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Four New Year’s Resolutions That Can Make a Big Difference For Startups in 2015

2014-2015As I look at startup companies all over the world one sad fact seems to be evident. I’m sorry to say that most fail in the first year.

The sad part is because startup company founders work their tails off and make many personal sacrifices for their dream. Countless hours are spent and opportunities missed while they pursue what they think will be the Next Big Thing.

But… Unfortunately after around a year most founders find themselves sitting around a table trying to decide if they want to continue slogging along without paychecks while they are racking up more debt.

And… There is always that potential investor just on the edge of solving all their problems with a big check. In most cases more money won’t necessarily solve any real problems. The money is just a temporary Band-Aid.

So what kind of New year’s resolutions could startup founders commit to that might raise the probability that their startup will be a success?

Here are four potential New Year’s resolutions for startup founders:

1. Resolve to only create products and/or services that will be compelling for potential customers next year not last year.

So many starup ideas I see would have been great back in 2012 and completely successful back in 2010. Unfortunately the concept is a little stale right now. If an idea is already out there and gaining any type of traction starups can probably save a lot of future grief if they keep looking for another idea they can dedicate their lives to for the next few years.

Look for ideas that will get people excited in 2016. Why so far out? Because it will take you at least that long to get wheels under your idea.

How do you know if an idea will be great in 2016?

For now I will leave the full explanation of this to a future article. But… You will know a great idea when you see it and when you show it to others and you see genuine excitement.

2. Resolve to make sure your idea can make money.

This may seem like a no brainer but most startup teams get so wrapped up in the bits and bytes of their idea that they do not focus on the actual potential profitability of the product/service.

How much of the product/service do you need to sell to cover the cost of operations?

When the answer to this question is such a high number that you would need to have the entire working population of China as customers then you need to rethink your business model.

When the answer to this question involves a $20 million launch marketing budget just to get to break even you will probably have a hard time scraping up that money unless you have a very rich uncle.

If you think you will make up for a lack of traditional revenues by selling advertising, think again. Just to get your product/service in front of enough eyeballs to generate enough advertising dollars to significantly move the needle will take a large marketing budget and a very compelling offering.

Can your product/service make money?

You will need to intimately understand your customers wants, needs, pain points and what they will spend for your product/service. You will need to either make them money, save them money, or be lots of fun to compel them to spend their hard-earned cash.

Run the numbers before you start on your journey. Be sure you can sell a reasonable amount of your product/service. If the numbers don’t work out, so what… Move on to another idea.

3. Resolve to spend investor’s money like it is your own.

When I would go shopping with my kids they would frequently point out something they wanted. It could be candy, a toy, or some sugar heavy breakfast cereal. They really needed it and now. So I would tell them okay they could get it but the money would come out of their allowance.

All of a sudden my kids didn’t need it anymore. Its amazing how people spend differently when it is their own money.

When you finally get the seed or follow on capital needed to launch your startup remember to always spend that money like it is your own cash. Yes, I mean every single penny should be spent like it is your own.

Only spend money that will make a significant difference in your company’s future (or present) profitability right now. Demand the most bang for your buck.

It may seem harsh but cut out the cappuccino bars, sushi dinners, swanky furniture, Uber Rides, and high priced office space. Save those expenses for after you are raking in cash and have shown your investors a profit.

4. Resolve to decide what you want from your startup company before you begin.

Before you begin your startup journey take a few minutes to think about what you actually want from the experience. Talk to a few friends about it. Write it down. Tape it on your bathroom mirror so you see it every morning and night when you brush your teeth.

It could be independence, being your own boss, working with your best friends, changing the world, or just the adventure of running a company. Whatever it is you want be sure you are laser focused on those goals. Everything you do should be put through this important filter because a year or years from now if you are not true to what you want no amount of financial success will really matter. On the other hand if your company does a crash and burn but you got what you wanted you will be a real success.

An example of how I see startup founders get tripped up on this one is when they want to be their own bosses but they end of giving away controlling interest in their companies after several rounds of raising capital. If you own less than 51% of the company you are not your own boss.
And most of all… Do what you love because that may be all you get out of the venture.
Too many startup founders charge into their companies without taking a few hours, days or even weeks to at least map out the basics. These four New Year’s resolutions should prove very valuable when starting the essential thought processes, conversations and research needed to raise the probability of your startup’s success.

What Is A Catalyst?

CatManStarting a company can be a lonely endeavor. Believers are scarce while criticism, empty ideas, and detractors are many. All businesses, new and established, experience roadblocks, setbacks, and unique challenges. Addressing those issues early, quickly, and effectively will vastly raise your probability of success..

You have a great business idea and a great startup team but what’s required for you to scale the way you want? If your startup team is currently located in a place with essential support elements why would you want to disrupt your business to move to another city? That sounds like a sure way derail the hard-fought progress you’ve already made.

There’s one thing I know for sure… It takes more than money to launch a successful business… It takes the right catalysts at the right time. That’s what the Catalysts Guild is all about. A catalyst can be a business connection, mentor, additional team member, effective distribution channel or new strategy.

