Secrets to STARTUP SUCCESS

CLARIFY YOUR REASONS AND YOUR GOALS

Whenever I meet someone who wants to start a business, the first question on my mind is: Why? Why are you doing this? Why now? What are your reasons, and what outcomes are you hoping to achieve? The answers to these questions will drive both the direction of the venture and how effective the founder will be in getting it off the ground.

All reasons are not created equal. Each comes with benefits and tradeoffs. What follows are nine common reasons for plunging down the startup path, along with a few important considerations for each.

INDEPENDENCE/SELF-RELIANCE - If the freedom to call your own shots appeals to you—if you want to set your own priorities, work at your own pace, and be your own boss—you are in league with most aspir­ing business owners. The more autonomy-driven you are, the more you might prefer to operate as a sole proprietor or freelancer, rather than as part of a founding team.

“Being your own boss” is more myth than reality for most entre­preneurs. Every successful business owner must consistently answer to others: customers, creditors, suppliers, and investors. Understand how your independent streak might constrain your bottom line and limit your growth prospects. Research confirms that businesses started by two or more co-founders succeed at higher rates than those run by sole proprietors.3 And if you are interested in growing the value of your business over time, you will, most likely, need to complement your strengths with those of others and relinquish some control of your business to funders or other business partners.

ACHIEVEMENT - If you are motivated by challenge, driven to be the best in a particular field, want to prove to yourself that “you can do it,” see a better way of doing something, want to do work of highest quality, want to stretch, learn, and get better—all these are positive signs for the future of your new business. The drive to achieve is one of the most potent and lasting motivators because it comes from within, can be focused on the concrete steps vital to advancing a startup, and isn’t easily weakened by challenge or adversity.

The early days of a startup can be frustrating for achievement - driven founders because many important tasks and activities don’t lead directly to measurable outcomes. Given that paying customers may not be a reality for some time, the more clearly you can define what constitutes meaningful progress, the more your drive to show progress can be directed in fruitful and satisfying directions. In Chap­ter Five, I’ll share ideas for clarifying goals and priorities early in your startup process.

FINANCIAL GAIN/WEALTH - You may view starting a business as the best way to earn a good living or as the road to wealth creation. This latter ambition is often a special case of the drive to achieve, where money functions as a way of keeping score and a means to other ends. Even after financially driven entrepreneurs have earned more money than they and their families will ever need, they continue to be lured by the great game of commerce and the thrill of the deal. In the eyes of venture investors, this drive toward financial success is usually a positive sign. As Chris Holden of Court Square Ventures notes, “Those who are most motivated by a return on their personal sweat equity and the risks that they took, the money that they raised, and their own money that they put in it, those are the ones who are most willing to adapt to changing conditions, and be transparent, and to not care about being liked or how they look. . . . They don’t let any­thing get in the way of their real goal, which is to succeed.” Chris’s experience is supported by a Kauffman Foundation study published in June 2009, examining the personalities and motivations of 549 suc­cessful startup founders across a range of industries. Seventy-five percent of these founders “expressed a desire to build wealth as an important motivation in becoming an entrepreneur.”4

Bringing realistic financial expectations to your startup journey will be vital to your success. The road to startup wealth usually re­quires financial sacrifice in the early going, sometimes extended over many years. Well-prepared founders are willing and able to operate at reduced income levels as long as necessary. If financial motivation is the only thing driving you, you may not be willing or able to handle the economic realities of early-stage startup life.

HIGHER CALLING/MISSION - Some entrepreneurs are passionately driven by a special cause or a higher calling. Their animating fire cannot be quenched. Lynn Ivey personifies this reason for starting a business. I’ve met very few people who bring her combination of un­shakable belief, optimism, and energy to their startup effort. As we will see in later chapters, Lynn’s personal sense of mission propelled The Ivey through some very tough sledding. This is true across the startup landscape in the form of many mission-driven founders, who seem to draw energy and inspiration from a source greater than themselves.

Unfortunately, mission-driven founders may be more likely than others to become trapped by their passion. Their confident certainty and sense of destiny can blind them to the more sobering aspects of building a business, and they may be slow to understand that their mission and message won’t resonate with everyone. If you feel driven by a higher calling, be sure to surround yourself with reality checks to counterbalance the stubbornness that can come with inspiration.

MARKET OPPORTUNITY - Of all the reasons to start a business, I be­lieve most strongly in this one as a predictor of ultimate success. When founders are driven to address a known gap in the marketplace, their energy is directed precisely where it should be—on solving an emerging or existing customer need. They are much more likely to build their new business on a foundation of solid market demand. J. C. Faulkner has always been an entrepreneur in waiting—it’s stamped in his DNA—and so it was only a matter of time before he made his startup leap. But his specific idea for D1 sprang from his timely recognition of an emerging gap in the marketplace. He was passionate about catching the coming wave of home finance activity and de­signed his venture to do so.

If you are obsessively driven to solve a customer problem, be sure to do your homework by testing your assumptions about the size and readiness of your chosen market. It’s not enough to successfully solve a problem. You must solve a problem that customers will pay to have solved in sufficient numbers and at a price that will generate a healthy return for your business over time.

AN ESCAPE FROM SOMETHING - Many, many people want to pursue self-employment because they are desperate to break free from a dead-end job or a bad boss. They may feel bored or stagnant or fear that working for others no longer provides the security it once did. Or, they may have been laid off and cannot find any reasonable op­tions in the current job market.

