Do you want to start your own business? Are you procrastinating? Are you afraid to fail?
This train of thought afflicts many first-time entrepreneurs.
So how do you get past this point?
Expectations are what drive human behavior. As entrepreneurs, we are all victims of our own backgrounds and resumes.
First, realize that despite what you’ve read about or seen in the media, every new business struggles in the first few years. It is never a smooth ride. Every entrepreneur wonders whether what they are doing today is the right path to take. These troubled times are rarely ever publicized. Recently, at a small event, the founder of Honest Tea said the company struggled for the first 8 years. And so, we expect our start-ups to encounter few hiccups along the way to success.
Next, when we went to school, our teachers explained a method for solving a problem and this method allowed us to solve similar problems with certainty – all by just following the same steps and procedures. We learned that we could do research and find the answers in books too. Yet, another lesson drilled into us year after year, is to plan your work thoughtfully and then execute the plan. This is the issue with business plans. Most are filled with baseless estimates, numbers pulled out of thin air, and no real evidence of a viable business. They are works of fiction. But they are the plan and so we feel compelled to dutifully execute them.
Now fast forward. Many entrepreneurs start their business careers as employees for established companies. These companies have a proven way of doing business. When they write an internal business plan for a new product, they are following a process that has led them to success with many products before. The steps are known. While there is some risk, for the most part, they don’t need to hunt for the right manufacturer or create a social media presence or establish a brand. It’s already in place. New products follow what’s been done in previous generation and the changes from one generation to the next are slight. Once again, we expect the business to unfold as planned.
The proof points provided to us in our lives before entrepreneurship give us unrealistic expectations. This is what leads to disappointment. In the U.S., there are over 600,000 new business starts each year and more than half will be out of business in five years. Its statistics such as this that cause entrepreneurs to pause and ask, “Did I investigate deep enough? Did I plan well enough?” New entrepreneurs come to accept failure as the most probable conclusion. When the reality of entrepreneurship meets expectations, the action of closing businesses seems normal. Surely, there must be a better way to create a new business.
Start-ups are 100% creation. It is something from nothing. A business plan is like a cookbook, you expect to follow the steps of the recipes and get the desired result. What if you didn’t have a recipe? What if you were on Iron Chef and were asked to make a delicious meal from a basket of random ingredients to please a panel of judges you don’t know? However, you do know that the judges want something different. You’d have to create the recipes and then test to see if the judges like them. It would be trial and error. That’s exactly what a start-up company is all about, except you get more than one chance with the customers.
The reason most business fail is the entrepreneur has the wrong mindset at the beginning. A start-up is a new business experiment. You don’t really know your potential customers, no more than the chef knows what the judges will like – it’s guesswork. You need to gain direct experience with the customers and marketplace before your new business can really get going. Your product and business model are subject to change as well because they are guesses too. This is the idea behind the concept plan, a strategy for designing and conducting business experiments, and the development proof of concept for a business.
The concept plan addresses what you think the purpose of your new venture is, what you are going to be building, how you believe the business will unfold, and unlike a business plan, it acknowledges all the assumptions, estimates, guesses and wishful thinking. Then the strategy for business experiment tests the critical assumptions that are most impactful on the business. Just like the scientific method, this is a repetitive process of discovery until you can uncover the right product and the right business model – and this can’t be done by reading market research reports or by brainstorming about what customers want at Starbucks. Once you have turned those big unknowns into facts, then a business plan can be devised. This is the experimental start-up phase that most new businesses miss.
About the Author
Cynthia Kocialski is the founder of three start-ups and helps entrepreneurs transform their ideas into new businesses. Cynthia is the author of Startup from the Ground Up and Out of the Classroom Lessons in Success. Cynthia writes regularly at Start-up Entrepreneurs’ Blog http://cynthiakocialski.com/blog/ and provides information on Concept Plans in her video series.