To live by a code gives your life meaning and structure. In fact, we all live by a common code in our daily lives. It is how our society is able to function. Entrepreneurs live by a code, and we call this code the start-up principles.
Start-up principles are a set of laws we must follow to reduce the risks and ensure success. They explain how things work and significantly aid your decision-making to reduce failure. People that do not follow these principles will have a high chance of failure.
Entrepreneurs have a tendency to mess things up by making stupid mistakes. So, in this article I will go over the list of principles that is said by numerous experts to be most helpful to save yourself from being a victim of bad entrepreneurship.
1. What Are Start Up Principles?
For every new business that is successful depends on three things:
- Product – you are able to produce the required product
- Market – there is a market for your product
- Capital – you have money to sustain your losses
The product must meet the market requirements and you must have to money to build it and send it out to market.
After the US government failed to build a flying machine on a 100 thousand pound budget and leading experts at that time. The wright brother built to first successful plane with less than a 2 thousand pound budget.
The start-up principles I speak about below help create to synchronicity between the product and market (we call this product-market fit). Even with little capital minimising all risk wherever possible.
2. Why are Start-up Principles Important?
The biggest reasons businesses fail is because of no customers.
The biggest reason businesses never get going is that the product idea is too complicated and requires too much time and skills to implement.
The biggest problem is that we do not actually know what the market wants until we see how they react to the product we give them. Therefore, there is risk in the unknown. We follow principles to help guide us in these uncertain times.
What makes this principle so effective is rooted into why most business fail and do not ever get started in the first place.
#No1 Start-up Principle: Start Small, Think Big!
Steve Blanc is author and creator of the business model canvas. His golden tip, which I highlight as the #No1 principle, is start small, think big.
Chance Lock Wood Mawson says that the common reason businesses fail is that they over complicate things. In addition, this means you want to keep things simple.
By starting small and focusing on a small aspect of your start-up vision will increase your chances of success. This means you want to start by creating a minimal viable product. Which is basically a sample and aim to grow from there.
However, you must think big. This means you need a vision and as you keep succeeding at the small things, will build you up to the bigger goal.
#No2 Start-up Principle: Get Out The Building!
To many people hide behind their business plan as if, it is this magical ticket to the wonderland.
However, the truth is no business plan will survive the first interaction with customers. That is correct, and it can seem demoralising but the chances your business plan will survive the interaction with customers is very slim.
In fact, this is usually when people give up, after the first attempt. Moreover, all the famous entrepreneurs we know today failed hundreds if not thousands of times.
Nevertheless, you learn from experience, and this experience can only be developed by getting out the building and interacting with customers, and listening to their feedback.
Academics call this effectual thinking, which is a type of human problem solving developed from dynamic and iterative process of creating new artefacts in the world. Getting out he building and speaking to potential customers is the secret to gaining intuition and building that gut feeling for all your decision making in the future.
#No3 Start-up Principle: Do NOT Take Risks
Academics tell us that all good entrepreneurs take risks. In part, we know some of the greatest entrepreneurs where risk takers; I would have to advise against it.
Too many start-ups fail because to many people think by taking risks will lead to success. It may have led to success for a select few in the past, and it may lead to success for a select few in the future, but the odds are stacked against you.
In fact, many of the best tools out there today tell us to combat risk by testing all assumptions you have.
Do not put you faith in any business plan that has not been in contact with customers because this plan is just a list of assumptions waiting to go wrong.
If I have learnt anything over the years it is that accept the worst will happen.
#No4 Start-up Principle: Test Everything!
Warren buffet is known to create 200 shoes designs and take all of them out to potential customers to know their response.
Try to sell your product if one person is willing to pay for it then it means there is a market that just waiting to be discovered.
Ellis Paul Terrance Quote
By testing everything, we are seeking solutions through trial and error, which we also know as being the process of creativity.
#No5 Start-up Principle: Manage Failure
When starting a business there is a lot of Uncertainty and Risk. The risk can be both positive and negative.
A start-ups objective is to seek out these opportunities and explore their significance whilst always reflecting the customers view.
We concentrate on what you can create rather than elaborate forecasts.
We call this pivoting. Whereby, it means taking the new ideas out to potential customers, and reflects on the new insights this brings.
However, each pivot will cost money and time and so it is good to put a plan forth that manages the product development process with the budget.
#No6 Start-up Principle: look at problems as opportunities
From much experience, I have seen people avoid gaps in the market because there are barriers in the way.
In actuality, you can look at these barriers as potential opportunities.
Professor Howard H. Stevenson: “Entrepreneurship is the pursuit of opportunity beyond the resources you currently control.”
I like to see barriers as this indicates that is not going to be easy. I always think if it is not easy, means there is less competition.
#No7 Start-up Principle: Start Now!
I made this mistake, and it was mainly because I put starting my business at a less priority.
If you start now or next year, you will find yourself going through a timely process so if you start now you are more informed.
#No8 Start-up Principle: Stop Treating Start-ups like Big Business
A common mistake people think is that a start-up is the same as a functional business.
But, this is just not the case.
We cannot follow strict plans, as no plan survives first contact with customers before executing.
The consequence of using the waterfall model in a start-up is assuming that the vision will not change, and every problem and feature has been thought of from the beginning.
This is confusing a faith based vision with customer facts.
