Starting a new business from scratch is both exciting and full of uncertainty. Entrepreneurs are eager to surround themselves with like-minded people, get down to work, and see their ideas become reality. At the same time, it’s common knowledge that about 81% of new companies fail – and that’s discouraging enough to darken any enthusiasm.
However, there are key factors for startup success that often remain overlooked and become the reason for setbacks and downfalls. Checking them off at the beginning may increase a company’s chances of making it, and ensure that a business is thriving in both health and longevity.
Furthermore, what all successful startups have in common is good planning, hard work, and persistence. This sounds simple enough, but if we break it down, the recipe becomes more complicated.
Read on to learn the top 10 key success factors for startups!
1. Business Idea
A great business idea is the one ingredient a startup can not succeed without, and yet, it’s not the only important factor, defining whether a company will make it or not. An entrepreneur can have a million-dollar idea and still fail to capitalize on it because of poor timing, an unreliable team, insufficient business environment research, bad planning, and so on.
Nevertheless, the fact is, that you need an outstanding business idea to start a successful company.
It may be difficult to define the quality of an idea and its practical potential, but brainstorming with peers and trusted experts in the field may help you overcome your personal bias. In addition, you should ask yourself the following questions:
- Can the market benefit from the product/service?
- Do you know the industry well enough?
- Do you have enough experience in the field?
- Is the product/service flexible or too dependent on outside factors?
This information will help you evaluate how qualified you are to implement your business idea. It may also give you insight into whether you may be able to convince investors to support you, and how likely you are to find interested customers.
Furthermore, keep in mind that your concept may change over time as you develop your products and/or services and better understand the customer. Businesses that are agile and ready to evolve are usually the ones that succeed.
2. Business Plan
Creating a detailed and sensible business plan allows companies to strategize their development, monitor progress, and make timely adjustments. Startups that don’t think ahead and lack an organized approach are less likely to succeed and overcome unexpected obstacles.
A basic business plan usually includes:
- Goals. Knowing what you want to achieve and defining the steps you need to take will help you better plan your business growth, finances, and time management.Your goals may include product development, marketing, customer acquisition, and customer service milestones, as well as any other business-specific objectives.
- KPIs. Defining key performance indicators allows startups to monitor business health and see if they are on the right track. If some processes underdeliver or fail, the company should investigate the issues and fix them.
- For startups with limited resources and unstable revenue, setbacks pose a major risk and may cause substantial losses and even put them out of business.
- Growth Strategy. Designing a growth strategy enables startups to outline a development path to follow. It also helps organize the business better, set clear goals, and pursue them with more accuracy.Also, there are different ways to grow a business, and planning which one to execute at different stages of the company’s development can improve success rates.
Strategies, of course, change over time, but having them outlined enables you to better see their strengths and weaknesses and implement improvements.
- Funding. Few businesses are self-sustaining from the start, and planning how you intend to fund your operation may be the difference between making it and breaking it.Relying on external funding such as angel investors and business loans may help a business grow artificially, but can’t ensure its long-term success. Startups that plan their finances and follow revenue goals are more likely to become profitable and reach sustainability sooner.
3. Core Team
Assembling a dream team is one of the top 3 key factors for startup success. In the beginning, businesses are usually comprised of a few people who manage multiple processes and balance a variety of tasks. Building a team of driven professionals who are competent, dedicated, and ready to put in the extra work is a predisposition for success.
The attitude of the founding members, combined with how they interact with each other and how each one of them contributes to developing the idea may determine whether the business will make it or not. If people are not on the same page and don’t share the same vision for the future, this may create setbacks and put development off track.
Power struggles and irreconcilable differences are among the top reasons why founding members split up. Building a business plan at the initial stages of your journey may help the core team clear up any disagreements before they become an issue, and set down ground rules. In addition, it should be clear from the beginning what the chain of command is and whether there is a single leader to make the tough calls or a board of equal partners.
4. Execution Timing
Even the greatest ideas and the best teams depend on outside success factors, and the hardest one to account for is timing.
Even if you know the business environment and make careful calculations considering every possible variable, an unexpected turn of events may still cause you to fail.
A product may be thoughtful, functional, and designed to make people’s lives easier, but if it’s ahead of its time, the market may be reluctant to accept it.
For example, even electricity was considered obscene when it first became publicly available. It was new, confusing, and unpredictable, and people didn’t want the risk.
In addition, products that strongly depend on technology may be constrained by the stage of development of the solutions they need to support them. Therefore, an entrepreneur may have a groundbreaking idea but be unable to implement it because the tech is still too expensive or not established enough to facilitate commercial success.
