Everything theoretical in this article will be the definition of Startup by Steve Blank, who says “Startup is a temporary organization looking for a repetitive and scalable business model”.
Google is full of articles on how to start a startup, slogans like “if a startup is easy to run, anyone would start it” and similar stories that make a startup a “scary”. Going back to Blank’s definition and common sense, why would it be difficult to do something that is temporary and still in demand?
After reviewing thousands of investment applications in the Startup studio and working with hundreds of entrepreneurs on the development of their business models (how to create, deliver and enhance value in every sense), I decided to write a few lines about what Startup is, and why is it hard to outgrow it?
What is a Startup in practice?
We humans tend to complicate things for a million and one reasons, and most often because we feel good when we use terms and sentences that make us look smarter in society, smart = happy, I guess. If someone said during the presentation that he_she was working on an idea and that apart from working on it, there was no concrete result, and besides the results he_she still didn’t know what he_she really wanted or needed to do, it wouldn’t sound as good, mysterious and attractive as someone tells you, I have a Startup or we are a Startup. From here, we can conclude that Startup does not necessarily have to be registered. Moreover, you are in the phase when you do not know what you are doing, you are looking for the right product/service and a customer who will pay for it, you do not need formal registration that leads to costs it makes each month, make you work even harder and earn more through current job. It will actually only lead you beyond the goal of becoming independent.
Then what do you need when you are a Startup?
You need to understand what stage you are in, to look at things realistically and not get carried away by some quick results and big numbers. You should write down your idea on paper, taking into account three things:
- Does anyone other than me need this product/service and are these people willing to pay?
- Can I achieve the result myself or do I need help of people, a team, and if so, what skills should they have?
- How do I reach customers who will return after the first purchase, and spend as little money as possible?
Ultimately, you should not be misled that you have to register a company first and then do everything after that. Of all things, although it is true that the administration and bureaucracy can sometimes slow us down, it is easiest to start a company.
“Problem-Solution” and “Product-Market” fit
No, the buyer will not cross over from the competitor because you are kinder and because you sell blue instead of white balls. They don’t even know you exist, and spending $ 10 a day on boosting and social media ads will only make your pocket emptier. Take seriously the problem you want to solve for the client, research, people usually ask for solutions on forums, and then talk to them. If you do not have some Balthazar innovation, talk and read reviews about competitors’ products/services, what they are and what they are not satisfied with. Based on the feedback, conclude what the biggest problem is, and think about the solution/value you will offer them. When you come to a solution, talk to people again, and yes, make sure you spend as little time and money as possible.
Client validation is a very important segment that we often fail to do because we mean that people can’t wait to give money for this new solution, that they miraculously monitor us and as soon as we register, we buy a machine that we desperately need and as soon as we produce the first piece, millions of customers knock on our door, and the phone and online orders will not stop… such high and unfounded expectations will cause us to experience disappointment at the very beginning of business, because of which some never dare to think about independent business again.
The most common arguments that people want to skip the “problem-solution fit” phase in which we do client validation are: “I can’t talk to customers without the product” or “I have to register first to be taken seriously”, or “I have to start production, to have stocks in a year, because what if the client asks me for a larger quantity during the conversation, and I don’t have enough products to deliver, I’ll turn out to be frivolous”,” I have this problem, people will surely pay for this because I didn’t find it anywhere else” …
If we know that in addition to the problem-solution, there is a “product-market fit” then you will see that the arguments are not very well founded for the first phase, which means not that you cannot, but you have to talk to the target group without products. Your goal is to prove that there is a problem, that the same thing hurts others, and to determine if the problem is serious enough, that is, if there are enough people who have the same problem and who could later be your customers. How do you do that? Well, talk to people, but be careful, if you assume that astronomers have a problem with telescopes for astrophotography, then you will not ask the baker if it is a problem, but you will find astronomers first, then those who practice astrophotography, only then get in touch with them in some way. Sorry, although this sounds logical, in practice we often waste time talking to the wrong person and target group, which misleads us, and delusion is never good.
When you realize that the problem is big enough, and you know well what it is, you can work on improving the originally designed solution. Here we come to the famous MVP. Paper is your friend, or Paint if you work on a computer, draw your solution. It doesn’t have to be a finished and perfect product, whatever you make will serve. It’s important that you have something that you can show to the same people you asked about the problem, possibly give it a test. At this stage, you see if the product/service you plan to do is adequate.
