Failure to thrive

There is a basic principle in start-ups that if you do not reach approximately 2% of the market that you can address within the first two years you will slide back down into the snake pit. Momentum is everything. The critical factor is when you decide to start the clock. I have written on several occasions about the benefits of bootstrapping, and one of the largest benefits is that it  gives you the control of the moment on which you start the investment clock, and, perhaps more importantly, you can get all of your mistakes out of the way before you start that clock ticking.

The causes of a failure to thrive can be broadly categorised into three:

One – accidental

Two – bad management

Three – deliberate

Under the category of  “deliberate”, I think we could fairly put the cases in which an investor culls their portfolio, where one of Porter’s famous five forces comes bites you very hard (for instant action by the state), or whether market itself entirely collapses.

 In the “accident” box, one might fairly put personal health failing, fire, flood, an act of God, or some external discovery that utterly changes the market all the forces which act upon you. Generally, I think you might have guessed, accidents don’t act in your favour!

 And that leaves is conveniently with “bad management”. Let me break that down a little further, since you, as management, have ultimate responsibility. It is entirely too easy for you to fall into one of the traps of:

·      Too soon

·      Too late

·      Too cheap

·      Too expensive

·      Too fast

·      Too slow

·      Or, worst of all, having the wrong product for the wrong consumer.

Which just leaves us trying to eliminate bad management. No, not ‘eliminate’ like Tony Soprano, eliminate as in plan so that it never arises. It may seem, at first blush, that not all of the factors in a business are under your control, but the timing is. Cost and pricing are. Speed of development is. The design of your product is definitely within your control. Fate may not have given you easy access to the correct customer, but certainly that responsibility is yours.

 Solutions, and all of which lie in the hands of management, are relatively straightforward. The first and most important is to set yourself a target of controlling at least 2%, and preferably 5% of the entire market space in a very short period of time. That should stop you sliding back into the noise floor of your business. Also, get cash flow. Obvious really, as it is called a “business” and not a “hobby”.

Management can then focus their attentions on bootstrapping, and let us be clear here the bootstrapping mean so much more than just building a prototype. Bootstrapping implies that you have tested the market in terms of product fit, timing, and pricing. If you have done that, and you’ve done a reasonable amount of customer research, and that has been backed up with a solid product design, then sales should follow. That is assuming, one has actually employed people who are capable of selling.   A business is so much more than a good product idea. Yet far too few entrepreneurs actually understand this.

 So, will you fail to thrive, or will you blow straight through the roof on a rightward and upward curve?

I really do think, no matter what you might think, that the answer lies entirely in your hands!