It's no secret that most businesses fail within the first few years. The problem is that no one ever explains why. It is common belief that each business has its own unique reason for failure, because that is what the defeated entrepreneurs tell people. Reasons such as "The economy made success impossible" or "advertising costs are just too high" are some of the most common arbitrary excuses for a failed startup. In reality, 80% of the business failures could have been prevented by following one important step that was either neglected or skipped altogether. That step is proving the concept prior to launch. If it's as easy as one step, why haven't the statistics for startups improved? Because although it is just one step, there is a reason it is skipped; it's difficult and uncomfortable. Excited entrepreneurs can't wait for the opportunity to open their doors and bless the world with their incredible new product or service. They formulate their idea, quickly establish an LLC to make it official, design some business cards, design a website, and start shopping for office furniture and other unnecessary "business" expenses. After all of this time and money has been spent, entrepreneurs realize that for some reason, they aren't getting enough sales. Figuring out why or actually going out and making sales is too difficult and includes the prospect of rejection. What happens next? The business shuts down and the owner explains how bad the economy is.
Watch as the people you know start businesses and you will see this exact scenario play out over and over again with very little variation.
Here's how to avoid it:
Test your concept prior to launch. Do not establish an LLC, do not buy business cards, do not rent space, and do not assume that anyone is going to show up and start buying from you as soon as you launch. Instead, design your product or service so that it will do its job and nothing more. This is your minimum viable product. Do not spend a single penny on fancy packaging, or extra bells and whistles. The idea is to find out if you can sell your offering for the amount of money you will need in order to survive. Once you have your minimum viable product (MVP) begin selling it using whatever methods you plan to use when your company launches. Entrepreneurs often have the idea in their heads that once they start a business, people will come to them and start buying. That is why they fail. If you find it difficult to sell your MVP, remember that this is what running a business will be like every day. If it isn't selling, try new sales methods, hold focus groups, reevaluate your target market, and if necessary, reevaluate your business.
You will need to decide at what point your concept has been "proved." This will vary significantly between industries but you need to establish a number of sales that need to be made before you proceed with launching your company. This sales goal needs to be difficult and you will need to track the time and expenses involved with each sale and figure out if it is profitable enough to justify the business. If and when you reach that point, then you will be among the few entrepreneurs that are able to enjoy the excitement and difficulties associated with a thriving business.
If you are having a difficult time proving your concept even after holding focus groups and making adjustments, there is no shame in admitting that the project is not worth pursuing. The worst thing you can do is assume that it's your "image" that is preventing sales and proceed with a full launch anyway so that you can be viewed as "official." By spending the time to prove the concept, you will have saved thousands of dollars and you will be in a much better position when starting your next project.
Please feel free to add any comments below. Thanks for reading and subscribing!
Next Post: Designing company automation: Making the company work for you.
Watch as the people you know start businesses and you will see this exact scenario play out over and over again with very little variation.
Here's how to avoid it:
Test your concept prior to launch. Do not establish an LLC, do not buy business cards, do not rent space, and do not assume that anyone is going to show up and start buying from you as soon as you launch. Instead, design your product or service so that it will do its job and nothing more. This is your minimum viable product. Do not spend a single penny on fancy packaging, or extra bells and whistles. The idea is to find out if you can sell your offering for the amount of money you will need in order to survive. Once you have your minimum viable product (MVP) begin selling it using whatever methods you plan to use when your company launches. Entrepreneurs often have the idea in their heads that once they start a business, people will come to them and start buying. That is why they fail. If you find it difficult to sell your MVP, remember that this is what running a business will be like every day. If it isn't selling, try new sales methods, hold focus groups, reevaluate your target market, and if necessary, reevaluate your business.
You will need to decide at what point your concept has been "proved." This will vary significantly between industries but you need to establish a number of sales that need to be made before you proceed with launching your company. This sales goal needs to be difficult and you will need to track the time and expenses involved with each sale and figure out if it is profitable enough to justify the business. If and when you reach that point, then you will be among the few entrepreneurs that are able to enjoy the excitement and difficulties associated with a thriving business.
If you are having a difficult time proving your concept even after holding focus groups and making adjustments, there is no shame in admitting that the project is not worth pursuing. The worst thing you can do is assume that it's your "image" that is preventing sales and proceed with a full launch anyway so that you can be viewed as "official." By spending the time to prove the concept, you will have saved thousands of dollars and you will be in a much better position when starting your next project.
Please feel free to add any comments below. Thanks for reading and subscribing!
Next Post: Designing company automation: Making the company work for you.
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