3 Reasons Why Some Startups Never Start
Salum Awadh (SA®) describes the path from idea to business in his second guest post for Atoms & Bits.
Introduction
Starting and running a successful business is the ambition of every new entrepreneur. To date, there is no research that confirms there are people in this world, let alone Tanzania, who would want to start a business and fail.
But failing after starting has become a common phenomenon in business literature today. It is estimated that more than 60% of businesses that start fail in their first five years of operations. Despite such a statistic, people still start new businesses today and fail, some even in their first 12 months. Is it an unavoidable situation? Is it preparation for re-building a successful business? Not really.
Perhaps the most frightening reality is that some businesses never go through their start-up stage; we call them start-ups that never start. This is very common among those who come up with new business ideas every day, leaving behind a bunch of previous non-starter ideas. Why do you bring up new ideas every time and never take time to find out why the previous idea never matured? Are you one of these people?
Before we talk about such scenarios in the business world, let's quickly look at what I refer to as from idea to business. I am sure if you are a good reader of business and motivational books, you must have come across themes such as ‘from nothing to something,’ ‘from zero to hero,’ or ‘making money out of nothing.’ Or the interesting book title "Why We Want You to Be Rich” by Donald Trump and Robert Kiyosaki.
All these books and articles cultivate an understanding of transforming fresh ideas into tangible businesses. It has never been easier to turn a fresh idea into a real, meaningful business. It is both an art and a science. But most importantly, it is a work of mind, attitude, and self-determination.
From Idea to Business
It is a lot easier not to start than to start a business because you only need to sleep more hours during the day and spend more time on your TV during the night. This will be enough for you not to start a really successful business. But turning an idea into a business requires a number of things, including the following:
Ask yourself why your previous ideas did not turn into businesses before jumping into new ideas. Assess your strengths and weaknesses as an entrepreneur. And determine whether you have what it takes to run a business on your own. Do market research to find out whether your idea of business has demand in your local market.
Determine your personal and business goals. Determine the start-up and running costs of turning that idea into a business. That will help you avoid starting with an under-capitalized business, which in most cases is a recipe for failure.
Determine the sources of raising capital to finance your start-up and initial working capital.
Register; don't start informally. Be formal.
These are just general things that you need to address before you can turn any idea into a meaningful business. There are more industry-specific things that one needs to look into before putting their idea on the shelf. Remember, this is not a checklist for starting a new business. We will look into such areas in the forthcoming articles.
But why do some start-ups never start? It should be understood. that failing to start is not a must-go stage for every founder. Why? Even when statistics show 90% of start-ups fail in the first year, we would still have 10% of those who do not fail.
Reasons of Premature Death
Undercapitalization
Most people start businesses with a lack of start-up and working capital, which results in stress on cash flow and illiquidity. It may take a few months sometimes to start getting clients.
During this time, an entrepreneur needs to have a cash reserve to pay for such expenses. Failure to do that may see a business owner struggling to pay for office bills, salaries, and other important items that are critical for business stability.
Lack of Entrepreneurial Skills
Technical and non-technical skills of the founder(s) are ultimately a pre-requisite for any business success. These include the ability to set goals, creativity, taking calculated risks, the right attitude, work ethics, and other similar attributes.
Hesitation to Execute
In the business world today, it is not just about having a good business plan or any strategy; it's all about putting such strategies into practice. As much as it is important to have a business plan, it is equally critical to execute it.
Whether it is a sales plan, a marketing strategy, or any well-prepared PowerPoint, most people today fail because they spend more than 50% of their time planning, 40% revising their plans and re-planning, and only allocating 10% for work, while business success is 10% inspiration and 90% perspiration.
Conclusion
We’ve covered some of the key issues that affect most businesses that end up in the start-up stage for months, some for years, and some even give up.
Always make sure that you evaluate and understand all business and entrepreneur attributes that will take you from ideation to successful business. And today, more than ever, resources on how to start a business and turn your idea into money are countless, from offline to online sources. Make time for yourself and read them.
Disclaimer: Illustrations courtesy of NFX, a VC firm that invests in pre-seed and seed stage startups.