Although it’s understandable that such situations provoke many of us to finally take the startup plunge, these kinds of “away-from” reasons, unless they are accompanied by an even stronger “toward” motivation, do not typically drive entrepreneurial excellence. The fur­ther a new founder moves from a distasteful situation, the less moti­vational power these reasons pack. Starting a business is hard; people don’t succeed simply because they were unhappy or unsuccessful at something else. If you are driven by dissatisfaction with your career or life situation, try to identify and cultivate more forward-looking motivations, reasons that would cause you to abandon a great situation because they are so emotionally or intellectually compelling.

LIFESTYLE - Some founders are primarily motivated to run a business that meshes with their desired lifestyle outside of work, but achieving your dream lifestyle while building a healthy business may be more difficult than the hyped-up entrepreneurial media would have you believe. It’s true that technological innovations have led to an explo­sion of home-based, Web-based free agents across the world (blog­gers, Web designers, Twitter consultants, SEO marketing specialists, etc.) and you can now outsource almost any task that you find daunt­ing or uninteresting. But most of these free agents don’t earn enough to cover basic living expenses,5 and those who do make a good living at it will readily admit that they work around the clock to lift their product or service above the abundant noise and clutter of the Web.

In the case of Tim Ferris, author of the best-selling book The 4-Hour Workweek and father of a worldwide movement of “lifestyle design,”6 it’s clear that he has put in herculean hours and effort in promoting his book, building his brand, and marketing his image across the world. In mastering any profession or a craft, the appearance of a rad­ical shortcut is usually illusory. If it seems too good to be true, it usu­ally is. Achieving your ideal lifestyle will likely require tough choices and sacrifices.

SOCIAL/COMMUNITY - Some founders are driven to entrepreneurship because they want to work with friends, be part of a great team, meet new and interesting people, or create a vibrant community of co­workers, customers, or colleagues. J. C. Faulkner launched D1, in part, because he wanted to create a better place to work. “My motivation was more personal than professional,” he said. “I wanted to build a place where I could attract talented people and treat them better than they’d ever been treated and where I felt better about working. I would have taken a cut in pay to do this. In fact, I thought I was taking a cut in pay.”

The instinct to start a business with friends or family is as old as commerce itself, and it’s common for founders to end up on startup teams because friends recruited them into the role. I worked for many years with a successful and superbly led global consulting firm that grew out of the collegial friendships among its three founders. For the most part, they saw working with each other and having fun together as the primary reason for joining together in a business. In this case, the founders’ social motivations served the venture well, contributing to trust-based relationships and alliances inside and outside of the business.

The inherent risk associated with starting a business with friends has been well chronicled. Just because you like a person or went to school with that person doesn’t mean he or she is a good fit for the business you are launching. I’ve enjoyed healthy business partnerships with close friends, but, in every case, the business relationship made sense and worked well independently of social factors.

INNOVATION/CREATIVITY/ARTISTRY - Many aspiring entrepreneurs are driven to pursue a technical innovation or a unique product idea, to turn a specialized hobby or craft into a job, or to build something that has value apart from themselves. I group these motivations to­gether, because the common animating force is the age-old thrill of making something from nothing. Founders driven in this way see their new ventures as crucibles in which this creation can occur. It’s a powerful motivator, and a close cousin of the need to achieve. Mark Williams, founder of Modality, is a great example of a founder who is obsessively, passionately, unreasonably driven to create the perfect product. Such founders are typically creatures of the lab, the studio, or the computing platform. Any opportunity that allows them to pur­sue their creative passion is one they will gladly embrace.

The challenge for founders driven by innovation and creativity is finding markets that are both sizable and ready for their craft. Re­searchers, “creatives,” software hackers, and product developers are often leery of marketing and sales activity and lack general business acumen. If your first love is innovation, learn to respect market and financial forces and the talented people who understand them. They will help you tether your passion to sustainable streams of good for­tune.

There are, of course, other reasons to start a business. Some people feel that they were born to be entrepreneurs and will jump at the first opportunity. Others want to go deep into a professional specialty or follow in a family tradition of entrepreneurship. Whatever your rea­sons, work to understand what is driving you and how this might im­pact your startup approach.

Alongside the question of why you want to start a business is the question of what you hope to accomplish. Even if sketched out in very general terms, articulating your goals puts a stake in the ground and helps you to further think through your overall level of readiness. I use the following questions with clients as a starting point:

■ Briefly describe your business concept in 50 words or less: What will you offer? For whom? Why is your concept unique or compelling?

■ What do you hope to achieve—personally and professionally—over the short-term (next 1—2 years)? What about the longer-term (5+years)?

There are no perfect answers. Start by brainstorming a list. Write down whatever comes to mind and then narrow the list to those items that are challenging and compelling enough to drive energy and ef­fort, directional enough to guide week-to-week choices and behav­iors, and clear and simple enough to keep front of mind.

Here are some examples of early founding goals I’ve heard:

■ Spend no more than $30,000 over the first year of operation and generate positive monthly cash flow after nine months.

■ Become known as the go-to expert in specialized healthcare training for the greater Nashville region within two years of launch.

■ Launch an initial website within three months and have ac­curate per-customer metrics in place within four months.

■ Build a company that is valued at $10 million or more within seven years.

■ Develop my team to the level that allows me to take two con­secutive months off each summer to spend with family, within three years.

As you can see, goals can vary considerably in terms of time hori­zon and focus (personal or professional). Only you can determine what success looks like as you move forward. The more concrete your starting goals the better, although they shouldn’t be etched in stone. They will need to evolve as you learn more about your market op­portunity (Chapter Four) and clarify your business model and “math story” (Chapter Five).