Businesses come – and they go. When you’re the proprietor behind the sign on the window that says, “We’re Closed,” the topic is obviously deeply personal. 2020 was a year unlike any other in recent memory; one for the record books on so many levels. With respect to businesses launching – and closing – the year was a bit of an oxymoron in that the pandemic forced the closure of thousands of businesses around the globe, yet it also spurred the launch of thousands of others. For those of you that shuttered your doors, we’re truly sorry. And for those of you who have launched a new business, we wish you tremendous success and want to offer a few tips on how to start your startup the right way.
The Ups and the Downs
Small businesses (SMBs) are the backbone of America – and just about every other country around the globe. In the US, SMBs account for half of jobs held within the private workforce. Sure, the global enterprises play a vital role, but the mom-and-pop shops, the startups and the small businesses are the fabric of any main street and every community.
Tech startups have a notoriously poor track record of success: fewer than 8% survive their first year compared to a survival rate of about 80% for other categories of small businesses. Five years later, less than half of SMBs remain in the market and only 40% ever achieve profitability. Men start companies about twice as often as women do and raise about 97% of the capital available from the investment pool each year.
Last year was the exception to everything. 2020 was ruthless: it cut a merciless swath across every business, big and small, near and far. Except amazon, of course, which is one of the few companies who significantly benefited from the onslaught of the pandemic. For the rest of us mere mortals and business owners, the tally was brutal.
It all started innocently enough with temporary closures and rent forgiveness that were seemingly enough to stem the inevitable, but, as it turns out, the situation was even more dire than many forecasters anticipated. According to statistics published by Yelp, more than 164,000 businesses went out of business March – September 2020. The cities hit hardest included San Francisco, New Orleans and Honolulu with unfathomable losses in the hospitality and retail sectors. Female founders have really struggled over the past twelve months balancing home care, childcare, eldercare and working. In fact, funding levels for women collapsed to sub-2017 levels.
Within the US, the number of new SMBs registered has been more-or-less steady-state since the late 1990s with one notable dip. Numbers plummeted in the wake of the 2009-2011 financial crisis then rose back to essentially normal levels by 2019 with ~750,000 new businesses launched annually. However, things changed in 2020: numbers spiked to record levels approaching 804,000 new business entities. The question becomes, what percentage will still be around by this time next year?
Tips to do at least Some Things Right
Nobody is perfect. Despite – and in spite of – the plethora of tips, examples and insights available on the internet, most founders are simply too busy trying to get their companies launched to read anything that could be informative or helpful. “Ain’t nobody got time for that!” Instead, most founders opt for a seat-of-their-pants approach to starting up their startups. And that’s the first tip of what NOT to do.
TIP 1: Start with a plan. The SBA (Small Business Association) has a wonderful business plan template that comes in around 30 pages. If that’s a bit daunting, begin with a 1-pager Lean Business Canvas to get things going.
TIP 2: No need to get super fancy from the get-go. Think “KISS” aka “Keep It Simple, Sweetie” model. Cardboard mock-ups, animated Powerpoint deck or a Filmora Flipdeck as a “beta software mock-up” and the bare bones to communicate your idea is all that you need to get started with your prototype.
TIP 3: Test things out on your audience. Start with friends and family, who, depending on their personality types, will either tell you everything that’s wrong and bad about your idea or placate you with, “That’s nice, dear” nods and give you absolutely zero feedback of any value. The art form here is to filter out the nonsense but to listen to the message that you’re receiving. Ideally, expand beyond your trusted inner circle and solicit the honest (and routinely brutal) feedback from strangers. Consider forums like MeetUp, Linkedin Groups and other communities where you can share what you’re doing. If you can’t convince others how great your idea is and if nobody is willing to pay for it – STOP. Pivot and rethink your idea and your offer.
TIP 4: Do some market research. Who else is offering something similar? Park your hubris and the whole, “We don’t have any competition!” thing. Investors hate it. Why? Because everyone has competition; you may simply be unaware of it. Keep digging and look into what types of ideas are getting traction, analyze why they’re getting traction and use those insights to inform your next steps.
TIP 5: Don’t become preoccupied with your branding. Of course, we want a cute logo – we all do – and it’s fun to play with colors and icons and fonts and all that good stuff. Yes, it’s important to have a name that is meaningful for your industry and your offer, can be spelled with reasonable ease and has some cachet to it, but you don’t have to knock it out of the park at this stage. Nor do you have to invest in a graphics designer to have your branding, professional presentation templates, pitch deck and all those other goodies developed for you. At this step, focus on your offer: why is what you’re creating going to be compelling enough to make people open their wallets to spend money on?
Hunt for bargains. Buy your NDA and legal templates online instead of retaining an attorney. Buy your professional templates and brand them as your own instead of creating them from scratch. Ditto for your creative assets: surely there are some stock images and videos that are good enough to make your point? Co-working spaces and fancy office furniture look fabulous but are they necessary?
Build your story – and your business – on a shoestring. The longer that you can wait until you borrow money, the more equity that you’ll retain in your company. If you seek investment too early and too often, you’re going to run out of shares to offer and have nothing left for yourself.
The best piece of advice that I ever received about startups came from a successful, serial entrepreneur who volunteered on Capitol Hill as an intern to learn as much as he could about the world while he was paying to attend a pricey university. Do you know what he said? He said, “Learn to live like a cockroach.”
If you’re not quite ready to start a startup, but you’re thinking it’s time to bring a little extra cash in, we can help you get your side-hustle game on. Check out this eBook. It’s jam-packed with all kinds of tips and inspiration. Go HERE.