Go to Bengaluru, San Francisco or Singapore and you’ll see one thing in common. Everyone has a startup or aims to build one. But then why do 90% of new startups fail early, and some as early as their incubation state or within the first year?
This happens all the more with startups that have secured outside funding. More money and VCs give birth to a host of new problems, more compliance and the debilitating pressure to deliver on aggressive targets for scaling and generating significant ROI for the investors in a rather short period of time.
The dream of being a unicorn is only realised by 1% of the startups and most of them are anyway operating under heavy losses like Uber or going bankrupt like WeWork.
This happens a lot with first-time start founders who maintain a reactive approach to crisis management rather than being proactive and planning ahead. No business is safe from the innumerable crises that arise during regular operations in an economy that is unstable, unpredictable and brutal. When competition is fierce and consumers are always changing their minds, it is easy for small fires to turn into conflagrations that just can’t be put out.
Something as simple as wealthier competitors poaching your team leaders over time to as ruthless as the bigger fish in the market employing dirty price and positioning tactics to cut you out can wipe away thousands of hours of blood, sweat and tears in an instant.
So how do you prepare for such roadblocks and tackle crises that jump at you out of the blue?
Here is some advice and insights that I can share from my decades of experience building successful startups in various domains about steering smoothly through crises:
Evaluate Whether You are Solving a Problem or Creating One
If your products or services are not solving an existing need or problem, then you need to go back to the drawing board and start over. Sometimes, the answer also lies in creating a problem, generating demand and then being the first through the door to solve that.
Think smartwatches! Nobody really needed one before, but Samsung, Garmin and Apple made sure of it, and now everyone wants them.
The Right Recruits Will Save You a World of Trouble
Talk to people in your professional circle, ask for referrals and measure your needs and goals before hiring. Good leaders may not be the best strategic hires, and ultra-skilled people might not be best leaders.
Evaluate the stage your startup is at and hire people that bring a mix of leadership, niche skills, innovation and work ethic to your company. Look at their past experiences as well as current ideas to make sure they work in tandem with your goals.
Manage Your Capital Even if it is Abundant
A rookie mistake that is far too common is burning through your bank because you have plenty of it. Just because there’s an abundance right now doesn’t mean you cannot cut costs or eliminate superfluous expenses. Scaling is expensive, and in most cases burns a hole in your startup’s pocket if not done wisely because unforeseen and hidden costs keep mounting up.
On the other hand, being stingy with essential expenses and outgoings in a bid to save your funding can also have severe and irreversible consequences. Test the waters before taking a plunge, especially in a new market or in a domain where you lack experience and expertise. It is also important to make sure that ambition doesn’t chip away from the efficiency of operations and the quality of your hiring.
Promote Innovation Within Your Team
Sometimes, the hunger for innovation can make you overlook your best employees and their ideas because the grass does seem greener on the other side. Encourage and motivate your most valuable members in the team to think ahead and disrupt the status quo.
Give them the chance to grow and shine by avoiding micromanagement and not limiting their resources and ideas. And if they are already exceeding expectations, don’t rock the boat by being overly analytical, critical or ambitious.
Identify Problems, Manage Risk and Prepare Measures to Avert All Crises
The earlier you identify potential problems, the lesser the risk and the easier it becomes to avert a crisis before it shakes the foundations of your startup. This includes a lot of things such as employing quality hires, using capital efficiently, top-tier data analytics and a solid plan to tackle unforeseen circumstances.
Closely and frequently monitor your progress while also being patient when it comes to growth and profits. Sustainability and scalability go hand-in-hand, with the former taking precedence over the latter.
It certainly helps to remember that exponential growth is a marathon, not a sprint.
