Starting a new business
It takes determination, bravery and a serious dose of wild optimism to start a new business.
To build a startup is even more demanding than building a business because in addition to all factors when building a business, it is expected that you are building something that scales and provides a two digits month-to-month growth.
It takes hard work.
Despite all efforts, about 70% of new businesses won’t celebrate their 10-year anniversary. What is causing this high failure rate and why so many people give up on their great idea and invested efforts?
Factors to encounter, related to the business environment
When starting to work on a new idea and building a startup in a given industry segment, it is important to ask questions and know a few statistics.
What is the startup failure rate in your industry, your city, your neighborhood, your niche?
Why is this important? Because once you have these numbers you have an idea of what the odds are to survive. More importantly, it also gives you an idea if you are setting up your company for success, by locating your activities in the area you initially started in.
The industry failure rate is important because it will not allow you to ignore factors like economic, financial, social and cultural data in your particular niche and region. Is your startup in the right community, city, state? Are the customers you are targeting in that region and cultural environment looking for your services or product?
Good questions to ask when you start would be:
- What are the best cities for startups?
- Which city is best for the services/products I am building?
- What industries are startup-friendly?
- Which industries are most profitable?
- What do investors (currently) invest in?
- Where are the investors located?
- If your startup is a technology startup, what technology stacks and frameworks are currently in favor to be invested in?
What would behavioral brain research tell us on the topic
ScienceDaily recently posted an interesting article commenting on research done at Queen Mary University of London.
The research was focused on analyzing the complex relationship between reward and effort in achieving goals. The researches were able to identify two critical stages in the decision-making process.
What are these two stages? First, when deciding what to do, people are motivated by the outcome and focus on the rewards. Then, when they start executing on the plans of what they want to create, focus shifts to the difficulty of the goals and on the effort, they need to put in.
How can we benefit from such information and how to interpret it?
The results of the research could be interpreted in different ways.
One interpretation would be that the reward needs to be so great, that the day-to-day work and the amount of effort that we put in need to be well compensated. When we start a new business, the goals need to be greater than just financial success. It needs to bring purpose and keep the founders energized to continue with the project.
Another way to look at this might be that founders need to make a very detailed plan about how this business idea will be executed, so they know what is in the road ahead and be prepared for it. This sounds like creating a business plan, and it is. Having all elements and factors put on paper and reviewing all potential work can well define the efforts needed to bring the idea to life. Then it will be relatively easy to wight the expected rewards against the effort and realize if this idea is worth the investment of time and talent.
To achieve your goals, the researchers’ recommendation is to keep ‘eyes on the prize’ all the time while managing day-to-day tasks during the execution process.
In the end, all this is about managing expectations.
Once we define what we want to create, we need to make sure we set up our company for success. Checking the industry statistics, locale, area and state friendliness to what we want to create is something founders need to research and be aware of.
Lastly, we need to understand how our brains work to help or impair us. The reward of what is being created needs to outweigh many times the efforts and time investment. To ensure we know what is needed to make our idea a reality, a good description of what is involved in the process is a must. Business plans are considered something from the past, but there might be a good reason they existed in the first place.
Make sure you are after a big reward. Remind yourself daily of that reward and avoid putting too much weight on current and immediate tasks. This is the behavioral scientists’ advice for achieving your goals.