However, while timing is something you can not completely control, there are measures that can help you minimize the risks:
- Conduct a PESTEL analysis.
- Utilize predictive analytics.
- Do market research.
5. Market Research
Knowing the customer well is a key success factor for startups or any other business that wants to prosper commercially. Without understanding who you are selling to, you can’t be sure that you will be making the right calls when developing a new product or service to deliver value to your customers.
Research may provide insights into who the customer is as a person, where they live, what obstacles they face in their personal and work life, what they need in order to overcome them, what drives them, and so on.
On the other hand, companies that create persona profiles, which are based on their personal idea of who the ideal customer is, may fail to understand their audience altogether. As a result, they may fail to design a product that answers the user’s needs, and even if they do, they may be unable to reach them with their marketing message because it’s off-target.
6. Competitor Analysis
Competitor analysis is a powerful tool that enables companies to understand the marketplace and business environment better. Knowing who they are up against is essential for startups, because it allows them to learn and build upon their competitors’ experience, mistakes, and successes.
Entrepreneurs can collect ideas for product development, marketing, pricing, and sales strategies, and figure out ways to improve their business plans and their ideas.
In addition, looking at their rivals’ successes provides businesses with a new angle from which to explore their customer’s preferences and buying habits. Leveraging this information, they may calculate what market share they would potentially be able cover, and how to attract new customers with a unique business proposition.
All in all, without knowing who already occupies the marketplace and what they have to offer, there’s no way of knowing how to position your brand in order to stand out as something new and interesting.
7. Product Development
When you are just starting out as a business and have a great product idea, it’s easy to fall in love with it and consider it perfect the way it is. However, products need to evolve and adapt to match the market’s ever-changing requirements and preferences.
Startups that constantly work to improve their products, listen to their customers, and strive to satisfy their needs are more likely to adapt and stay in business.
Adaptivity, of course, doesn’t mean putting behind your vision and values in the name of profits. However, sometimes compromises have to be made in order to make bigger progress in the future.
How flexible the product and your approach are, is one of the key success factors for startups.
8. Business Model
A business model is, basically, how a company exchanges its products for money. Defining it is not a top priority for startups, because it’s not an immediate necessity – how to proceed usually becomes clear when developing the products and understanding the client better.
However, planning different ways that your solutions can respond to the customer’s needs outlines a network of development paths that the organization can explore.
Depending on whether the business operates online or offline, business models can be digital or traditional. And as the demand for digital services and availability is now higher than ever, even strictly offline companies should consider creating a digital model and capitalizing on their online potential.
Business models have to evolve over time and grow with the company. Startups that invest time considering their options are able to set clear goals and strategize on how to achieve them. If they stay agile, they have better chances of succeeding.
9. Pricing Strategy
Startups often disregard one major success factor – the market dictates the price, not the company. Defining the right pricing model is one of the least appreciated growth tactics, and, at the same time, amongst the most profitable ones.
Conducting pricing research enables companies to base their pricing decisions on facts and market trends, rather than assumptions. Otherwise, they risk undercharging or overcharging the client. This means that they either fail to easily increase profits, or miss out on an opportunity to attract new customers. In both cases, they are constraining growth and hurting revenue. For a startup, every dollar and every client counts, and unbalanced pricing can lead to a slow demise.
10. Creating Demand
Startups, especially those in the tech industry, often focus on creating an amazing solution with cutting-edge functions, and strive to refine it to perfection. And that’s great. However, what they fail to take into account is how the customer feels about the product. A common misconception is that great products sell themselves. Unfortunately, they rarely do.
Demand shouldn’t be taken for granted – it’s something you create, fuel, and maintain consistently. The process is simple and can be narrowed down to three major steps:
- Conduct market research to identify and get to know the target audience.
- Understand how the product relates to the customer’s needs.
- Design a marketing strategy that drives the audience to make a purchase.
Companies that put in the work to create demand for their solutions, and focus on the customer, rather than only the product, have better overall success rates.
When starting up a new company, it is difficult to do everything right and avoid all possible mistakes. There is much work to be done, various KPIs to track, and limited resources to rely on. In addition, one should beware of outside forces that are beyond one’s control.
However, startups that approach their endeavors strategically and leave little to chance, usually stay in business longer and achieve growth faster.
And while there are many key factors that define a company’s path to development and future success, vision, planning, hard work, and persistence are also behind every single one of them.