Surviving the Startup journey Pt. 1 – Vetting the Idea

Statistics show that more than 50% of startups fail within their first year and less than 30% survive to become big businesses. I once heard a prominent business executive tell his story of failing to sustain his small business meant to help young people startup.

Successful business leaders have had failed startups but we do not want to repeat such mistakes where lessons have been drawn already, what is the essence of history if we still make old mistakes. Starting a new business comes with inherent challenges and in Africa, even the orientation and economic systems pose a challenge. Entrepreneurs and investors must therefore make meaning of the lessons drawn from past failures to grow startups. Here are five factors to consider in avoiding a failed startup.

1. Have a niche. Stakeholder on the market especially clients have some level of change inertia, which means difficulty to deviate/change from what they know already even when they are not having maximum satisfaction. There is some level of loyalty on every market. To change, entrepreneurs and business managers especially startup businesses must have some unique selling proposition to convince prospects to be clients/customers. At least, the idea must have three unique selling propositions and the more you have, the better to have more market share.
2. Positive growth Prospects. In choosing the business or vetting the Idea, entrepreneurs must study and understand the prospects of the industry and market trends of the business to be able to project the prospect of the business. There is a man called David Sokol who was referred to as Buffett’s Mr. Fix-It. Whenever Warren Buffett had a challenge in any of his businesses, David will be commissioned to go and fix it and what David does is to study the dimension of the business especially the financials and map up a strategy for its growth. Studying and understanding financial statement is a very important attribute every entrepreneur or business leader must have. It is important to undertake a research into the industry and market of your business before you launch out. There are some professional organisations, which can help, especially startup companies in this important area and one such is Prime2Prime Ideas Limited.
3. Less Competition. This is as much a benefit as a challenge. In starting a business you do not want an industry, which is choked with competition, which will make it difficult to win a client due to numerous competitors. However, this also means that penetration rate will be high and so it is important to secure a greater market share on entry. For instance there are a lot of technological apps on the market that if you want to start something in such an industry, you will need to define your market to serve.
4. Have Strong Passion in the area of business. There are so many challenges, which beacons for startup failure, and one of the underlining-surviving factors is passion. Do not go into a business you do not have superior passion for. It is the passion that will keep the business going when the challenges come. You will have market challenges, financial challenges, regulatory challenges as well as human resource challenges and in all it is only your passion that will keep the drive in you. Vet well, your level of passion.
5. Minimal Operating and recurring costs. It takes a lot of effort to start making income and so to survive; the business must not be expensive to operate at the beginning. There are businesses that you may not need to engage office-residence staff. You may rather hire consulting staff that will be engage on work basis. The numbers of business that collapse due to financial difficulty in Africa are more than any other factor. It is important to have a financial projection for the business out of the historical analysis before the business is launched. We shall deal with financing on its own since this is an important element in starting, sustaining and scaling up every business; it is called the lifeblood of every business.

There are still many more factors to help in sustaining our startups. Share your thoughts. What to you were the important factors if you have started and sustained a business or have some ideas to share. If you are a startup, what are the factors affecting your growth. Let us share to inspire as we build a robust ecosystem in Africa.

If you have any publication that fits in helping boost and enhance our startup ecosystem, send an email to henry@tentmakergh.com. Visit www.tentmakergh.com to learn more about Tentmaker Ghana.

The writer is the CEO/Lead Consultant of Tentmaker Ghana, an Entrepreneurial Incubating and Industry startup Hub based in Accra Ghana.

Email henry@tentmakergh.com