For the last decade, technology startups have been a dime a dozen. We hear (several times a day for those of us who follow tech blogs and news sites) about success stories like Netflix, Snapchat, and Vine. We hear about the millions (or billions) of dollars these disruptors are “worth,” even when some of them aren’t actually making a dime (which, to me, doesn’t exactly spell success, but that’s another story!).
We also hear about spectacular failures—Solyndra, Amp’d, and Color come to mind—and plenty of founders seem to view failure as the cost of doing business, or even as a badge of honor. Last year, Blake Mycoskie, founder and “chief shoe giver” at TOMS shoes was featured in an article where he was quoted: “As much as it hurt, I realized that failure is an inevitable part of thinking big and going after what you’re really passionate about.” And while I hope failed founders everywhere find raging success in other ventures, I tend to agree with the recent New Yorker article by James Surowiecki where he explains that, based on a 2009 study of venture-backed businesses, “past failure really just predicts future failure.”
So why not take steps to not fail in the first place? Founders don’t need to “anticipate failure,” as was suggested in another article I read recently (this time in Entrepreneur). This thought is terrifying! So if you’re a young business owner or a “wantrepreneur,” keep these tips in mind as you navigate your path to success.
1. Determine Your Point of No Return—and Be Ready to Pivot Well Before You Reach It
In order to prevent reaching a point of no return, you need to have mile markers that flag potential disasters ahead. For example, if you lose X percent of your client base, will the company be in free fall? Or, if you lose Y percent of your revenue, will you be unable to pay taxes or payroll, jeopardizing the viability of the business? Neither of these things should happen overnight—you ought to be able to see them coming from miles away.
The red flags will be different for every business, and you will need to reassess them as you grow, but long before you get to an unrecoverable point, you should have some warning and some time to launch into action. The actions could include working with a consultant, possibly hiring new staff, testing new markets, changing pricing, and the like—just make sure to do them before it’s too late. Mistakes don’t necessarily spell doom, and you should view them as learning opportunities and stepping stones on your way to success.
2. Have a Recovery Plan
Once you’ve determined your point of no return, make a recovery plan that you will implement as soon as you hit one of your predetermined speed bumps. If you start to lose clients, maybe it’s time to spin off one part of your most successful product. If the product is failing, maybe you offer a service instead. If you’re low on cash, maybe you need a line of credit that you keep just for emergencies. If you’re young, maybe part of your recovery plan means moving back in with your parents or taking on a roommate to save money every month.
My recovery plan is more of a strategy and involves constantly testing new ideas and products. I’ve never been a guy to have all my eggs in one basket: It’s too risky. Of course, the majority of my time and energy goes to my main business, but I have other products in development that, should the time come, I could focus on while still bringing in money from my main gig.
3. Try to Anticipate What Your Customers Will Want
The only way to discover what works for your customers (and will therefore keep them coming back) is to test and tweak your existing products and services. I can’t stress this enough! Even at times when everything is running smoothly, start thinking about ways you can improve on what you’re doing. For example, when ShortStack first started in 2010, everyone loved Facebook, and every business felt the need to have a Facebook page. Our software was used to make apps, especially contests, for Facebook.
Flash forward a few years, and things have changed. Yes, Facebook is still the biggest player in the social media space, but lots of business owners have soured on it. We didn’t anticipate this, exactly, but as other social media platforms gained momentum, we saw an opportunity to refine our product for people who already liked us but didn’t necessarily want to be limited to using it on Facebook. A new version of our product allows users to host campaigns—contests, promotions, newsletter signups, and the like—wherever they want (including on Facebook, of course).
The bottom line here is that markets are constantly growing and changing, and what your clients and customers love about you today might not work so well in six months. Part of your job should be to anticipate their needs.
4. Be Flexible
What do Kodak, Tower Records, and Blockbuster have in common? Their leaders didn’t plan ahead (see #3) and, what’s worse, they failed to pivot when it was abundantly clear that scrappy startups had the potential to upend their industries. Basically, they weren’t flexible. If you can’t think of multiple ways to “shift” your business idea if it doesn’t work as you anticipated, then I’d question whether the idea is really a viable one.
This brings me back to the new version of my company’s software, which happens to be in beta as I write this. I could have started a brand new company and left the profitable “Facebook version” of the software alone. But because we have so much invested in testing, content, PR, marketing, and development, it didn’t make sense. Instead, we’re adapting. The funny thing is that our users haven’t exactly asked us to do this, but we see an opportunity to refine our product and offer many additional benefits to our existing users and bring on a whole bunch of new ones—all because flexibility is in our DNA.
5. Look for Opportunities to Learn About Your Customers So You Can Improve Your Product
One of the things that makes my company unique is that everyone, including me, handles customer support tickets. While there are some CEOs or founders who might believe that dealing with customers is beneath them, this is where I learn the most about the health of my company. Customer support is where we hear complaints and compliments and get the majority of our feature requests. Obviously, these are things I need to know about, so that’s why I make it a point to go into our support desk every day to take the pulse of our users. Going back to the first point in this article, if I started to see a string of tickets that criticized a certain feature of our product, or even noticed a trend of complaints about our customer service agents, those would be red flags for me.
We occasionally use SurveyMonkey to ask our users simple questions about how they use our product, and about what kinds of businesses they run. We also learn a fair bit about our users on Facebook and Twitter. Finally, we use our own social campaigns to collect email addresses in exchange for some of the free resources we offer (eBooks, PDFs, and the like). Scouring all this data to gain insights about our customers, especially to learn how they use our product, is fundamental to our success.
The media is going to continually cover stories of CEOs who flamed out but rose again, because everyone loves a good comeback story. Just remember, it’s the success that people want to read about, and success is generally reserved for people who fight hard not to fail in the first place.
One final thought: While the media also tend to promote overnight success stories, there’s no reason to think that the startup you’ve invested a few years in isn’t going to succeed. One of my favorite quotes is from Ben Chestnut, founder of MailChimp, who said, “My overnight success took me 10 years.”
Photo of dominoes courtesy of Shutterstock.