Old School Startup Rules: 4 Business Fundamentals That Will Never Change

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Courtesy of www.theconverseculture.com

Our planet’s startup climate is being rapidly and radically reshaped.

An aspiring entrepreneur can launch a global brand from his or her basement at a fraction of what it cost only a few years ago. Business ideas admired as highly innovative two decades ago seem stale, even laughable, today.

Not surprisingly, there’s a lot of talk and hype about old assumptions and models that no longer apply, and, in most cases, I agree.

Steve Blank, for example, has outlined a set of new rules for navigating the emerging technology bubble.

But, before we leap headlong into an unscripted future, let’s get our bearings.

Regardless of economic phase or cycle, certain immutable laws of commerce will continue to apply to business models of all types and stripes.  Whether you’re building an iPad app, a solo consulting practice, a 20-person restaurant, or a thousand-person engineering firm, an enduring set of factors will dictate your success or failure. Of the hundreds of issues and concerns on your plate as an entrepreneur, a few fundamental principles will drive most of your risk and most of your growth potential.

A few weeks ago, I met with several accomplished physicians who are considering launching a major new venture.  I agreed to spend a day with them and help them take an objective look at the envisioned business and their roles within it. I explained that we at Ready Founder Services use a simple but powerful 4-part model to evaluate and improve a venture’s readiness to successfully launch.

4-Quadrant Framework

These factors — Founder, Market, Math, and Execution — are universal and timeless. Any startup founder — regardless of the type or size of their business, the nature of their technology, or the era in which they launch — can dramatically improve their odds of success by skillfully attending to these four fundamentals.

These four areas of focus will never go out of style. Get them right, without compromise, and your odds of startup success will skyrocket. Get them wrong, and you’ve added strength to the the blustery headwinds that aim to knock your venture out of the sky.

  1. FOUNDER(S). The principle of Founder Readiness asserts that a primary driver of your venture’s success or failure will be you, or, more precisely, the degree of fit between you (your motives, personality, expertise, etc.) and the needs of your venture. Why are you starting a new business? What do you hope to achieve? How well prepared are you to launch and build it? In what ways do your personality, motivation, skills, experience, knowledge, etc. match up with the challenges of entrepreneurship? What kinds of investments and sacrifices are you willing and able to make? What relationships and resources do you bring to your startup?
  2. MARKET.  Aspiring entrepreneurs often become emotionally attached to their business concept, overlooking a fundamental business principle:  An idea isn’t great until the market says it is. As a startup founder, the surest path to success is to focus obsessively on your market — what fundamental human problem are you solving? — and allow your offerings to be shaped over time by customer demand.  In this way, you protect yourself from a fundamental startup mistake:  assuming that customers will love your idea simply because you do. For most new ventures, the greatest risk is that sufficient market demand for the offering simply does not exist. So start with the market. Then follow where it leads.
  3. MATH. You can be well-prepared as a founder and find strong market demand, but still fail to make money.  Unless your business model performs well against a set of basic economic principles, your efforts will flounder and stall. So, understand the math associated with your idea. What is your business model and strategy? What is your path to profitability? What kind of profit margins can you achieve, and at what velocity? What are best and worst case scenarios along growth path, and how will you deal with these? A good “math story” cuts through the window-dressing typically attached to business plans and hones in on issues and variables that should be kept front-of-mind.
  4. EXECUTION. Turning the napkin sketches into gold is no easy task. Seasoned investors are usually less interested in the core idea that gives rise to a startup venture and more interested in the capabilities and track record of the startup team. That’s because startup ideas are everywhere, but people who can execute with excellence are exceedingly rare. And it’s not simply a matter of skill. Certain business concepts are more executable than others — they have fewer moving parts, they bring together a potent blend of talent, technology, planning, communication, etc.  What will it take to successfully execute on your idea and what are your venture’s strengths and weaknesses relative to these requirements?

Despite the exhilarating opportunities opening up to the world’s aspiring entrepreneurs, the essential anatomy of commerce is not much different today than it was hundreds of years ago.

You can love music without being swept away by its noise. If you want to radically enhance your odds of startup success, focus on the fundamentals.

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