Let’s Start With Startups
The definition of a startup can range dramatically depending on who you talk to. On one end of the spectrum is the startup with a single business owner or entrepreneur who uses their own money to establish a small business. At the other end of the spectrum is a group of entrepreneurs who start a company together, secure funding from venture capitalists and begin their journey with access to the resources of an incubator. The common thread between them all is the spirit of entrepreneurship, the risks of a new business and the desire to see growth.
Startups Typically Have a Lean Business Model
One factor that links virtually all startups is their lean business model. By definition, a startup is a new company. For a new company, revenue is not guaranteed. There is always a risk involved with establishing a new business, no matter what the industry.
A lean startup has two major financial concerns. The first is how to get financing, raise capital and have enough to function for the foreseeable future. The second is how to generate or increase revenue.
There are several different ways that a startup can begin. For many entrepreneurs, a startup is financed with savings, investments from family members or personal loans. Larger startups may also have limited financing, but they may raise capital through angel investors, grants or business loans. Whether a startup begins with a thousand dollars or a few million dollars, they will likely operate on a shoestring budget. This is necessary, at least for the first few years, in order to become profitable as quickly as possible.
The second financial issue faced by a startup is the matter of revenue. At the early stages of a startup, any extra money typically goes to growth, marketing and brand awareness. While that might be considered a great long-term plan for a business, it is a problem if there is no revenue. After all, most startups don’t have unlimited funding. Therefore, startups need to figure out how to bring in revenue as quickly as possible.
Offer Creative Solutions to Current Problems
One of the defining characteristics of a startup is the fact that it promises to solve an existing problem in a unique way. Think about Uber and Airbnb, two of the most successful startups on the planet. Both began as a unique solution to a problem. Uber promised to offer people an alternative to taxis that was more technologically savvy and often more affordable. Airbnb helped homeowners rent out unused properties, giving travelers a place to stay. Both of these startups were ultimately successful because they identified clear problems and proposed answers that no one else had thought of.
Entrepreneurs who want to make their mark on the world should look beyond profitability, media attention or immediate success. Instead, think of how to be one of the creative startups that makes a difference for people. Whether you are opening up a gluten-free bakery or developing a new app for smartphones, are you able to solve a problem for your audience? Can you deliver solutions in a creative, unique way? If so, then you’re ready to commit to your idea and make the numbers work.
When Is a Startup No Longer a Startup?
If you’re an entrepreneur running your company from home, and you have only been open for a few months, then you’re almost definitely a startup. At the same time, a group of 20 web developers in a makeshift office in San Francisco might also be considered a startup. At what point, however, does a business no longer qualify as a startup?
There are three things to consider here: Profitability, age and mindset. If a business is new enough to not be making a profit, but they are disrupting an industry, they can still be considered a startup. Many new tech companies start out this way. Although they are a few years old, they spend all their money on growth and expansion, and investors may not be recouping any capital investments yet.
Age is another issue. A company with a 10-year history isn’t really a startup, no matter what their profitability or revenue.
Finally, there is mindset. You can often tell a lot about a company by their offices and their culture. A number of large creative startups try to keep that startup atmosphere alive in a direct way. Even when companies are making millions and hiring new employees, they still want to give the appearance of a lean startup. It can keep employees and owners hungry, driven and pushing for growth.
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Unique Challenges for Startups
Startups have many of the same challenges that any other business might have. However, they also have some unique difficulties that often get overlooked by eager entrepreneurs. Some key issues are sustainable growth and increasing brand awareness.
Growth
Growth, and often rapid growth, is par for the course for most startups. Growth is a good thing, but it is challenging to expand quickly. You’ll need to bring on new talent who understand what your company is all about, and you’ll have to face the challenges of financing expansion. While you want to grow, you don’t necessarily want your business to evolve from its original plans and business model.
Brand Awareness
Brand awareness can also be a struggle. After all, a startup is a brand-new concept. The general public won’t yet be familiar with your company’s name, mission, products or services. One of the key ways to increase awareness of your brand is through digital content.
To start, your business should have an appealing, informative website. This is where many prospective suppliers, investors and customers will go to learn more about your startup. A blog and a social media presence are two more ways for you to create relevant content and establish a cohesive voice and image for your startup’s brand.
