Shikhar Ghosh of the Harvard Business School opines that, “Nearly 70% of all startups fail.” If that’s not alarming, then I don’t know what it is. Even more important, it sparks a crucial question of: “What aren’t startups doing right, what is the reason they wield such high attrition rate?”
A curious bid to find answers led me to the following seven factors that, as part of a whole, could be accounting for Ghosh’s observation.
In fact, in June 2015, I designed and instructed an entrepreneurship development seminar on the exact theme: “Seven Mistakes Startups Make.”
The seven are:
Sam Walton, the iconic founder and former Chairman of Wal-Mart Stores rightly observed: “Individuals don’t win, teams do.” What is fact is that all of the world’s entrepreneurial leaders understand that, “a leader’s potential, irrespective his talent or charisma is determined by those closest to him.”
Steve Jobs built Apple courtesy the great business partnership he enjoyed from his closest friend, Steve Wozniack, a design engineer.
Bill Gates grew Microsoft, thanks to his unsung hero-friend: Paul Allen. Ken Ofori-Atta and Keli Gadzekpo for many years partnered to build one of Africa’s most innovative investment brands in Databank. Great and enduring businesses are the products of solid, mutually-benefiting partnerships.
Characteristically, wrong teams are known by the following:
- They are led by a passionless leader;
- Team members don’t know where the company is headed for
- They are not aligned with the business’ goals and vision
- They lack the relevant competence for the job
- They dislike change
- Its team members don’t go the extra mile for the business, amongst others
If you have a product you cannot sustain in the marketplace or your target market doesn’t respond to, then you may have to rethink the product.
Essentially, a new product has to offer customers exceptional utility at an attractive price and the company must be able to deliver it at a tidy profit, according to blue ocean strategy authors: W. Chan Kim and Renee Mauborgne.
Also, business leaders ought to be mindful of the fact that, it is not the business of the customer that they get rewarded for their innovation; it is their responsibility to partner the customer to make their products succeed.
That requires adopting an outside-in paradigm (partnering with the needs of prospective customers) in designing products, to avoid the resistance of the market.
Not Facing Reality:
UT Group co-founder, Prince Kofi Amoabeng asserts that, “an effective business leader is one that expertly balances leading with the heart and managing with the mind”.
I observed with a lot of trepidation that too many people in our part of the world are unable to build profitable businesses owing to the fact that, they invest excesses of their hearts and little of their minds.
A leader’s job is to first define reality and then face that reality. Many start-up and even established business leaders fail to act in such decisive moments:
- A repeatedly, under-performing and/or non-aligned team player
- A failing or faulty product on the market
- Dwindling sales
- Escalating cost of operation
- Unsold stock
- Mounting debt
Such instances and many more in business require that entrepreneurs act decisively, swiftly and strategically.
Failing to Sell:
It’s interesting how startup entrepreneurs launch a new product and expect the product to sell itself.
Well, sorry, I am sure you know by now it doesn’t work that way. Products don’t sell themselves, not even the best products; people sell products. Methinks there is a market for anything only if you will sell it.
Thus, the challenge isn’t with whether there is something to sell but with how to sell it. Few mistakes salespersons do:
- They lack the skill of communicating and connecting with people
- They busily sell to family and relatives
- They offer discounts at the slightest reaction
- They fail to sell to strategic buyers; that is persons that go on to sell to many more
Overpricing your Product:
Even global businesses get the pricing hurdle wrong. Like it or not, pricing is key to gaining competitive value. Get it wrong and your innovation is futile. Pricing matters because it is one of the three topmost factors that influence customer’s buying decision. The other two are: brand value and peer influence.
I published a motivational newspaper about two years ago and priced it above the industry average of GHc2. Our reasons made sense, at least to us: the fact that the magazine wasn’t just another political, sports or entertainment newspaper whose content expires after at most a week.
But this ideology faced opposition from our clients who were quick to compare it to another newspaper. The reaction, amidst the fact that they did buy the product, became repetitive that we decided to align with the market’s view.
We hadn’t lost a price war; we were doing what businesspersons do: they partner the customer so as to succeed. For entry products, one proven and trusted strategy is to operate at the most efficient ratio so you can present your product at a price below the industry average whilst still delivering superior value to clients.
In HR we contend that, “people don’t do what you expect; rather, what you inspect.” Don’t delegate work to a new hire and trust your intuition the work would be done. Confirm it, please.
Assure team members you are looking over their shoulders for a period up until when they are competent enough to handle tasks without supervision; and that ultimately, it is to groom them into capable hands that can handle any responsibility within their defined roles. Many startup entrepreneurs commit the following mistakes:
- They delegate work to inexperienced people without proper and adequate coaching or training
- They fail to maintain regular, informal communication with team members to assist them perform better
- They accept any report given them without painstakingly following through to confirm or otherwise
I found this to be the single biggest reason many startup entrepreneurs don’t breakthrough. They give up on the pursuit of their dreams. Sir Richard Branson posits that, “entrepreneurship is a long term endurance game.” I define entrepreneurship as a risky guess. It’s not a puzzle for the simple. It is the reserve of today’s audacious thinkers, driven by a vision of creating a better future. And hard truth is: many a time we stop at the very trajectory that leads to that breakthrough we have years fasted and prayed for. Don’t stop!
Minister David Mills is an Author, Keynote Speaker, Executive Trainer and Leadership Expert. Educated at Prempeh College, he wields an MBA from the Lord Ashcroft International Business School of Anglia Ruskin University, UK. He is President of HR & Leadership Centre, a mission-driven, graduate leadership training centre developing ethical and innovative business leaders and entrepreneurs from Africa. Contact him via: email@example.com
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