Video Blast! - What is the key factor for start-up success?
Bill Gross, the founder of IdeaLab and an entrepreneur who has successfully started over 100 businesses explains what the most important factor is in defining whether a start-up succeeds or fails.
What defines whether your business succeeds or fails? It may not be what you think...
Bill Gross highlights that many of the best business plans, with the best teams to back them up did not fail because of their business plan or the product idea, but because of the timing of their entry onto the market. He highlights some pertinent examples to show that often the timing and readiness of the consumer market for a specific product or service. He highlights some key external factors, such as a recession or technological limitations may actually be the most important deciding factor between whether a product fails or succeeds. Take these two examples for instance:
AirBNB--This service, now described as part of the sharing economy first came online during the height of recession. This service helped many people to overcome their hold-ups on renting out a room to a stranger and brought AirBNB continuing success. During the recession homeowners were (and still are) looking to make a few extra bucks beyond their regular income and AirBNB offered an easy way for people earn extra cash simply by renting out a room in their apartment. The recession was the necessary push for renters to move beyond any prior hesitations around allowing strangers into their homes.
This examples shed light on the importance of timing in the product release. Should AirBNB have entered the market during an economic upturn it is much less likely homeowners would have taken advantage of the opportunity for a secondary source of income, or allowing stranger into their homes!
Z.com: This online media platform came about at a time when broadband penetration remained too low. At the time it was too difficult to watch video content online because of broadband penetration and the company went out of business after a short time. This example explains that again, the success of this entrepreneurial endeavor was determined by a technological constraint beyond the control of the start-up.
Just two years later, when broadband penetration increased to over 50% in the US and the Codec problem was solved a site with a very similar if not the same service-- YouTube came online. The timing was perfect and allowed YouTube to gain extreme success and it remains today one of the most visited sites on the web.
Timing can be the make or break issue defining whether your product or service succeeds! Make sure to assess consumer readiness and the external limiting factors when analyzing the market for your product or service.
Many influential entrepreneurs differ from Gross on this account. While other entrepreneurs argue timing is extremely important, they state that even if you enter the market with a great plan at the perfect time, if you don’t have the right team in place to support and grow with that idea, the business may fail in 2-3 years. In this situation, even if the business was succeeding after a few years momentum can become lost and the team sluggish. In this instance maybe the team was great for the initial start-up phase, when things were really disorganized and chaotic but adjustments must be made for the business to continue growing. As businesses grow and become more structured, less chaotic and more segmented, the same team you started with may no longer serve the needs of your expanding business.
The idea is of course of paramount importance, a successful business is not built upon an idea that brings nothing new to the table. Yet, as Gross points out, others had a similar idea to YouTube and even released the product onto the market earlier, showing just how ahead of the curve they were. Yet, as innovative and desirable as this idea may have been, because of the external technological factors, the launch took place at the wrong time. Thus the idea is important, but the idea must be in tune with the current market climate and backed by a team that is dedicated to seeing that idea succeed. All of these cogs in the machine must be working to bring the business to its full potential.
4. Business Model
Contrary to what many would believe, this is not the most important element to creating a successful business. In fact, some of the most successful businesses did not begin with a solid business plan. Did this stop them from success? Nope. Gross points out YouTube entered the market with no business plan but as the idea became profitable a plan was implemented.
Influential investors and entrepreneurs often argue that a business plan is only effective for a period of six months before it needs to be reworked and revamped. It is important to have a business plan but if you are not confident in your business plan, that is not a reason to call it quits. This plan can be tweaked and changed as your business grows. As the direction of your business changes depending on your product offering and the market, reassessing and changing your business plan to match is a must! Thus a business plan is not a static trajectory or unchanging path to follow blindly but a constantly fluctuating set of guiding principles.
Finding funding is a critical moment for any start-up. Bill Gross addresses that there are many opportunities to find support and funding throughout the course of your planning and development. Finding funding should not therefore be a defining factor in seeing your business succeed. Funding can come from many sources and at different times during the start-up phase of a business.
The Ye! Community has compiled many sites and resources offering investment opportunities, support systems, and sites to get in touch with Angel Investors and other resources available for investment and support within our country guides. Funding comes in cycles. Don’t let a lack of funding be the reason your business closes its doors! Funding comes in waves, using the resources at your disposal is key.
What’s the Takeaway?
What to think about: Is the consumer ready for my business? Be honest with yourself. It is often hard to be honest with yourself when you have dedicated so much time and effort into developing your business and the idea behind it. Many influential entrepreneurs explain the hardest but possibly most beneficial thing to remember when starting your own business is not to fall in love with your own idea.
Sometimes it is not about your idea, the team, or whether your product or service is grounded upon a solid business plan, but simply a question of timing.
On that note, here are some important questions to ask yourself when looking to start a business:
Is the market ready?
What external factors might hinder the penetration of my business?
What is the current economic status in my country?
How will the consumer use my product?
What economic issues is my consumer dealing with now?
What will draw the consumer to my product?
Are there other products on the market doing what I do?
These types of timing related questions will allow you as a business owner to be reflexive and analyze the market to decide whether the timing is right for you.