5 reasons to persevere through start-up obstacles

They said it was going to be hard. But you had no idea it would be this hard. Exhaustion, a poor diet, a parade of ‘no’s and disappointments. Plus mentors and advisers, including me, listing reasons to pack it in. It isn't easy to maintain your enthusiasm and energy in the face of all that.

So when should you not shutter your start-up?

The only thing I hate to see more than good people burning cycles on lost causes is to see good people giving up too early on good ideas when in reality the opportunity was far more promising than they could see from their trendy co-located office loft.

Persevere

So when are the discouraging obstacles not an apocalyptic sign, but simply short-term hurdles, perhaps requiring just a bit more effort and diligence? Here are just a few clues that it’s time to stick it out and renew the energy and resources to continue:

1.      Required capital was initially under-estimated (this is common) but doors are still open to you for additional resources, even if from friends and family.  You may be reticent to ask again, and that's a fair concern... and indicative that you are being wise with investors' trust and money. Still, it is your responsibility to manage your enterprise wisely and to sell your vision. But never confuse your very real fiscal responsibility with imagined guilt of the risk both you and investors are taking together.

2.      You’ve not yet introduced your MVP (minimally viable product)... but it is because you’ve made a valid pivot from the original plan. If the delay from these pivots are based on honest and useful customer feedback, the delays are valid and a good reason for asking for more runway. 

3.      Your reasons for delays and obstacles are not excuses. There’s a difference between a problem you cannot control and therefore must accept and overcome, versus a crisis you created or could have changed but chose to ignore.

4.      The market gap that your product/service is intended to fill is still not being adequately filled by established competitors. As long as it will fill a genuine need in the market (presuming you’ve done that diligence) then there is still an opportunity to be exploited.

5.      You can identify all the voices telling you that you cannot do it - because they all sound remarkably like you. They are all inside your own head. Take a step back and look at yourself in the third person. Is the negativity you are hearing from yourself the same you’d tell someone in your identical position? Or would you be kinder, more encouraging while still realistic? 

Like my earlier post giving you good reasons to shut the doors, there are no hard and fast rules, and of course, any one of these are not a guarantee of a successful start-up deserving your continued effort. But just as it is unwise to continue to pursue a start-up out of obligation, it is unwise to make a permanent decision about shuttering it without taking a moment to review the real reasons for your current discouragement.

Few if any start-up situations ever meet ideal expectations. But with a deep breath and a little introspection, you might find that the reality of the situation is far from desperate. 

5 reasons to shutter your start-up.

There's no lack of enthusiastic blogs, posters, and gurus out there encouraging you to follow your dreams and strike out on your own. So I am aware that my contrarian posts can be a real downer, as I’ve written several posts that discourage potential start-ups from, well, starting up, including the fallacy of expecting a ‘better’ product to succeed, or the idea that you should chase your dreams.

But there are great ideas that deserve your attention and enthusiasm. Yet once you’ve already sunk your heart and soul and 401K into your business, when is negative thinking just ‘nattering nabobs of negativity’, and when does it become a warning that something is wrong and you need to get out? After all, the sage tells us that ‘everything is temporary given enough time’, and we all know that even expected obstacles cost more and take longer to overcome than ever often predicted.

So when is enough enough? There are a few clues that it’s time to recognize that it’s time to close the doors:

1. You, yourself, are exhausted and cannot continue to infuse your discouraged team with requisite energy to soldier on through the current circumstances.
2. Resources are spent. This seems obvious, but resources are never really ‘gone’, just harder to raise - but if you are spending more time raising funds instead of selling an MVP (minimally viable product), you are on a slippery slope.
3. You’ve made little progress in overcoming objections from potential users either in fact or positioning.
4. You’ve missed initial, and extended, deadlines and milestones.
5. The market gap that the product/service needed to have filled is beginning to be adequately filled by established competitors.

There are no hard and fast rules, and any one of these are not indicative of a start-up needing to be shuttered. But any two or more create an uphill battle that takes the joy, enthusiasm, and health and finances of founders down with it.

Unless your start-up is a cruise line, there’s no glory in going down with the ship. 

Teaching entrepreneurship isn't impossible.

My son starts his junior year in high school Monday. His first class? “Entrepreneurship”. Given that he’ll have me, our clients, and associates as resources, I expect him to ace the class. Yet perhaps that is an unfortunate expectation, because I’m not sure entrepreneurism can be taught.  

I also taught a college course last year on Small Business Management. I conveyed useful information as required by the curriculum, and included important speakers, videos, and motivational information for added emphasis for important topics. The students seemed to benefit, I’m pretty sure I did a good job, and I’m pretty sure my son’s high school teacher will also. Still, some students in that class will never venture off on their own, some will fail and quit, and still others will succeed. One already has.

