Startups provide fuel for today’s innovation economy. Brilliant ideas turn into tangible tools, products, and services that, in some way, make our lives easier, better, or more efficient. However, successfully taking an idea, creating a company, and executing on a vision is an enormously challenging undertaking. There are themes that can help guide entrepreneurs along the way, and below are some thoughtful tips that could and should be incorporated to every new startups’ strategy process.
Set a clear, strategic roadmap
Strategic roadmaps help you scale your business. They outline the long-term vision of your company, and without it, you’ll quickly realize the goals you’ve set are more geared for short-term success and likely won’t sustain the long haul. Planning needs to incorporate the short, medium and long term.
Flexibility to respond to the demands of changes in business is what keeps many startups afloat. Speed, responsiveness, and innovation will keep your business at the forefront of its industry and provide your target audience with the most desired product or service. Take Airbnb for instance, whose demand was high and yet the company was still fresh. As it continued to grow, Airbnb put processes in place to ensure it adapted at the pace the company was reaching, and to the demands of the market.
Execute, Execute & Execute
According to authors David Nortan and Robert Kaplan who wrote The Balanced Scorecard, “90 percent of organizations fail to execute their strategies successfully.” It’s not only important to create your strategy; it’s highly critical that you’re also prepared to execute your strategy as well. Make sure you have the talent and resources needed to get the job done and done right.
Constantly analyze your financial performance
Develop the Key Performance Indicators (KPIs) that best measure the financial performance of your business. Keep them top of mind throughout the organization and manage to them on a monthly, and in many cases weekly, basis. As you grow, these KPIs may need to change, but without financial metrics to manage to your business is flying blind.
Recognize if it’s time to throw in the towel
If you aren’t seeing measurable and sustainable progress – in terms of growth, customers, or even profitability – within the first two or so years after your organization is in place, consider winding down and scaling your business back. Take a closer look at your financial performance to assess your next steps and determine “if there’s a THERE there…”.
Today’s business is ever-changing, and startups are what constantly provide markets with new growth opportunities. Some of the most utilized brands today like Instagram, Pandora, and Zapier had a starting point with a wild, high-potential idea and un-forged avenues to success. Whether you’re new to entrepreneurship, or you’re ready to IPO, hopefully these recommendations have provided some insight on how to better your business in this fast-paced, exciting environment.
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Often, entrepreneurs are fueled by passion for their product or service, their love for career independence, and the joy a “winning business” brings. It is not uncommon or surprising that when entrepreneurs do see red flags, such as losing money or overspending, they desire to keep going and push through. But is that the right thing to do?
It depends. A company can do well or do poorly based on how well resources are utilized. Cash flow is a strong indicator of the health of a company and whether it will survive. A rule of thumb for startups to keep in mind is that the initial phases of a business will include losing money until the company can firmly support itself. The balance of this understanding means that as a business owner, one must thoroughly understand the stages the company will go through, and how to build a scalable business so that long-term, the business is profitable.
There are ways to optimize the opportunity for a business to complete the phases of business sustainability. Below we outline 5 ways to avoid running out of capital and staying more than afloat – but instead becoming profitable.
Build a scalable business model
This is probably the most important step to take when starting a new business. Creating a scalable business model allows you to create efficiency before investing large amounts of money or capital into the business. It’s extremely important to not only have a great product and brand, but to also know how to reach your customer base and establish efficient processes to grow your business. Having a scalable business is also attractive to investors.
If you’re unsure of how to build a scalable business, find someone that can
Yes, your scalable business plan is that important. If you can’t create it, ask someone that does have the skill to do it for you.
Set your limits before you get in the weeds of the business
Know when to keep pushing through business challenges and know when to call it quits. Too often, startups are pushed to the limits and performance ironically does the opposite of “keeping the faith” and fails. How much of your personal money are you willing to invest? How much time are you willing to invest before the company takes off? What are the measurable goals you plan to achieve? These are just a few of the points to address and know where your boundaries are set.
Focus on Cash Position
There are many key performance indicators that can guide managing a business, and your business model will determine which are most appropriate. However, particularly in early stages, the cliché “cash is king” take on higher meaning. New businesses need laser focus on how much cash they have, how their current expense level translates to the draining of that cash, and how each and every decision impact both. Both strategic and tactical planning needs to be cash focused, or a business can find itself in the doomsday scenario of running out of cash.
Do your homework on viable sources of funding
There are plenty of options to seek funding from, and not all are equal. Family and friends, angel investors, venture capitalists, and even your own funding are all possible ways to get your business in motion. Find the right option that will allow your business to expand through plenty of research and asking plenty of questions.
The bottom line is starting a business brings its fair share of ups and downs and risks and rewards. As an entrepreneur, it’s up to you utilize your resources, intuition and money management skills to manage both. A rule of thumb is to aim for realistic financial goals that will not cost your new business too much long-term, and try your best to plan, plan and plan!