It’s estimated that well in excess of 600,000 new businesses launch each year, and that only about half of young companies make it past the five-year mark. For founders, starting a new venture can be both exhilarating and exasperating. That’s why many successful business leaders urge aspiring entrepreneurs to consider a number of things before hanging their shingle and opening their doors.
Do an unbiased personal assessment
One important consideration is how your personal qualities and skills will factor into your new life as a company owner. “Before you even start looking for a business to create, consider your knowledge, experience and skills,” advises Barbados businessman Bobby Genovese. “What would you be the most happy doing? And what have you been most successful at?”
Bobby Genovese suggests contacting former colleagues to help you assess your specific strengths. “For example,” he says, “I’m good at sales and had a way of making people feel comfortable, and was very determined to succeed. If you’re going to be successful in whatever path you decide, make sure you are passionate about it, and never take no for an answer.”
Know your industry
How much do you know about the industry and the marketplace you’re planning to enter? You might believe that your business concept is unique, but until you perform a competitor analysis, you don’t really know for sure.
Ian Wright, founder of British Business Energy, says that “Just because you have a brilliant idea does not mean other people haven’t also had the same idea. If you can’t offer something better and/or cheaper than your competitors, you might want to rethink starting a business in that area.”
Know your audience and what it wants
As you’re learning about your competitors, you’ll also want to give equal consideration to the people or companies to whom you intend to sell. This means determining whether your business idea even has an audience that will sustain it.
“One of the most painful and common mistakes I see first-time entrepreneurs make is that they fall in love with their own business idea,” says Steli Efti, CEO of Close.io, an inside sales platform. “They’ll spend months building what they believe to be the next innovative, disruptive, game-changing startup. Then they launch … and nobody buys, nobody cares, nothing happens.”
He notes that it’s easy for new entrepreneurs to become enamored by their own ideas, and suggests instead to “fall in love with the problem you’re trying to solve for your customers, and validate your business idea early on that it is a problem worth solving.”
Have a compelling value proposition
Many of today’s most successful companies did something really smart during their earliest days that helped them go from good to great. They determined specifically what it was that made them unique in a way that mattered to their customers. This uniqueness enabled them to build not just profitable businesses but, in numerous cases, strong, recognizable brands and a loyal customer base. And it all started with a value proposition that set them apart from their competitors.
“In its simplest terms, a value proposition is a positioning statement that explains what benefit you provide for who and how you do it uniquely well,” writes Michael Skok, founder and partner at Boston venture capital firm Underscore VC. “It describes your target buyer, the problem you solve and why you’re distinctly better than the alternatives. Establishing a substantive value proposition is critical if you want to start the journey from your ‘idea’ to building a successful company.”
Consider cash flow
Got money? You’ll need it. “Simply put, without cash flow there is no business,” writes Donny Gamble, founder of personalincome.com and ideahacks.com. “Keeping cash flow coming in will be an ongoing challenge, but it’s never more important than in the startup phase. Before you can officially launch a business—in fact, before you can even say that you’re in business—you need to have some clients and some cash flow coming in. When you start your business, that should be your primary mission.”