That wonderful product concept was your brilliant idea. It was so amazing and awesome; you decided to go for it and become an entrepreneur and launch a start-up. But it not going as you expected. It’s much harder than you anticipated, everything seems to be progressing more slowly, and maybe it seems as though it’s not moving forward at all. Now, you are starting to second guess your decisions, wondering whether your next attempt at making the product a success will yield the results you so desire.
So where did you go wrong? You know your dream is achievable. There are plenty of proof points of success business everywhere you look. But how? You are not alone. Every entrepreneur feels this way at some point. It’s a test of your convictions.
Often the reason most entrepreneurs don’t survive is a mindset and perspective issue. Let’s go back and look at how most entrepreneurs get started, and then I’ll show you how those that succeed do it.
Conventional wisdom tells the entrepreneur to start with a business plan and then execute it. This is the beginning of their downfall because it cements in the entrepreneur’s mind the notion that they’ve done the research and the result is they’ve determined the recipe, a definitive path to success. However, most business plans are filled with guesses, unfounded estimates, and wishful thinking. In fact, there is so little fact and information based upon direct experience with the market and customers that most business plans are nothing more than fairy tales. They should start with “Once upon a time”. And like any fairy tale, the entrepreneur expects the end to be “And they lived happily ever after”.
Statistics on business failures show that this isn’t what happens.
In the U.S., more than 600,000 new businesses start each year and more than half will close within 5 years. This is true of businesses in other countries as well. The venture capitalists are admired by many throughout the world. They have brought us Amazon, eBay, Google, and Facebook. Their goal for start-ups is to ‘go big’ by going IPO. Yet, in the past 10 years, 30,000 start-ups were funded and only 2% of their companies have reached that goal, most failed. Collectively, the venture capitalists have conducted an industry wide business experiment. Most of these new businesses had business plans, most failed. So why do entrepreneurs continue to follow the same process to the same end? This extremely high failure rate is the result of a system that isn’t working.
The entrepreneur has missed a step. It’s the experimental start-up phase. This is where the entrepreneur designs and conducts a series of business experiments in order to discover the right product and business model. It’s when the product or service concept meets its business. How does the entrepreneur do this? They start with a concept plan that outlines what they intend to do and why, and they include all the assumptions and unknowns about the business. Unlike the traditional business plan, here the entrepreneur acknowledges the holes, assumptions, and issues. Next, the entrepreneur couples the concept plan with a strategy for conducting business experiments. This orchestrated and systematic process allows the entrepreneur to develop proof of concept of the business. Only then is the entrepreneur in a position to write a solid business plan, one based upon experience and facts.
Why is thinking of your start-up as experimental so effective? It sets the mindset that what the entrepreneur is doing right now may fail – and most likely will. It’s okay for this experiment to fail because there will be another and maybe even more. Eventually enough knowledge and information is gathered to create the experiment that will succeed.
Contrast this to the approach of starting with a business plan; entrepreneurs feel the start-up has to work as outlined in the plan. Entrepreneurs hire employees and get them to execute the plan – after all, an employee want a sense of security and admitting you don’t know what you are doing, doesn’t instill confidence. The entrepreneur may have found outside funding, in which case, the investors don’t want to hear that they are experimenting with their money, that the entrepreneur doesn’t have it right yet. So the entrepreneur seals their fate and the business plan is executed to failure.
About the Author
Cynthia Kocialski is the founder of three start-ups and helps entrepreneurs transform their ideas into new businesses. Cynthia is the author of Startup from the Ground Up and Out of the Classroom Lessons in Success. Cynthia writes regularly at Start-up Entrepreneurs’ Blog. and provides in her video series information on how to create a Concept Plan.
