It’s no secret that the vast majority of startups fail. While the reasons for failure may vary, they all share a common cause: lack of research and preparation.
To stand any chance of success, you must have a clear and concise business plan. Thankfully, it’s not as hard as you may think. To help you create the bones of your plan, I’ve compiled a list of 20 fundamental questions I ask every startup founder I meet. Knowing the answers to these questions could help you prepare for what’s to come and keep your business moving in the right direction.
1. What is the problem you are solving?
People aren’t searching for a new product or service; they’re searching for a solution to their problem. The first step, therefore, is to identify the problem, then focus on building and developing a solution that offers real value and benefits to your target market.
2. How big is your target audience/market?
To estimate your potential market size, you’ll need to define your target customer. Who would benefit the most from your offering? This could be based on location, age, occupation, habits and even values and beliefs. Market research and data analysis are essential for determining how large your market is. Research can also help determine who your competitors are and what their reach is.
3. Why will people buy this from you?
To stand out from your competitors, you’ll have to give your customers reasons to buy from you, not your rivals. This could be because:
• You have a product that offers value to your customers and will improve their lives in some way.
• Your product is unique and delivers something special that differentiates it from similar products
on the market.
• You have a strong and authentic brand message.
• You focus on building trust through excellent customer service.
• You understand your product’s worth and have the right price vs. quality balance.
4. Why is it that nobody is doing it already?
Your idea has probably been tried already. But offering a different solution to an existing problem could be the key to success. A good example is Airbnb. Three college friends disrupted the over-saturated hotel industry by renting out airbeds in their apartment. What began as a way to earn a few bucks ended up as a multinational company with a net worth of over USD 62 billion.
5. Is your startup scalable?
Scalability is your startup’s ability to increase revenue while keeping incremental costs to a minimum. Thanks to technology, today’s startups have several options to increase efficiency and customer acquisition without incurring significant costs. Think digital advertising, remote working, smaller, multi-skilled teams, digital banking services, and automated work processes.
6. What is your burn rate, and how long can you last without further investment?
Fact: your startup will burn more money than it earns in the early stages. So, it’s vital to understand your burn rate – that is, how quickly you use up your cash reserves over a set amount of time.
It’s also important to understand your cash runway – that is, how long you can keep operating until you make a profit or need to source further funding. Experts believe a good cash runway should be between 12 and 18 months for most startups.
7. Will the company be able to run if you are not there?
Believing you can do everything yourself is flawed thinking, so learn to delegate. Delegation will help your workers grow and develop both personally and professionally. Trusting your employees in your absence is a great way to boost their morale and loyalty. It also frees up your time to work on new opportunities.
8. Who else is joining you on this journey?
A startup is only as good as its team. One of the top ten reasons why startups fail is onboarding the wrong people. For your startup to get past first base, it’s vital to have a team with the necessary skills and experience to succeed. This includes having the right personalities with the same goals and aspirations as you.
9. What have you done in the past that will help you do this successfully?
Investors will want proof of your skills and experience before considering funding your venture. However, don’t just focus on your past successes. If anything, past failures and learning from your mistakes might prove to be more valuable. Some experts even believe failure is essential for future success. As automobile magnate Henry Ford once said, “failure is simply the opportunity to begin again, this time more intelligently.”
10. Who can open doors for you? What is your network?
It’s not just what you know, but also who you know. Building a solid network of advisors and industry peers can help you:
- • Learn about new trends, share insights, and receive valuable feedback and advice
- • Find new business and investment opportunities
- • Enhance your own entrepreneurial skills
11. How will you go about hiring the best people for your startup?
A competitive salary may no longer be enough to attract the best talent, and it might not be feasible for your startup (think burn rate). Instead, growth bonuses and incentives such as wellness perks, flexible scheduling, and work-from-home opportunities may be enticing enough to get them onboard.
12. What gives your operations a cost-effective edge?
Employing ways to keep operational costs down can show investors you’re keeping an eye on your cashflow, burn rate and scalability potential. Ways to reduce your day-to-day operational costs can include:
- • Leveraging technology by automating repetitive tasks
- • Outsourcing to freelancers
- • Allowing for remote working
- • Shopping around for cheaper supplier rates
- • Hiring a smaller, multi-skilled, multi-tasking team
13. How are you utilising technology to disrupt your industry?
The biggest advantages startups have over traditional industries is the ability to pivot rapidly and disrupt. From big data to mobile devices, the use of cutting-edge technology can help your startup keep an eye on the competition, better serve your customers and gain
a competitive edge in the marketplace.
14. How good is your digital marketing strategy?
Getting your name out there is vital in the early days. Digital marketing is a cost-effective way to build brand awareness and gain recognition through social media and content marketing. Shareable content such as videos, blogs, contests and giveaways are examples of how you can engage with your audience and extend your reach.
15. What is your customer service plan?
Customer-centricity should be a priority for startups at every step of the customer journey. From product development to marketing and support, the customer needs to be at the centre of everything you do. A positive customer-centric culture can also encourage employee engagement and loyalty.
16. Who will do your finances?
It’s crucial to have someone onboard who understands the nitty-gritty of startup finances and can effectively manage your cashflow.
If you don’t have enough expertise in the financial side of your business, consider hiring a financial advisor or accountant to keep you on the right path.
17. Legal & Compliance – have you got this covered?
One of the top five reasons startups fail is a misunderstanding of the legal complexities and regulations involved in starting a business. From licencing to tax issues, compliance is a must from the start-off. Make sure you understand how your market is regulated and what permissions you’ll need both regionally and across borders.
18. Why are you doing this?
If you have no passion, and monetary gain is your only motivation, you’ll be doomed from the start. In his book ‘The Art of The Start 2.0’, business strategist Guy Kawaski urges entrepreneurs to focus on making meaning, not money. As Steve Jobs famously said, “the only way to do great work is to love what you do.”
19. Do you have an exit strategy?
Investors will expect you to have a clear exit strategy in your initial business plan. If your business is doing well, an exit strategy will enable you to liquidate your stake in the company and hopefully give your investors a good return on their investment. If you’re struggling, an exit strategy allows you to minimise losses.
20. What happens if this doesn’t work out for you?
The cold, hard truth is that nine out of ten startups fail, so the odds are already stacked against you. Be willing to sacrifice your idea if it’s not working, but don’t give up. Gain insights and advice from successful entrepreneurs – remember, even the best have experienced failure before succeeding. Your mistakes and those of others may be the most valuable lessons you’ll need for future success.
Starting a business is a huge undertaking. But if you start out by taking on board the answers to the above questions, you’ll be on the right road to potential success and future growth.