Flip through any book about starting a business and, within a few seconds, you’ll see multiple references to “strategy.” Without question, having an effective strategy is vital to every startup’s success, but the word gets bandied about far too frequently.
Perhaps because, deep down, every business owner dreams of having a secret formula for success—and the allure of finding that perfect startup strategy is too much to resist. Thus, they feel compelled to keep searching.
No Golden Ticket
In reality, the fundamentals of a business strategy can be broken down into two basic components: all the activities that go into creating a product or service, and all the activities that go into selling that product or service.
As Foundr recently reported: “Every business is different, every market is different, and you can bet that every entrepreneur is different. So therefore every business model or startup strategy is inevitably different.”
There is no golden ticket. Quiet often, credit for a successful strategy belongs to those who did a great job implementing a time-honored plan of attack. And that’s as much a reflection on decision-making as strategy.
The question is, are there certain strategic choices that virtually every entrepreneur must make when first starting out? And, if so, how can they increase their chances of success by making these decisions wisely?
Peter S. Cohan, who runs a management consulting and venture capital firm and is the author of “Hungry Start-up Strategy,” believes there are key strategic decisions every entrepreneur must successfully navigate. In fact, after interviewing more than 200 entrepreneurs, Cohan concluded there are six such choices. Here’s what they boil down to:
1. Goal Selection
Launching a successful startup requires you to attract the right talent (i.e. better talent than you can afford). So, the question you need to answer is, why would someone leave their present position to accept your offer when it’s probably less than what they’re making now?
As Cohan wrote in an article for Forbes: “ … The right mission can inspire terrific talent. And if a startup commits to an IPO or acquisition, this could help convince an investor that the firm will make him or her richer.”
2. Market Selection
In theory, you could sell your product or service to any business or consumer in the world. But theories don’t pay the bills. The question is, which market and why?
As Cohan sees it: “ … An entrepreneur should pick a market about which he or she feels deep passion and that is big enough to help the firm become a $100 million company even if the founder only receives 10 percent of it.”
Funding your business is a tightrope act; you need cash to cover expenses, but you also want to retain control of the company you’re building. It’s a question of how to fund day-to-day operations during the startup phase without giving away your business.
According to Cohan: “ … To keep control, a company can borrow on its credit card or crowdfund until it has proved that customers will pay for its product. Then the entrepreneur can sell a stake to a venture capitalist to cover the last mile before an IPO.”
4. Team Building
In keeping with goal selection (see #1 above), the strength of your business—and its likelihood for success—hinges on the team you put in place to execute its mission. The question is, how will you build your dream team?
“The entrepreneur can’t do everything—so he or she needs to hire and motivate A-level talent,” explains Cohan. “The stock options offered will only help with recruiting the talent if the entrepreneur has already built successful startups and provides an emotionally compelling mission.”
5. Market Share
It’s tough being the new kid on the block. Attracting customers and clients isn’t easy for a startup because most prospects don’t want to do business with a company that may not be around six months or a year from now. So, how do you capture market share?
Cohan’s take on it: “To overcome this problem and gain market share, the startup should do two things: Find a customer who has pain that has no cure and deliver the cure at a price that makes the product irresistible—what I call a quantum value leap.”
Let’s say you solve your market share problem. The phones are ringing, customers are buying, and your product is flying off the shelves. That’s great news, and you should be proud. The question you need to answer next is, how will you stay in sync with your customers’ evolving needs?
Cohan sums it up this way: “Once customers buy the product in droves, the entrepreneur should be kicked upstairs to monitor changing customer needs, new technologies, and upstart competitors to figure out additional products to build and fresh markets to conquer.”
Hot new business strategies will always garner attention from entrepreneurs and small business owners, but the essential elements of a business plan don’t change.
If you want to succeed in your business, forego the search for a golden ticket and focus on making the strategic decisions that pretty much every entrepreneur can expect to encounter when first starting out. The advice above should help guide your choices.