“The only thing worse than starting something and failing… is not starting something.” — Seth Godin
What you didn’t learn in business school can hurt you.
When you’re the one that’s trying to live your dream, go all in, and reach for the brass ring, the stakes are high, and the falls are hard. It’s an emotional roller-coaster. And, it’s also how startups fail.
But startups don’t need to fail as often as they do.
People keep learning the hard way that there is a better way to start a business that matters, and add value to people’s lives.
All in Startup: Launching a New Idea When Everything is On the Line, by Diana Kander,is the story of an entrepreneur who goes about the game of business all wrong. Lucky for him, he meets a mentor who teaches him the art and science of startup success.
Here are a few of the many big ideas from All In Startup …
1. Why Startups Fail
Startups don’t fail because people aren’t passionate or because they don’t work hard enough or because they don’t ship neat stuff. They fail because they find out too little, too late that their idea isn’t good enough.
“Startups fail because by the time the founders figure out that their idea isn’t good enough, it’s too late to make it better. They only realize that no one actually wanted their product or service after they’ve already run out of money.”
2. Your #1 Job in a Startup: Put Your Customer Needs First
People don’t buy visionary products; they buy solutions to their problems.
“In an ideal world, before you quit your job or sank your life savings into this company, you would have proven whether people actually wanted to buy your products. Now that you are already pot committed, you have to figure out why they don’t. You need to go out and talk to your customers. Figure out if they agree with all the assumptions you made in your business plan. Do they think prices is important? Will they buy bikes online? Whatever other assumptions are important to your business model. Put your customers and their needs before your vision for a solution. That’s one of the most important skills I learned at Sparksys. It’s your number one job in a startup.”
3. It’s Not About Hoping the Market Adopts It
It’s about understanding your customers and adding value to their lives.
“And this conversation …. the last conversation … and every conversation we’ve had shows me that you are too full of yourself to understand the most fundamental idea of a startup; it’s not about creating a great solution and hoping the market adopts it; it’s about understanding your customers first and creating something that adds value to their lives.”
3. Three Reasons Why Your Business is Failing
Either you solved the wrong problem, they won’t pay you for it, or your solution doesn’t work.
“So if you’re business is failing from the get-go, it means that either … you built a solution for a problem that doesn’t exist, or … your customers don’t know they have the problem or it’s not important enough that they are willing to pay money to solve it, or … your solution doesn’t actually solve the problem.”
4. Identify Opportunities Through Small Bets You Can Afford to Lose
Before you go all in, you need, you need to chip away at the risk, until you find the opportunities worth exploiting.
“Instead, they have learned how to minimize risk and generate luck. They do this by making a series of small, calculated bets to test their assumptions and find new opportunities. Each small bet is something they can afford to lose because it’s opportunities that both professional poker players and successful entrepreneurs will use all of their resources to exploit.”
5. Understand Your Customers and What Problem You’re Solving for Them
If you don’t know your customers well enough, and narrow it down, you’ll miss your mark.
“You can’t do well in a tournament without paying attention to the other players, and you can’t launch a successful product without understanding who your customers are or what problem you’re solving for them.”
6. Solve a Problem People Already Have
If you want to be relevant to your customer, then solve a problem that already exists.
“The way to get their attention, the way to start a successful company, is to solve problems that your customers are already experiencing rather than try to convince them that a problem exists.”
7. Human Beings are Irrational
Too many business plans are guesses about how people will behave, but people are irrational.
“It depends a lot on irrational human beings. And you just can’t predict how these irrational human beings will act. A lot of statements that you declared as facts in your business plan are just plain guesses about human behavior, and you can’t really declare guesses to be facts without first interacting with your customers to figure out if you’re right or wrong.”
8. Beware of Vanity Metrics
Don’t fall for metrics that make you feel good, but don’t actually measure anything useful.
“None of that means anything, Owen. You keep telling me about these vanity metrics – the press coverage, the site visits, all that stuff – it all makes you feel good, but it doesn’t really measure anything useful. It doesn’t really depict the health of your company. It doesn’t answer the question of whether your big idea can ever become a successful business.”
Only self-control will save you from yourself.
“You know what I learned about playing poker? It’s now how to bluff or when to bluff. It’s when to control yourself. These pros have a ridiculous level of self-control. You can just tell. Like no pro would have kept betting those pocket aces because that’s just spending good money after bad.”
10. Take Luck Out of the Equation
It’s easy to get caught up in the emotional whirlwind, and throw time, resources, and energy after your passion. But if you want to survive long enough to thrive, you have to play smart, reduce risks, and evaluate the odds.
“But it wasn’t just luck. He knew that. Owen thought back to his conversation with Sam about slot machines versus poker. He wasn’t just coasting through the tournament on luck alone. He was taking very calculated risks, minimizing his potential exposure on hands, and continuously analyzing his chances in a hand based on new information. Owen wasn’t worried about money already committed to a hand, he was thinking about his odds moving forward. He was gambling. He was excelling at a game of skill because he minimized his risks, and yeah, gotten lucky a time or two.”
Startup success does not need to be so elusive.
If you can teach yourself to really connect with and truly understand your customers pains, needs, and desired outcomes, you’ll be much more effective in the game of business, whether you are starting your own business, working in a startup, or even working in a large corporation.
After all, as Peter Drucker taught us long ago, a business to create a customer.