The Startup and Entrepreneur Checklist
Are you ready to begin your very own startup? Every year, roughly half a million new businesses are established in the United States alone. If you’re part of that group, you’ll want to do everything possible to be successful in a competitive economy. Having drive, passion and a fantastic idea is just part of the equation. This startup checklist can help prepare you for the first few years of operating a lean startup.
Identify the Most Important Aspects of Your Business Plan
When you establish a startup, it’s normal to have what some entrepreneurs call tunnel vision. It’s great that you’re committed to your ideas and your company, but it is easy to get too attached to details that won’t hold up in the real world. Keep in mind that many startups change direction over time. Some of the most successful startups have pivoted from their original plans in order to find quicker or more profitable success.
While a startup pivot might be beneficial, it’s also smart to figure out your priorities. It is up to you to decide what aspects of your company are not negotiable. As an entrepreneur, it’s your vision that drives the startup. Many creative startups do so well long term because they are committed to solving a problem in a unique way. If they gave up too soon, some of these startup companies wouldn’t be household names today.
Establish a Strong Online Presence as Quickly as Possible
Next on the startup checklist is to work on your online presence. They say that the best time to start a blog is yesterday, and that is completely true for new businesses. With so much competition, you need to make sure that your startup can be found online. This is especially true if you’re operating in an already saturated market.
So how exactly can a lean business model still accommodate a strong online presence? First, create a website. It should load quickly, fit your brand image and clearly explain who you are and what you do. To help people find your website organically, you’ll want to invest in inbound marketing. Unlike more traditional advertising methods, inbound marketing attracts the right audience naturally. If you’re a babysitting app designed to help busy parents, you could create a blog that answers common parenting questions. People searching for answers might use a search engine, come across your blog content and create an immediate connection to your brand.
You can also establish a strong online presence with social media. There are many different social media platforms, so it is up to you to determine which is the best fit for your startup. Social media is also a great way for you to share the content you’re already creating for your website.
Track Funding Closely
When most startups begin operating, they have a clear budget. While that’s a great start, far too many entrepreneurs lose track once the business begins to grow. Unfortunately, that can become a recipe for disaster. In addition to balancing the books, it’s important to consider profitability and track revenue growth over time.
A lot of startups receive funding of some kind, at least initially. This could be a bank loan, an extension of credit or seed capital from major investors. Although you don’t want to run out of this money altogether, success is about more than just keeping your account balance above zero. As you hire new employees, can you commit to paying their salaries for several years? If you have investors, when are they going to start wanting to see returns? Are your revenue streams on track to meet those goals in the coming months? All of these things should be carefully tracked. That way, you’ll never be surprised by the state of your finances, and all your decisions can be based on accurate information.
Decide What You Can Delegate and Establish a Great Team
There is no minimum or maximum size for a startup. An entrepreneur can establish a startup with a single owner/employee, and a tech startup might open their doors on day one with over 100 employees. At the top, however, it can be hard to delegate tasks no matter the size of the startup.
While a small business might be reasonably successful with a single employee, it’s hard to scale the startup for continued growth without new hires. The hiring problem is tough for larger startups, too, especially if there is already a unified team working together successfully. As an entrepreneur, you need to be open to the idea of growth. Think about the tasks you feel most comfortable delegating to others, and then bring in new employees that can handle those jobs.
If you’re working on an app, you might want to bring in a marketing professional. If you offer landscaping companies, you could pay someone to manage your blog content and craft new articles on a daily basis. You can’t expand without more help, so learn how to delegate successfully as early on as you can.
Perfect Your Elevator Pitch
This part of the startup checklist might come as a surprise. After all, in the world of digital marketing, everyone can learn more about you online if they need additional information. However, networking is incredibly important for a growing startup. The person you meet in line at the grocery store or at a casual networking event might be someone who can make a big difference to your startup.
Practice a two-sentence summary of your startup and your existing success. When friends and family members ask you what you do, use this brief pitch. Not only will they understand more about your business, but they can also remember the information and pass it on to their social networks as well. All too often, entrepreneurs get bogged down with details when discussing their startups. While passion is wonderful, a memorable elevator pitch can be the key to networking.
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