problem, and the customers in that market must see your product as a compelling answer to a problem that none of your competitors are solving.
3. Raise capital
It goes without saying that everyone has bills to pay. So if you are going to hire people or buy supplies, you will need money. But where can you get it?
The best place to look initially is probably your customers. If you can get them to pay you more for the product than it costs you to build it–and cover your fixed costs–you are going to be in a good position. You might also try to get your suppliers to extend you favorable payment terms. If neither of those suffices, you can try tapping your own bank account or your credit cards.
You can probably forget banks unless your start-up has some kind of collateral that the banks can seize or sell if you don’t repay.
And I’ve found that you may want to match your efforts to raise money from other people (friends and family, angel investors, venture capitalists) to the stage of your start-up’s development, moving up that ladder as you ramp your sales.