Startups offer several inherent advantages that larger, more established companies typically lack. Unlike corporations, which tend to get stuck in structure and bureaucracy, startups tend to have more flexibility and creativity in developing business plans and making big decisions. In many ways, new companies have less to lose and more reason to take risks – which can pay off.
However, most new businesses fall prey to certain pitfalls and fail to succeed in the long run. Research shows that almost 70% of startups grow too soon, increasing the risk of collapse. About 90% of new companies never make it past the five-year mark. Although far from impossible, it is extremely important to do due diligence before starting any venture.
This means not only knowing your product, but also the market. It also means fully understanding and then preparing for the common challenges founders face when building a company from scratch.
Here are five keys to keep in mind…
1. Create (and follow) a business model. For a business to be successful, employees must first properly understand their job and the company's goals. In other words, everyone must be on the same page.
For a team to work together efficiently and productively, therefore, a system or process is necessary. Ideally, this plan allows the team to know how to solve problems or respond to situations, for example, such as:
- Get feedback from customers
- Face challenges
- Add product features
- Distribute funds
- Simplified methods
The development of industrial processes is usually done in the early days of a startup. It can be a tedious and time-consuming task. But with a strategic plan in place, you can increase workplace morale and decrease downtime.
One way to establish this plan is to hold regular meetings with interested parties and, together, create a manual of the steps necessary to complete the process. As more projects are developed, it is expected that more procedures or processes will be added to the manual. Furthermore, whenever there is a change to a process, it must be shared within a reasonable period of time with the rest of the team.
2. Weigh the funds. Almost all startups struggle with finances. Cash flow problems can delay the launch of products or services. It can also prevent founders from taking the necessary steps to grow their business – from hiring staff to purchasing tools and equipment, conducting marketing and investing in technology that can streamline business processes.
Fortunately, there are options for loans, credit, and sometimes grants. Entrepreneurs can solicit venture capital investors, apply to local angel investor groups, apply for a small business grant, or start a crowdfunding campaign. Sometimes it is also necessary to negotiate with customers (e.g. royalty payments) to complete product development.
The golden rule: before starting a business, know how to get it off the ground — financially speaking.
3. Build a strategic team. Engineering founders know that their success depends primarily on their teammates. Therefore, hiring strategically and securing the “right” people are critical components to creating a successful startup. Delays in hiring can generate several problems, including lost time and hours of product development. After all, time is money.
However, building a startup team is easier said than done. Experts recommend the following strategies:
- Determine exactly what it takes to do the job well and don't settle for less.
- Create an attractive but realistic employee benefits program.
Another strategy: get to know your team and yourself. For example, a founding engineer may have the skills and knowledge to develop excellent technology products. But he or she may not have the business skills needed to operate, respond to customers, seek investors or balance the checking account. A successful startup is made up of a multitude of skill sets, which can come from many different people.
Product experience is not enough to be successful. Finding the right people to fill the critical roles needed to run a business and make it successful is essential. Understanding your business management strategy is the crucial starting point for meeting your skill set needs. Engineering startups need to identify core roles, from product developers to software designers, data scientists, marketing specialists, and even content managers.
4. Know when to escalate. As a company grows and its products or services become more in demand, there is often an urgent need to “scale up” to handle the growth. Rare is a business owner who wants to miss the opportunity to grow and earn more. And a good characteristic of startups is that they are usually small companies, so expansion is often simple.
Before starting, however, it is important to weigh the risks. Expansion often involves hiring more employees, moving to a larger office, exploring new markets to maintain the growth curve, and more. All of these are labor-intensive and require significant investment. Careful planning is essential to keep up with the rapid growth of your business.
5. Know what is needed and where. When a startup expands, the team will typically be affected. Roles tend to become more complex and the demand for certain skill sets increases. It is common for team members to have multiple roles, especially when a startup is new and, in principle, cannot afford the functions necessary for an ideal fit.
Hiring new employees, especially for short-term projects, may not be feasible initially. But if specialized skills are needed, it may make sense to find the funds. It is extremely important to know your team and recognize the skills and knowledge needed to perform specific tasks.
And remember: it’s not enough for employees to know their roles. It's also essential that everyone at an engineering startup understands their organization's long-term goals. Knowing your company's vision and mission gives your team a sense of direction and an opportunity to make a meaningful contribution to your business.