Treating start-ups as big business, trying to duplicate existing organizations, employing the hierarchy structure from day one, Hiring PM, VP sales and implementing waterfall is not a formal process for searching what the potential customers’ needs are.
What is actually happening here is scaling the start-up into a company before the first customer has been established.
Thus they have not established their business model before they invest their money into it. So creating a cloud of deals won’t be useful and will just get in the way for start-ups.
The root cause is the lack of information the start-up possessors. With the right information a start-up could go big from the start, but this is not the case.
#No9 Start-up Principle: Customers are the centre Of Every Business
The customers purchase your product and provide revenue to your business.
It knowing what your customer want from you that will keep you afloat.
If you are in the mind-set of “I want” then your focus is away from the customer.
However, the reality is, no one cares what you want, all that matters is what your customers want.
Start surveying your customers to figure out what they want and, more importantly, understand why they want it.
A lack of customers is why a business fails.
Case study – The Customers are the centre of every business
“John was brilliantly clever. After graduating from Stanford at the top of his class he worked for a few years and then returned to university to gain his MBA at Harvard. Upon completion he joined a top-tier management consultancy firm where he was highly rated and handsomely paid.
After a few years he had a “fantastic business idea to revolutionize the consultancy industry” so he quit his job to startup his business. He brought together a strong team of experienced people and raised lots of money from one of the top venture capital firms on the west coast. His team spent months developing the product until it was finally ready to launch.
John and his team organized a huge press launch and the company received rave reviews from influential media sources. Everyone was congratulating John on his achievements. His success was almost guaranteed. All he had to do was waiting for the money to roll in … so he waited … and waited … but the money never arrived. Sales of the product were very poor. Customers didn’t want it. And after 20 months of seemingly everything to save the company John ran out of money the company folded and he ended up a very public failure”.
After everything was stacked in, Johns favour did this happen?
Product development is the biggest risk in most cases yet Eric failed along with many others because of a lack of customers. The common reason for the lack of customers is not listening to customer requests.
#No10 Start-up Principle: Money Doesn’t Solve Problems, It Causes Them
If you think money is what you need, you’re wrong.
Having less money will spur creativity and allow you to come up with unique ways to get what you want.
#No11 Start-up Principle: Don’t Hire Too Quickly
Before you make your first hire, you’d better know what roadblocks the employee is going to run into.
If you do not have to the skill to do something then there is the option of collaborating and seeking others with the same ambition as yourself, or build a new skills set yourself.
This is the only way you are going to find out what these roadblocks are and what solutions you will need to overcome them.
#No12 Start-up Principle: It’s better to Have Hunger than Talent
We all know that passion is one the keys to success.
With this in mind, by hiring talent employees that only work to earn is like flushing money down your toilet.
Instead, hire employees who are hungry to work and prove themselves such as, students or people looking to get into the corporate world.
#No13 Start-up Principle: Emotions & Business are a Bad Mix
Do not make any decision emotionally. You emotions cloud your judgement and lead you to bad decision making.
Sometimes, the best way to do this is to step back and take a break when feeling emotional.
Once you calm down, you can then reevaluate the situation and make a decision.
As an entrepreneur, you always need to enlist. Seeking other people’s opinion is always beneficial when seeking the best decision.
#No14 Start-up Principle: Don’t get ahead of yourself
There is no possible way you can predict how well you are going to do.
So, do not get lost in a dream world of money! The most successful people always say a rich person works to solve problems, and a poor person works for money.
If you are going to follow someone’s word, follow Nike’s: just do it. If you want to be rich and successful, you have to work hard. There is no shortcut.
#No15 Start-up Principle: Focus, Focus, & Focus More
Focus is often the word use to explain people’s success; you have a lot to learn and a lot to work on.
For example, your business is like a baby. You are naive, and you still have a lot to learn, but you probably want to do what all of the other big boys are doing.
If you try to run before you can even walk, you will just get hurt (or in the business world, make many mistakes).
This also means there is not enough time in the day to run multiple businesses. You are more likely to succeed if you put all of your time and energy into one company.
#No16 Start-up Principle: Accepting you’re not that smart
Never underestimate your competitor, because no matter how dumb they may seem, they were still able to create a company that is larger than yours is.
Do not be afraid to ask other people for input. There is nothing wrong with asking for help because it will save you time, money, and potentially give your insight into your competition.
#No17 Start-up Principle: No Detail Is Unimportant
Small details can have drastic effects.
It could also be that minor detail sets you apart from the competition.
#No18 Start-up Principle: Business Plan
A general business spends their core time executing and selling to their target market, building their brand with ideas of expanding to a wider audience.
Yet Investors and educators teach you how to put your start-up onto a five-year plan. Investor’s use this information to judge who to invest in, based on the assumptions and highest profit margins.
A lot of faith is put into financial forecast and operating plans, which in turn, after all the people have been hired, the five-year plan based on these assumptions would be a success.
This is because many things will change that could not be accounted for as the Business Model has not yet been executed for full understanding.
#No19 Start-up Principle: Use information for innovation
By understanding, the job of the product and improving a product’s social, functional, and emotional dimensions will transform the product.
Peter Drucker – “The customer rarely buys what the company thinks it sells him. One reason for this is of course that nobody pays for a product. What is paid for is the satisfaction”.