In my role as a mentor to aspiring entrepreneurs, I find that most have the technical challenges well understood, but many are a bit short on some basic street smarts, or basic business realities. Thus I often recommend that before you kick off your own business, you join another startup or existing business to see how things really work. Even the best college degree is not a substitute.
For certain, passionately chasing a big financial opportunity in an area you have little street experience is a recipe for disappointment. I will certainly admit that starting and running a business is not rocket science, and you can learn many of the basics in any business school, but here are key additional business realities from my own experience that can lead to downfall:
You can start a business, but it takes a team to grow it. You alone will never find enough hours in a day to keep with all the challenges of sales, support, and scaling the business, in addition to developing and delivering your solution. Actually, building and nurturing the right team is the hard part, requiring communication, hiring, and leadership.
Jeff Bezos readily admits that his first career in a Wall Street-based investment banking firm gave him some keen insights into business realities, before a fear of regret and a personal passion led him to create Amazon, now the largest ecommerce site in the world.
Your leadership skills do not develop without effort. Unless you have a proven track record from a prior career, or experience leading teams in some other context, you can expect stumbles and a long learning curve to lead a team. It starts with documenting and communicating a real purpose and mission in terms everyone can get excited about.
Intellectual property is required for a competitive edge. You may think that patents and copyrights are not required, since your products are so innovative, but you will find that competitors are quick to copy your idea if you don’t protect it. In addition, most investors won’t give you money for scaling if you don’t have a strong property base.
Although Elon Musk doesn’t talk about it very much, he owns over 350 patents through Tesla, just one of his many companies. In addition to locking in his leadership position in electric vehicles, he has also used his patents to negotiate faster growth in his market.
Strategic planning is a required ongoing investment. If you wait for a growth crisis to kick off your next step, it’s probably too late. Planning for the future must be a regular activity, not just an early-stage or once-a-year event. Change happens every day, and it takes time and effort to prepare you for the next step. Survival requires regular updates.
Even the best solutions require marketing to survive. With information overload due to the Internet, you need to find your customers, rather than assume they will find you. That first burst of customers via word-of-mouth or a viral video won’t sustain your growth. Start with a range of platforms, including social media, advertising, and a great website.
Most investors I know have heard many passionate entrepreneurs chanting “If we build it, they will come” in lieu of a credible marketing plan. Let me assure you that companies without marketing plans don’t get the attention of either investors or customers.
Don’t under-estimate or ignore your competitors. As an angel investor myself, I’ve often heard the argument that your solution has no competition. My answer is that no competitors means no market, or you haven’t looked. Neither is good. I want to hear how your offering stands out, and how you have a plan to stay ahead of the crowd.
Having an innovative solution is a necessary, but not sufficient, condition for starting and succeeding in business. You also need the required skills for leadership, planning, operations, and growth, many of which are best acquired from business experience, rather than academia.
These street smarts, if you acquire them early, can save you a lifetime of pain. It pays to build relationships with an advisor or mentor, or work in the real business world for a while, before you strike out on your own journey. It’s more fun to enjoy and see positive results from your efforts, than to spend your life trying to catch up.
*** First published on Inc.com on 12/15/2020 ***
*** Bulgarian translation provided by Zlatan Dimitrov ***