In his most recent TED talk, Bill Gross gave a powerful presentation titled; what’s the single biggest reason for why startups succeed? See here for the video.
Gross started dozens of companies, some of which became successful and some never got off the ground. And in his journey in the business world, he analyzed his successes and failures as well as more than 200 companies and looked into what made a business fail or succeed.
According to Gross, there are five key factors that influence the success of business.
- Idea
- Team
- Time
- Funding
- Business Model
Based on the studies he conducted, Gross’ analysis shows that the number one reason for the success of a business is the factor of timing, and not the idea for the business as most people tend to think.
That’s indeed a surprising discovery especially when every other entrepreneur is after the next big tech idea, or the next successful business model, or the superstar employee that’s going to change the course of the business.
It turns out that your assumptions about the success of a business are all, unfortunately, in the wrong. Now, let’s delve deeper into a few of these factors and discuss how they can influence your startup business success.
1. Timing
Timing is the most crucial success factor.
It can make your or break you.
But I don’t want to spend much time discussing why timing is critical for success. The reason for this is simple. It’s very obvious why launching a business at the wrong time will harm your business. In fact, if you launch a product when there isn’t enough demand for it in the market at the time of the launch, then your business will inevitably run into the ground. It doesn’t matter how passionate you are about the product. Your idea might be well ahead of its time and you’ve probably spent a long time developing the concept of your product, but the reality of that matter is this: if the market is not ready for it, then your business is doomed to fail pretty much from the start.
But there’s an important caveat here.
In order for you to launch your product when the time is right, you have to have been in that industry for some time. It’ really hard to break into a new field without the necessary background in that business. And if you try to ride every new business wave just because there’s money to be earned, you will most likely lose all of your money. Don’t make the mistake of entering into businesses you don’t understand, but rather prepare yourself and stay up to date with the latest trends within your industry, and you will have better chances of success. You’ll know then when the time is right to launch your new product.
2. Idea
The best advice I can give you on this blog is this: stop wasting your time thinking about the next big idea.
The idea for your business is certainly important, but it’s not the determining factor for success. Most of the time, you can create a successful business by out-competing other businesses. You can do so by providing better service. You can also do so by reducing prices or using a smart pricing system. You can also do so by advertising your products using effective marketing strategies. And you can also do so by earning the respect of new customers and spreading a good word of mouth.
And there’s a lot of real life examples of businesses that succeeded in a very big way without a new idea. Here are a few ones: Starbucks, Facebook, Chipotle.
Starbucks was not the first franchise coffee shop, Facebook was not the first social media platform of its kind, and Chipotle wasn’t the first restaurant to sell burritos. But they beat the market using a combination of marketing, pricing, customer service, and a high level of trustworthiness.
You too don’t need to conceive of the next big idea to become a success.
3. Business Model
A lot of startups are concerned with the business model they should follow.
This part of launching a business can certainly be complicated, if you want it to be. But I really like what Amazon’s founder, Jeff Bezos, said about business models. According to Bezos, the best business model is the one which starts with the customer.
Or as he put it, “start with the customer and work backwards.”
Listen to what customers want and tailor your system accordingly, but whatever you do, make sure the checkout process is as easy and as simple as possible.
In addition to taking care of the checkout process, consider the following questions when you want to create a business model:
- Do your customers want faster service?
- Can they get the same product elsewhere for a lower price?
- Are they happy with the payment system you’ve set up?
- Do they think the forms you have them complete are unnecessary?
- Do they enjoy their buying experience with the staff you’ve selected?
- How do you handle complaints? Do you receive a lot of complaints?
- Do you over-deliver or under-deliver? (If you’re delivering on the promises you make and you’re a startup, then you’re under-delivering. You must always over-deliver).
4. Team
The staff you select for your business is important to the success of your business.
Select people that will work with you and not for you. I say work with you because you want a group of people that are equally passionate about the business as you are. You want your staff to think of your business as their business and to work as hard as they can in order to keep pushing the business forward.
However, good loyal employees can be hard to find. Not everyone is motivated to work and not everyone has the same amount of passion for the business as you do. So be very careful before you hire someone and get stuck with that person.
Often times, it can take a little over 3 months and sometimes even a year to know if the person you’ve hired is a good fit for your company. So craft an interview process that would allow you to find the ingredients you’re looking for.
Finally, you would benefit from thinking of business not in terms of the next big idea, but in terms of timing and team. Focus on those two factors and the other pieces will flow more naturally in the direction of your business.
Good luck.