When Eric Ries published his book, The Lean Startup, in 2011, I applauded his efforts. Too much time and money had been invested by startup entrepreneurs in creating the perfect product or service before asking customers to buy it. This resulted in burnt-out founders and expensive company failures. Instead, Ries encouraged creating and selling a “minimum viable product” to customers that could constantly be improved over time.
Lately, entrepreneurs are taking Ries's advice to the extreme, launching half-baked products and services to get something into the marketplace. But these "ultra lean" startups demonstrate little value for customers and result in company failures. This new class of startup doesn't realize that founding a company isn’t simply about throwing a bunch of ideas against the wall and seeing which ones stick with customers. It’s about investing time, energy and money into creating a superior product or service that truly solves a deep pain for their target market.
Business moves at lightning speed, and it's easy to slide into the ultra-lean way of thinking in order to get to market as quickly as possible. If you're in startup mode, these seven tips will help you stay on track, stay lean (just not too lean) and be successful.
1. Find real paying customers. This requires getting out of your company’s home office or shared incubator space to meet customers who will pay for the product. This doesn’t involve only solving problems that your company founders are interested in but in matching them with the customers’ pain. Find “real” customers willing to pay for your product—relatives and friends don't count.
2. Landing a first customer doesn’t mean 10 more will follow. There will always be early adopters who will try anything. The key is to find a much larger targeted group who will buy your solution over an extended period of time. This involves investing in a strategic, long-term marketing and distribution plan and not just focusing on product development.
3. Reputation only gets one chance. Sell a poor-performing product to a customer, and you can pretty much guarantee you won't ever get that customer to give your business a second look. What's worse is that your customer will tell their friends and family, possibly through social media, about their bad experience. And if that's not bad enough, you'll start losing the talent you have—smart employees don't want to be part of a failed product or company with a bad reputation—and you'll have a tough time replacing them.
4. Investors can be distracting. Many startups spend more time wooing and pleasing investors than customers. Being dependent on outside investors to fund a company long term is counterproductive, however. The best way to get cash is to build a stream of paying customers as quickly as possible.
5. Track everything. Consistent with the Lean Startup movement, you need to constantly test your products, marketing and distribution methods. Only invest in what is traceable to ensure that even your failures can move the company forward.
6. Get bigger faster. Small companies are vulnerable to larger competitors. And don't buy into the idea that you'll make a killing when your bigger competition will want to buy your innovative smaller company—that theory is mostly myth. Instead of buying your startup, the larger company will just deploy its resources to copy your solution. For your small company to survive, it needs to invest heavily in growing or it will get crushed by its larger competitor. This involves building a first-rate team with industry experience who can be paid market wages.
7. There are no shortcuts to success. Building a successful business takes time and patience. You need to have enough passion and money to sustain you during the tough times and provide a resiliency from failure. This is especially important, since most seemingly "overnight" successes actually take seven to 10 years to hit the big time.
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