Unfortunately not all new ventures end up as success stories. The reasons are plenty and well known. But start-ups continue to commit those very same mistakes.
Ensuring success involves implementing the critical parts of the business plan in a systematic way. Like, identifying the product functionalities that will have takers; building a scalable sales process; having a team with fantastic skills in their specific domain be it technology, operations, service delivery, sales or finance with a reasonable track record of success; and last but not the least, knowing when to conserve and when to scale the business.
Any product development or innovation is done with the confidence that there is a market for it. Definitely some amount of due diligence would have been done before embarking on the development process. However, reality actually strikes when you get down to the task of converting the product into dollars. A lot of ideas lose steam at this stage, only because a systematic process is not followed to identify the right fit. It is not that there is no market for it. In most cases, either the product needs to be tweaked to get that market fit or it is a little ahead of the curve in terms of market readiness.
This is a typical issue with most start-ups. My experience has been that in most cases, the CEO does not recognize this and keeps throwing money into getting sales and by the time realization hits, they are in a cash crunch.
To know if your product has a market or understand what needs to be done to convert it to dollars, one has to get customers to try out the product and endorse its usefulness …. even if you have to give away a few for FREE. Ofcourse, it is always advisable to ensure that the customer has some skin in the game, however small it may be. This will ensure a higher level of involvement and timely implementation. Getting the first few customers is the real challenge. Usually this is achieved by approaching people whom we know and convincing them to invest in the idea based on the entrepreneur’s personal reputation or actually running a small Direct Mailer campaign to a small set of target customers and convincing them on technology and value. Both these approaches work.
Once you have 8 – 10 such users who are willing to provide testimonials on how your product helps them in their business process and provides ROI, and MOST IMPORTANT are now willing to pay for your product, then you have a bestseller! This will mean that your solution is now a ‘must have’ and not a ‘good to have’. The day you are able to build a business case for your product, you can then rest assured of converting it into revenues. This is the time to invest in a proper Go-to-Market plan. Until then you will only be shooting in the dark. Oh yes … the final version that actually finds a market need not necessarily be the one you started out with … and that is quite normal.
Until this stage, it is important to be frugal and conserve resources. The time to throw resources will come when this is converted to a repeatable and scalable sales process, ensuring a regular revenue beat rate. Getting here will be a major milestone for the company and will go a long way in convincing VCs to invest in your venture.
All that I have written is nothing new but requires constant reiteration as in the heat of trying to quickly establish a revenue stream, some of these basics are forgotten and once again the same story unfolds.