How to make sure your business doesn’t fail

Embarking on a journey of entrepreneurship is not for the fainthearted. As many will attest, the road is full of obstacles and disappointment, but those contemplating such initiatives- or even those that are already well on their journey- are not totally exposed to the vagaries of business life. There is much that they can do about it to improve their chances of success.

Rather than go into sophisticated business jargon and explore complex models, I thought it helpful to keep things simple and focus on the foundations the satisfaction of which significantly increase chances of success especially for those early in their entrepreneurship life.

There are simple rules that entrepreneurs can observe to provide a solid foundation upon which they can build and grow a healthy offering. Here are my five picks.

The business model is critical

Perhaps the single most important question a founder must answer is “why”. Why are you doing this and what is the reason for the existence of your startup? Purpose gives way to the business model and offering, which in large part will depend on a careful researching of the market, an understanding of the consumer, what they are lacking or what they crave for, or perhaps what has been missing from their life unbeknownst to them.

A good business model is in many ways, at the risk of oversimplification, like a piece of a jigsaw puzzle that fits perfectly in place. This will encompass an offering, a revenue model and an operational mechanism that are attractive and doable, and the execution of which will generate a state of flow from which provider and recipient derive a benefit.

The key takeout here is to ensure that you are bringing something new to the table and that the economics as well as the operation make sense and work.

Able founder and good bedfellows

Investors always look for an able founder and a cohesive and competent management team. Leadership and competence are a magic combination that any business requires. Capable leadership can refine or even fix an imperfect business model, but a business model no matter how perfect cannot survive bad leadership and flawed management.

If the above captures the view from an investor’s perspective, think also from a market, an operational and customer perspective. All of these respond to good leadership and a management team that effectively collaborates while demonstrating the ability to pivot and adjust to the different curved balls the future may throw at them.

Such surprises may come from competitors, market conditions, the elements, or even black swans as we recently experienced with the sudden arrival of Covid-19 and its life-altering ramifications. Capable leadership and a cohesive management team can not only figure out how to deal with such unexpected developments, but they can also convert them into potentially lucrative opportunities.

Ensure you have the right funding

Funding and cashflow are like fuel to a vehicle or an aircraft; if it runs out for whatever reason, you can imagine the consequences. When it comes to finance, startups face a two-pronged challenge: securing enough funding and maintaining positive cashflow.

Startups, especially in the early days, need financing to either get things started or to sustain operations until they become profitable. This requires preparation and proper setting up by securing enough funding to nurture the operation through and allow it to reach critical speed. This also requires creating an appeal to investors, and ensuring the narrative continues to demonstrate optimism and credibility. Obviously, the results need to reinforce this narrative to build conviction.

As businesses grow and push for revenue, the leadership needs to manage for cashflow. Being cashflow positive is existential especially in the earlier days. Money running out is a state that needs to be seriously considered and most certainly avoided to ensure the sustained viability of the business. Many great propositions fail because the operation is not properly funded or suffers from negative cash flow.

Brand building and marketing are not optional

Bookkeeping alone is not enough to see a business through and to proof it against stalling or imploding. Startups need to think about their brand, their story, and their marketing. To excel at both is fundamental to the success of the business. Getting marketing right means it really doesn’t matter what you are selling because people will come and buy it and that is the purpose of business.

The reality of many entrepreneurs is that they tend to know their business well, and often have underdeveloped other skills that are necessary for success. In such a situation, perhaps it is wise to consider outsourcing such future-determining functions rather than botch them up and bridle the business by insisting on handling them internally despite the absence of the requisite skillset. Naturally, there is a cost associated with such a decision, but there is also strong upside.

Communication is the lifeblood of companies

I cannot underscore the importance of communication in any business, under any set of conditions, and no matter the size or stage of life. If funding is the fuel, communication is the oxygen that ensures proper combustion and creates propulsion.

Communication covers everything that the founder and management touch. To start with, communication is critical among the inner circle that owns and runs such a business, and you need for that to flow smoothly as otherwise one would be sowing the seeds of discord in the not-too-distant future.

Furthermore, this applies internally as it applies to investors; it affects suppliers equally as it does employees; it affects how you approach the market and how you manage the narrative with diverse public audiences.

Getting the communication right affects the brand and determines the culture of a company.

Conclusion

Obviously, setting up a business and ensuring its sustainable success and longevity are difficult. However, it is also not rocket science. It is true that many things can conspire to derail it, but ensuring its health requires observing some fundamentals.

Each of the abovementioned considerations warrants a detailed and profound exploration on its own, and the areas are fascinating. At the same time, it is wise to start small, do the common things but do them uncommonly well.

In the spirit of keeping things simple, I would encourage entrepreneurs to do their homework, make sure that they love their work, be disciplined, and do not quit in the face of sustained difficulty. Ultimately, success and prosperity ride on paying attention to the small things and basics.