You see, you are not registered, but you are a Startup, you are wanted, and you do not violate any law. Once you develop a business model, do market validation, and have a base of potential customers who can’t wait for your product/service (they have to wait because they’ve been working with you all the time on a solution) then register a business. After registering, you are still a Startup, and so it will be until those customers start coming back and recommending it to others. When your cash flow becomes positive, congratulations, you have become a sustainable business, you can now further develop and prepare a business model for scaling. Once you are registered, try to be a Startup as soon as possible. Your goal should be to bring the business model to sustainability as soon as possible, and then to be Scaleup. Sustainable business is hard to do because it is preceded by a million questionnaires, Startup on the other hand is more of a way of thinking, a business mindset, while thinking about a business model feel free to call yourself Startup, as thinking should not be difficult for us humans, nor just “starting” startups are not difficult. A startup is difficult when you skip steps and the market brings you back to reality, and that awareness hits you hard. It’s like when you read a script instead of a book and you get questions on the exam that you haven’t read anywhere, and you fail the course… It’s important to emphasize that even though we outgrow Startup with the first business model, we will look for the right business model in the same way, so we will have a growing business and a startup within that business at the same time, this is actually the best combination because it allows the business to grow continuously and leaves room for innovation.
Let’s not forget, you don’t work alone, somewhere during your journey you have certainly found equally motivated partners who complement you with their skills and knowledge, so everything about startups is developing in a good direction. Also, you think rationally, you outsource everything you can, you don’t create unnecessary costs, every step you take and every penny you invest bring you a certain result, you are closer to the goal of becoming independent and creating value. I say independent, because the most common reason why people decide to start their own business, in addition to the more money they expect, is to be independent. Independence, freedom and having your destiny in your hands is a good thing, think how much you don’t believe in yourself when you consciously leave your and your family’s existence in the hands of your employer, because for some reason you believe that someone else will take better care of you than you alone! Let’s face it, not everyone can and should be an employer, but that’s a different topic.
There are also business models that create value for investors and aim to exit at some point. Their primary goal is not to quickly become self-sustainable and profitable, but to create value and sufficient investor interest in the B, C, D series of investments and/or IPOs, after which investors and owners pay off many times over. Thus e.g., Spotify is worth between $ 40 billion and $ 70 billion, although it has never made a profit since its inception, its net loss last year was over $ 500 million, which is also a topic for another time.
Conclusion: While Startup as a term sounds nice, one should not fall into the trap that the advantage is to stay Startup for too long. A startup is anyone, registered or not, organized in a group or alone, who is still looking for a suitable business model and regular customers. Startup is actually easy to start, I don’t even know why the verb “start” is used, which is more associated with formal registration (which is also no longer a big deal) than with the flow of thoughts and research activities, it’s hard to outgrow Startup. To outgrow Startup do your homework, don’t skip steps. Register a company if you have customers ready to buy and recommend your product, even if there are ten of them. If you’re making a product and then looking for customers, at least one, you’re doing the wrong thing, it’s like jumping off a tree and expecting to fly into the sky, of course you’ll fall on your behind, be happy if all the bones are there!
Bonus for those who read the whole article 🙂 The biggest enemy of starting a successful business is the entrepreneur himself_herself because they are blinded by their idea or too stubborn. You need to love your idea, but you also need to know that that idea needs to be refined, and that it almost never stays in its original form. If potential customers ignore your emails and calls or reject you, of course you will consider: did you hit the target group, did you hit the problem, is the value/solution offered according to the problem, what did you write and how much did you write (people don’t have time to read novels), according to new knowledge you will then adjust the model and approach, and try again. It is also a virtue to know when to give up and change direction. You don’t go head over heels through a wall. For those who take “never give up” literally, no one alive can help. Do not give up in terms of reaching the goal, if it is correct, it is ok, and you will definitely change the way, tools and direction if they are not good, if you know that doing the same thing you will always have the same outcome, such as to stand on the cover that is not secured on the way to the store, “don’t give up” does not mean to stop on that cover every time and break your leg, but go to the store, but another time go beside it somehow.
