In 2018, AngelList, the world’s leading startup directory, listed over 8,000 Australian businesses, adding 73 in December alone. With all this talk of hubs, incubators, accelerators, coworking spaces and launchpads, it can seem like everyone’s giving it a go. This is due, in part, to greater access to public and private resources, and to a new culture of entrepreneurialism sweeping the globe.
With so many of us seeking independence, it’s an uncomfortable statistic to know most startups don’t make it past the three-year mark. Why? Put simply, turning an idea into its own commercially viable business is really difficult. It takes a lot of grit, but more importantly, it takes good strategy and tactics.
Here are six tactics to help you reach three years and beyond.
Learn the lingo and decide on yours
Even if you are not planning on raising capital or joining an accelerator, learn the lingo. The conversations you’ll need to have are likely with entrepreneurial enthusiasts and they speak startup fluently.
Some words to start with include ‘churn rate’ and ‘exit strategy’. This is particularly difficult if you are transitioning from a small business into the startup space, with the focus of the conversation now on scalability and growth rather than profit margins.
While you learn the newfound culture of startupland, listen to the differences in business activities and decide how you are going to explain what you do. Decide if you are a small business, a startup, an idea, a firm, a consultant or a freelancer. Whichever you decide to label yourself as, stick to it.
Don’t be afraid to find competitors
The idea of competitors is an inherently scary one. Similar people with similar ideas and sometimes a thousand times more capital than you. It’s important to start by understanding the commercial landscape you are about to enter, and validating your place within it. Find competitors from all over the globe, even if your business will only be local. If there’s genuinely no competitors because your business idea is entirely unique or you are entering an emerging industry, then find businesses in industry verticals who have a similar model in another market. Grill them, their customers, wording, branding and pricing models. A great way to do this is through analysing available competitor data.
There is a fantastic book by Seth Stephen-Davidowitz called Everybody Lies that highlights just how important search data is for uncovering human truths. When you apply this logic to your business idea you can form a clear idea of what your users want, and what your competitors are already offering. Tools such as Semrush and Google Trends can let you see what people are really looking for and how they’re trying to find it.
Be a pessimist
Aspiring entrepreneurs always have an ongoing motivator and that’s their fan club. It usually consists of very close family and friends, and perhaps a few ex-colleagues. This initial network is your support group and sometimes your seed funding. They’ll likely tell you your idea is great, and although it really might be, it’s really important to keep one eye on the potential pitfalls and not focus solely on opportunities.
Large organisations hire business analysts to find potential risks. In the beginning, it’s unlikely your office will consist of more than yourself, maybe a co-founder or two and some Ikea furniture. But as a startup, constantly assessing your risks is really important.
This is especially true in your first year. It’s not quite the glamorous startup life you see in the movies, and the key to success is often a strong pinch of paranoia. When we launched Hassl, this purposeful paranoia showed itself in many ways: extra user-testing, additional legal scrutiny of our contractual arrangements and international tax planning before we’d even left Victoria. These sorts actions, driven by the fear of something going wrong, means you stay on top.
A good idea and hard work can take you far but it’s the risks that you didn’t see coming that will stop you passing that three-year mark. For example, an uninspected increase in tax or an employment contract error.
Pitch it ugly
Branding is an invaluable part of a successful business. Especially in the consumer space, creating a brand personality that oozes into every inch of your user experience is effective, but it shouldn’t come first.
First, ideas change once you’ve had more time to think it through, research the market and speak to potential customers. With Hassl, it wasn’t until we interviewed other teams that we realised they wanted a project collaboration tool designed for the team member, not the project manager. This is the core of Hassl’s brand, down to every piece of microcopy in the app. If we’d created the branding first, we’d inevitably have to either redo it or the product would have ended up being moulded by a brand not that did not speak to its purpose.
Secondly, good branding takes time and time is money. While there’s the temptation to start with the fun stuff, just work with a really basic logo initially and put your funds to crucial business activities.
Lastly, good ideas and great leaders should be able to pitch it ugly. Reach out to potential users and investors armed with only a word document and your voice. If people like your idea without the frills, it gives more credence to your vision and confidence to take it the next stage.
One-line business plan
There are on average 6,600 people in Australia who search for ‘business plan template’ every month. There are lots of templates out there and they range from half-page diagrams to 50-page documents.
We have never made a business plan. Instead, we set six–month goals to achieve.
At the end of each six–month period, we reflect and then build on where we’re at. I have founder friends whose business plans are the size of a book and are referred to weekly. Whether you prefer a high-level goal approach or a detailed plan, it is important to be able to communicate what your business is going to be, and how, in a single sentence. This is your vision.
Write it down and practice it over and over again.
In the future, when you need to answer many quick-fire questions about your strategies and tactics, it’ll be very useful to have your underlying vision to refer back to.
Understand your technology
This one only applies to technologically led startups, of which there are many. We have an ongoing joke that most startups at tech conferences are looking for a technical founder. While this is funny to joke about, we do have a national skills shortage when it comes to coding and engineering.
If you don’t have a technical founder it’s essential you take the time to understand the technology that fuels your idea. Ask for documentation and a run through of the languages, disciplines and proprietary tools used. Spend a day doing a basic online course. It’s inevitable that a potential partner, investor or user will ask you technical questions along the way, so it’s best to have a broad understanding of how it works and what the technical limitations are.
Reach out for free, local advice
If there is one thing Australia has it’s lots of friendly faces to reach out to. While we haven’t taken on any investors, we have had absolutely great advice along the way. Who you reach out to is really dependent on the sort of advice you are looking for.
If you are looking for financial or logistical guidance, reach out to your local council or government small-business department, most of whom have a dedicated business budget that goes to a wide range of free workshops, mentor programs and walk-in office hours.
If you are looking for product or service design guidance, there is no greater value than designing for your ideal customer. Try reaching out to them. Where possible, invite your ideal customer to be a beta user, helping you to shape your product in exchange for discounted services into the future. This will set the groundwork for a loyal customer-base too.
Lastly, for growth advice find industry experts you admire and reach out to them. If possible, find an event they are going to be part of and meet them in person. Remember their inboxes are likely to be as busy as their schedules so pick several and don’t get disheartened if you don’t hear back.
Another avenue for industry advice is service providers. Google for Startups offers great online resources and their local teams regularly engage with entrepreneurs.
Whether you’ve got an idea in the back of your mind, or you’ve set up shop in someone’s basement, it’s best you take these challenges head-on. Underlying all of these considerations needs to be perseverance and an acceptance of rejection. It’s going to be hard, but it’s also going to be really, really exciting.