Mastering the Art of Business

If you’ve ever read blogs or books on starting a business, you’ve probably read a million tips on how to succeed. But how many times have you seen relevant information on what not to do? The fact is, numerous startups “fail”, but much can be learned from that experience. Personally, I don’t like the term failure, because every startup experience is a success in itself. You gain quite a lot from it. Perhaps not financially in the short term, but it will pay off in many ways eventually.

According to Scott Shane’s Blog, the four year survival rate of new businesses in the IT sector is 38% (based on a 1998 startup date). So that means out of 10 new businesses that start at the same time as you, roughly only 4 will still be up and running after 4 years. I actually saw this first hand when I started my first 2 companies. After just 1 year, it surprised me to see that some fellow entrepreneurs, who started in the same year as me, had “closed shop”. As the years passed on, fewer and fewer remained.

But don’t get fooled by these statistics. It depends on the context, the location, the years, and many other factors. For instance, in my case we had started up just before the dot-com crash. That meant we were lucky enough to get our first round financing. But that also meant it became impossible for us to get our second round, especially since our primary investor entirely pulled out of tech investments (including us). Others followed, not because we had failed, but because of economic circumstances.

If context and location are critical factors in success, what are things that should be avoided? Here’s my position on this.

1.    Starting a business for starting a business
We’re entrepreneurs and we really want to run our own business. In fact, if you’re like me, starting a business just might be close to an obsession. But hear me out; take a step back and breathe. If you blindly follow your passion to start a business, you will probably end up spending a lot of energy on something that will not come to fruition. You’re likely to abandon the project.

In the last two years I researched about a dozen potential business projects. Researching and validating your idea is actually a great thing to do. But I’ve also gone all out and developed two full products, only to put them on the “shelf” when I was done.

The first one was a mobile application that integrated geo-positioning, social networking and event management for Android phones (when the phone wasn’t even on the market yet). When I look at it now, I’m wondering why the heck I abandoned this project. The answer is passion. The application just didn’t appeal to me that much in the end. The fun was in the challenge of doing it and in the motivation of starting a new project, but it wouldn’t be my business of choice and I actually didn’t see this as being the next big thing. So I stopped.

A few months later, my wife had a great idea about developing a multimedia mashup application a la scrapbooking. I spent a huge amount of hours to build a full prototype using Flex for the front end, PHP for the MW, and mySQL for the database. I did the whole application, my wife worked on vector graphics, and we managed to get some people to sign up. It’s actually not bad, but it’s not exceptional. Again, it was a challenge, and I proved myself I could develop this. But after letting pilot users play around with the website, most of them didn’t come back. Because of this, I got discouraged, and decided not to continue with the project. However, in reality I didn’t abandon this project because of this obstacle. I abandoned it because I wasn’t passionate enough to be fully committed and continue on regardless of obstacles. Remember, you will have many obstacles when starting a business, some quite difficult, so it’s critical that you have the strength and persistence, which can only be sustained with passion.

This leads us to the second “faux pas”.

2.     Under delivering
If you want to succeed in your business, you better be good at it. Whether you offer a product or a service, it’s critical to be outstanding at what you do, otherwise differentiating yourself and attracting customers will be difficult.

I’m not a software developer per say – sure I can develop lots of stuff, but I don’t consider myself to be an actual software developer and that’s not my real interest. We hear a lot about the importance of following our passion when starting a business these days. But the fact is that it’s true. If you start a business in something that isn’t 100% a passion for you, chances are you’ll abandon your project. In addition, your more likely to under deliver and be unable to clearly differentiate yourself from the mass. If starting businesses is your passion, pay close attention to what type of business you would like to run. Don’t get ahead of yourself and start any business idea that comes to mind. Think it through. Also, keep in mind that although you may be good at something, it doesn’t mean it’s your passion.

3.     Too Product Centered
Avoid being product and technology centered. Know who your market is and what their needs and interests are. If you don’t know, do your market research. A gut feeling is a good start, but it’s not sufficient. If you’re lucky enough, your gut feeling will realize itself, however chances are you will be wrong. As W. Edwards Deming once said:

“Do not rely on judgment as you will be wrong.”

This means you have to rely on data and facts. In my previous examples of the products I had developed, this is exactly the approach I had taken. I had an idea, and my feeling was that people would be interested. Although the idea might have appealed to a specific niche market, the form and realization of the product may not. Remember that a product or a service is multidimensional and you need to consider all of its dimensions: function, usability, quality, type, and importance, to name a few.

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This concludes part 1. Stay tuned for part 2 of “6 things not to do when starting a business”, where I’ll cover the following items: Being in denial, Sidetracking, and Under or Over networking.

What do you believe should be avoided at all cost when starting a business? Have you ever experienced these mistakes?