How to Create a Successful Start-up

I mostly talk about marketing and social media in the posts and frequent readers expect high-quality, insightful posts to make their marketing sizzle. I hope you’ll forgive today’s digression into how to create a successful start-up.

Just to give you a little background, many of my clients are start-ups, as is Hausman & Associates, so much of my advice comes from practical experience. I also worked with the Small Business Administration helping start-ups navigate the myriad uncertainties that are necessary to create a successful start-up.

First, let’s talk about what we mean when we talk about a start-up business. There’s a difference between lifestyle businesses and start-up businesses.

A lifestyle business is designed to supplement or replace the owner’s income. There’s no real intention to grow beyond the capacity of the owner and, later, maybe family.

Start-ups are decidedly different because the owner(s) plan for significant growth.

It’s start-ups that create 70% of all new jobs in our economy — making them the engines of progress.

Planning to create a successful start-up

I know, we’ve all heard of successful businesses who’s plan consisted of scribblings on the back of an envelope or a napkin. Face it, those are the exceptions and most start-ups who fail to adequately plan are doomed to failure.

Lack of planning accounts for many of the 80% of start-ups that fail within 18 months. And, a napkin doesn’t count as planning. That doesn’t mean you need to develop a 300+ page business plan, but it does mean you think deeply about what you’re planning.

By the same token, you can’t be so married to your business plan you ignore opportunities. Adobe almost went under in the early days because they’d envisioned selling a bundle of computer technology along with their software, according to Charles Geschke — one of the founders. It turned out ignoring their original business model was the best decision they made.

Fail fast

Failing fast seems like a description of what NOT to do when starting your business, but it’s great advice.

If you think about it, why should you waste time and money developing a start-up business that’s doomed to failure. Find out early and save yourself the expense and aggravation.

How do I fail fast? Good question.

You fail fast by floating your idea and seeing how folks (prospective customers, investors, and media) respond to your ideas. For instance, when Zappos wanted to find out if anyone would actually BUY shoes online, they created a simple ecommerce site to see whether their idea would work. Of course, we all know the answer, but the important issue is they tested the waters before developing an expensive website, buying inventory, and marketing their baby.

I’m working now with Groupsurfing, who’s first product, hexsee, is nearing beta testing. We all loved the idea, but we needed to see how users would respond before investing a lot of time building the product. So I set up a few opportunities with target groups to show them what we had using animated powerpoints that simulated what the product did — hexsee creates private layers where groups can surf any website, leaving comments right over the content. These adventures , as we call them, allow groups to plan weddings and vacations, shop together, or do anything else they want as a group online. Check out the website for more info on the product (which is free).

I also sent invitation through Facebook and Twitter inviting friends and followers to view the animations and give me feedback. Luckily, the feedback was overwhelmingly positive (in fact, we’ve yet to find someone who didn’t want the product), so the development team went to work coding — hexsee will launch in Beta late November.

The point is, we gave the product the opportunity to fail. If potential users couldn’t understand what we were doing, didn’t want it, felt it didn’t offer anything unique, or felt it would be too complicated to use, we would have simply dropped the idea in favor of something that did peak their interest.

Now, I’ll be the first one to admit that consumers often don’t know what they want. That’s why asking them is a really bad idea and not a good way to adequately test interest. Imagine if Zappos had simply asked folks if they’d be willing to buy shoes online. The likely response would have been no and Zappos would have never been born. In my house, that would mean a lot of unhappy shoppers.

Fail fast, but don’t just ask people what they want — show them what you have and see if they want it.

Management failures

While many businesses fail because their products aren’t unique, solve a problem that folks don’t really care about, or fail to communicate to consumers effectively, many fail because the founders/ leaders lack skills necessary to nurture the start-up to success.

I once worked with a tech start-up that had everything going for it — good funding, unique product, growing market, strong partners — but the founders were an utter failure at managing the business. First, the two founders didn’t know how to manage employees from various levels and backgrounds, especially hourly employees who needed different motivation (and level of supervision) from the sales force. Second, they tried to micromanage everything — even firing the head of IT because he ordered a different desk for his workers than the one picked out by one of the founders.

Good managers practice servant leadership meaning they are cheerleaders who encourage their employees to success and celebrate their performance. Servant leaders also coach employees to acquire new skills and learn from their failures. Servant leaders remove obstacles and get resources needed for success.

Find me the money

Many small businesses still bootstrap because they want to control their own destiny. Venture capitalists often want too much stock and control. Venture capital firms often have different goals (short-term ROI) than founders (sustained growth), creating tension that’s bad for business.

Angels offer a less controlling option for start-ups, but they often invest relatively small amounts of money that might strangle growth.

Changes in US finance laws now allow microfinancing commonly called crowdfunding. As part of the JOBS Act (Jumpstart our Business Startup Act) businesses can now raise funds through sources such as Kickstarter.

Even with funding, most businesses will still have to bootstrap — meaning they’ll have to find ways to do what needs doing without hard cash. Bootstrapping not only means retaining control and profits from your business, it keeps you close to customers and allows for fast pivots when goal, markets, or objectives change. Bootstrapping keeps a start-up agile.

Here are some methods of bootstrapping:

Equity instead of cash

At Groupsurfing, instead of getting my normal fee, I’m getting stock. Risky, I know, but with a substantial upside. Trading equity for services may work well, especially in getting very expensive talent needed to develop and marketing the product. Be careful, however, or you’ll be in the same position as with a Venture Capitalist — owning too little of your own stock and giving up too much control over direction.

Barter

Some businesses are willing to barter their services. For instance, at Hausman & Associates, I sometimes barter marketing services for website development. legal, or something else I need.

Networking

Networking is a great way for creating a successful start-up. Not only is networking a great way to meet co-founders (I met John from Groupsurfing at a Co-founders Lab event), find mentors, get training, and meet potential customers. Meetup is the best bet for my money.

Interns

Hiring interns (or getting their help in exchange for college credit or experience on their resume) may mean getting high-quality talent at an affordable cost. If interns represent your target demographic, you’re getting a two-fer — management help and customer insights.

Outsourcing

Outsourcing can be a more cost-effective means to get talent than hiring full-time employees. At Hausman & Associates and Groupsurfing, we also hire talented folks on an ad hoc or part-time basis. This allows us to size up potential employees, while keeping our costs down.

Social networking

Social networking is a very cost-effective tool for marketing your start-up, getting valuable feedback on your business model, and connecting with the media and finding partners. At Hausman & Associates, we have our own dedicated social platforms, but we also use the extensive network of our founder, Angela Hausman. Personal Facebook profile, as opposed to business pages, have advantages making them very desirable additions to your social networking plans.

At Groupsurfing, The Iota Project (a media company dedicated to issues of singularity and transhumanism), and other clients, we share messages on both their own social networks and those belonging to Hausman & Associates.

How to Create a Successful Start-up