Confessions of an Entrepreneur: Getting Past the Startup Phase

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There is a lot of interest in startups. Where people got their idea, how they raised the capital, what their elevator pitch was, and so on.

But while startups are interesting, and nothing can happen unless someone actually does start the business, what ultimately matters is can the startup grow beyond the startup phase and become a viable ongoing business?

After years of doing it — and an equal number of years studying entrepreneurial ventures — there seems to be some distinguishing characteristics of those that transcend the startup situation and make it as a real business.

1. Founders get along.

They have complementary skills and clear role definitions. They are involved with the business. They share a dogged determination to succeed in spite of obstacles. They have respect for each other and what each brings to the business. They can work out differences with each other.

I was lucky early on in my career to have such a business partner in a guy named Fred White. We were completely different but never could have created a business that was successful as ours was had we not teamed up.

2. They have the right outside help.

I’m talking about the right attorney(s), accountants, IT consultants, board members and others. They are getting good advice that they listen to. The wrong advisers and professional service providers can kill a business quickly.

I cannot tell you how much bad advice I have seen given to business owners over the years from people who were incompetent. It is downright shocking in some cases. Conversely, I have also witnessed tremendous success resulting from really great outside input.

It goes both ways.

3. Their business plan matches their start-up capital.

They are cash flow positive and are constantly looking ahead to make sure they don’t run out of working capital. Their revenue exceeds their cost. They have good accounting. They are scrappy and disciplined.

Everyone likes to say a lack of capital kills businesses. I like to say the wrong business plan kills businesses. This may be one place where a lack of capital actually results in a better shot at building a business that can survive beyond startup because so much more discipline is needed from the start.

4. They have a genuine sense of purpose.

And that sense of purpose can convey this to all clients, customers and employees. That means they care deeply about filling a need in the marketplace. They have passion for doing something better than what is available now. They may have a mission to reinvent a business type or even industry. They have lots of enthusiasm and this is frequently (and successfully) conveyed to everyone else on the team.

Tesla Motors is a great example of this and has created a tremendous business and value by attacking a mature industry and meeting an unfilled need for electric cars that have a better range than any other electric vehicles.

5. They have a clear focus on their target customers.

They know exactly whose wants and needs they are trying to fill and design their entire business around those customers. This focus is clear in every bit of marketing, advertising, promotion, product or service offering, facilities, employee hired and more. This understanding of their target customer is embedded in every aspect of the business.

I always like to talk about Fayettechill, Signature Bank of Arkansas, Riffraff, Slim Chickens and Sam’s Furniture as great local examples of “getting this” concept.

6. Ability to discern between ineffective marketing and the wrong product/service offering that the market just doesn’t want.

This is so critical if firms will be able to move beyond being just start-ups. I learned early on that marketing and promotion isn’t always the reason something doesn’t sell. It may be that you are trying to sell something no one wants. It’s important to understand the difference so you can adapt to the market.

I have been in this position with my own businesses more than once. Sometimes you need to dump something that you have experimented with trying but didn’t take off.

It isn’t easy if you don’t give up easily.

7. Ability to adapt to a changing market while at the same time not losing what created early success.

Believe it or not there is a dark side to listening too closely to the market if that means the business throws out their primary customers to go get new ones. You could see this in a Cadillac. They wanted to get younger buyers, but in the process, they lost their older customers who were accustomed to rolling couches. The school is still up in the air as to whether their strategy will work.

I could talk about this topic all day. It’s a personal mission for me to help start-ups create viable businesses that survive over the long haul.

Yes, you can learn much from your failures. But failure can hurt a lot of people and it’s still best to avoid it if you can!