10 things entrepreneurs must understand to be successful
Dr. James Bowen | August 11, 2017
Starting a business can be a challenge for anyone, but this list from a University Canada West professor covers the top 10 items that entrepreneurs must understand to give them the best chance at success.
Entrepreneurs must understand:
- The Business
I have seen founders who aren’t technical start technology companies, founders who figure that financial issues such as accounting, taxes, etc. can be delegated, and founders who don’t know modern leadership or corporate culture concepts. Such founders figure someone else can understand, make the right decisions and implement them properly. Delegation can work, but they shouldn’t delegate understanding. Delegating could mean opportunities missed or less than optimal solutions implemented. The founding team needs to understand each aspect of the business.
Every assumption in a plan is a risk. Every assumption is a non-fact: to say there are no risks means there are no assumptions and thus everything is a fact. This even includes future-oriented information such as potential market share. Founders need to view their start-up as the process of turning assumptions into facts.
Some founders believe it’s OK to lie or exaggerate to customers, investors, partners and employees, as long as they deliver on their promises. Exaggerating and lying establishes a corporate culture, in which issues are allowed to fester until they become problems. Individuals become self centered in their orientation and place their own enrichment above the positive impacts for the customer, investors and everyone else. It also increases risk for customers when potential issues and clarity on how risks are alleviated are not explained.
All businesses are about people: saving them time, saving money, accomplishing their goals, etc. It’s why employees work there and customers buy. Understanding motivation, perspectives, expectations and how customers will evaluate the company and its offering are necessary.
- Customer’s Risk
The customer is taking a risk buying from a new company. Marketing has to be two pronged: how does the start up’s solution solve the problem, and will the solution deliver on its potential. The start-up needs to eliminate the risk of a bad purchase for the customer.
- The Market
The market is in constant evolutionary change. Start-ups need to be able to speak about how their solution fits where the market is going over the coming years, particularly in conjunction with other solution possibilities. I have seen too many start-ups that are variations of a theme, which current solution providers will someday incorporate into their solution.
A founder might have a vision and a broad and detailed understanding of how to accomplish it, but many struggle to communicate that to others in our attention deficit world. We need to be able to communicate a spaceship-sized idea to a compact car-sized attention span.
- Fixed Costs vs Variable Costs
A business model must have the proper balance between fixed and variable costs. If the business has a potential for large volumes of customers or will evolve quickly as the business model is better understood, then the initial fixed cost and variable cost structure need to be appropriately planned. In general, if the model will evolve, it might be better to have a more variable cost structure thus allowing the financial structure to evolve with the business.
- Emotional Commitment
A start-up is a significant trial of emotional strength. The start-up will likely have more negatively stressful events than positive accomplishments. This can wear down one’s commitment and passion. Founders need an unswerving reason why they are doing this start-up. It can’t just be about getting rich.
- Constant Validation
The founder's idea and approach will need to evolve, what worked yesterday might not work today. A founder needs valid and reliable validation sources that constantly reality check ideas.
Dr. James Bowen is a professor at University Canada West. He is also associated with 10 universities, including three in Europe, where he teaches in their MBA programs. He has more than 20 years of management experience and is a published author. For more blogs from Dr. Bowen click here.
University Canada West is located in the heart of Vancouver, British Columbia. The university offers both online and on-campus Bachelor of Commerce, Bachelor of Arts in Business Communication and MBA programs. The business-oriented university provides students with the experience to succeed in their careers and scholarships to recognize students’ academic excellence.