What Important Lessons Can Startups Learn From Sears, J.C. Penney, and Radio Shack?

searsForty years ago I remember hearing about how one of my neighbors had just become a millionaire. That was back in the 1970’s when being a millionaire really meant something. How did he make his million?

This guy didn’t win the lottery and he wasn’t some kind of engineering wizard who just came up with some world changing technology.  He sold shoes for a company called Sears. He wasn’t the CEO or anywhere near the top of the organization. He spent his day on the selling floor helping people find the right pair of shoes at one of the one thousand Sears stores. He was just a regular worker bee. The guy was at Sears for over twenty-five years and was regularly investing in the employee stock purchase program. One day he looked at his stock balance and it was over a million dollars.

To put this into perspective that would be almost $6 Million in today’s dollars. These days with all the money being generated by hot technology startups a $6 million dollar pay day for a worker bee may be an every week occurrence. The magic formula back in the 1970’s was to work for a company like Sears.  This concept seems quaint now.

If you weren’t around back in the 1970’s buy your dad a beer one night and ask him to tell you about who the captains of business were back then. Sears was the retail leader with J.C. Penney close behind. Radio Shack was the hot technology retailer of the day with more store fronts than Sears and they had an electronics hungry free-spending army of customers.

PenneyBut what’s going on with Sears, J.C. Penney, and Radio Shack today?

In 2014 Sears is on life support as current management has tried a variety of strategies and financial engineering to keep the company afloat. Sears is not alone. J.C. Penny seems to be on a downward slide also. And Radio Shack may not make it past this Holiday season without a significant change to their entire business model including a drastic reduction of personnel and store fronts.

Forty years ago all these companies were leaders in their segments. Minting millionaires and appearing to be unstoppable.  They were the Googles, UBers and Amazons of their day. Like today’s leading companies they had huge product hungry customer bases,they were flush with cash, they had the best management teams, and the world was theirs… Until it wasn’t!

So what can today’s startups learn from these former big business darlings?

 LESSON 1: Never stop innovating.

So you worked real hard getting your first product out to the market. You are probably feeling pretty good. Like you climbed Mount Everest. Well take the afternoon off then get right back to work on your next product. The innovation never stops. And if you don’t have a “head of innovation” then you are not innovating. Your “head of innovation” should have only one job… Making the next generation product for you company before someone else makes it.

radioshack1LESSON 2: Always be ready to obsolete your own business. 

What usually happens when a company goes on the decline is that another competitor has entered the market with a disruptive product, service or distribution strategy. And that competitor is on its way to obsoleting your company. You should always look for ways to obsolete your company yourself before someone else does. If you do it before the competition then you will still be in business instead of just talking about the good old days. Think about how Netflix obsoleted Blockbuster Video. and how Apple’s iPod obsoleted the other pile of MP3 players on the market. The auto industry dealer network may be living through the early stages of being obsoleted right now. I’m sorry to say that all those plaid jacketed car salesmen will probably not be around in a few years. Maybe they can go keep the travel agents and bank tellers company.

LESSON 3: Customers really do come first. 

A good early warning is when your customer numbers start to drop. When your customers stop coming back you need to figure out where they are going and how to get them back. Keep an eye on your customer numbers what ever that metric is for your company. Fixing your customer numbers is no black science. Just talk to your customers and take the time to really listen to what they are saying. You don’t need to go very far to see a great example of this rule being broken. According to QuantCast  over the last year the number of active users for Zynga’s games has dropped from around 1.6 Million to around 860,000. A 46% drop! What do you think Zynga should do? Maybe listening to their customers would be a good start.

LESSON 4: Last decade’s (or last year’s) management team is probably not the right team for this decade (or year).

Markets change. Products change. Technology changes. And… Companies must change and grow to survive. An unfortunate fact of life is that the management team that got you to where you are may not be the one to get you to where you want to go. The Sears management team that guided the company through its most successful period would probably be lost in today’s multi-channel highly-competitive retail environment. The same goes for a startup company. That awesome team that brought the first product to market is probably not the right team to take the company from ten employees to five hundred warm bodies. Be a part of that management change. Don’t resists it or your company may disappear overnight.

Zynga Active User Numbers Drop 46%

Zynga Active User Numbers Drop 46%

LESSON 5: Always be hungry. Never stop thinking like a startup.

What would Sears look like today if they had not lost the “startup” spirit? What if they had not forgot that hunger for success that their founders most certainly had? If you ever find yourself sitting in your office looking out at all you command and thinking “I have arrived”… You should call down for some empty boxes because that is the beginning of the end. If you look closely at most any of the fallen company giants, at the core you will find a management team that lost its hunger. Work became a 9 to 5 thing you showed up for instead of the reason to live. Those fallen giants forgot what made them great. What set them apart and what got them to the top of the mountain. That first mountain is just a place to look around and find the next mountain to climb.