But what part of entrepreneurism can be taught, and of that, is it truly entrepreneurism? Or is it simply management? What are the building blocks of entrepreneurship versus the innate personality required to be knocked down seven times and still get up an eighth?

Can you be taught to have a comfort with risk?

No, but you can teach risk management, and offer advice on where others have faltered

Can you teach passion?

No, but you can promote sacrifice and self-reliance.

Can you teach leadership?

Absolutely, but it grows with experience.

Can you teach commitment?

No, but you can inspire and encourage.

The rest, perhaps, is tactics and processes. This is why mentors are so important to the entrepreneur. Mentors are as much about reviewing operational plans and go-to-market strategies as they are about being an example, and a source of inspiration and encouragement.

On the whole, I don’t think you can pluck anyone off the street and make them a confident entrepreneur, ‘Trading Places’ style. But those who have a natural inclination to go against the grain and rise above the noise can learn to be entrepreneurs, even if it can’t be taught. 

When your dreams are a crock.

I wasted some time today to complete an estimate for a modest-sized potential client today.

Kind of a waste, because I’m doing it out of obligation for someone for whom I know will not buy it. It didn’t take too long, so I’m not bothered, but I thought it blog-worthy because for the umpteenth time, its another boot-strapped start-up that I know they’ll stick to their dream instead of facing reality.That reality is that dreams require sacrifice.

Experts will tell you that most start-ups fail due to under-capitalization. I suggest that that is a symptom of a greater issue: Common Oprah pabulum encouraging your dreams. I know, what a downer. "No one ever got anything without dream

s!" Whatever.

Nothing wrong with dreams. “Go get ‘em, Tiger!”

But dreams are only useful when you understand the reality. Not only the plan for when the dream is realized, but also the plan for when it fails. As a mentor to entrepreneurs, I’ve sat through plenty of VC presentations. 70% of the presentations never addressed the Plan B. Never have I seen an initial plan lacking a discussion of risks ever make it past the initial presentation.

The idea of having one’s own business, building one’s new widget, being one’s own boss is too great a draw to allow concerns about the costs, (time to market) runway, and the outside help that is needed to see it through impact your decision, because,

“Follow your dreams!” said Thoreau*.

So off they go.

So when the dream becomes work, when the risks become higher, when set-backs become more common than anticipated, the fledgling entrepreneur takes shortcuts.

Extends credit to the unworthy.

Buys services from the cheapest comer.

Plays Three Card Monty with incoming invoices.

And when the reality of the present overwhelms the dream they had in mind, they hold tight to that dream because in spite of the unpreparedness, in spite of the lack of planning, they

“Hold tight to the dream”. Because that’s what the poster in their office says.

But too often in the self-absorption common to mere mortals, we forget that our dreams are not others’ dreams. And dreams, to paraphrase Ayn Rand, are not claims on reality.

So my rates aren’t in your budget. (As if I believe you ever created a budget.) Yes, Billy Bob was cheaper. That’s fine, Billy knows what he’s worth. Or maybe Billy Bob is chasing his dream too, blind to the reality that you, too, are looking for the easy way out. Life is not a Successories poster.

So I’m not going to lower my rates for your dream. I’m not going to extend you credit for your dream. I’m not going to trim off the preliminary steps I think are critical to success with the project.

I have my own dreams.

*Thoreau never said this.

"Plan", as a verb.

"Turn left here."

"But that's a building!"

"You missed your turn. Please make a u-turn as soon as it is safe to do so."

"But I'm in an alleyway!"

So, a couple years ago, I was visiting New York with my family, showing them my old haunts and taking in a game at the old Yankee Stadium. I opted to get a GPS unit from the car rental company because I knew that the roads had changed in the years that had passed since I last drove Long Island's Northern State Parkway.

Unfortunately, when on her very first assignment the lovely voice of the GPS unit directed me to a condo development in Queens instead of a hotel in Lindenhurst, it quickly became evident that things had changed since she'd last been calibrated. It wasn't long before I stopped referring to the chronically incorrect voice in the bright yellow sack as the family-friendly 'lemon lady', and opted instead for the far more colorful 'b*tch in the bag'. After the second day, we stowed the painfully out-of-date navigation unit in the trunk.

Are your business plan documents like that confused guidance system? Is your business planning process useful in navigating toward your goals or is it an annual process that is more routine habit than useful tool? If you are creating it once and then not updating it regularly to respond to changes that occur in the market, then what you created wasn't a tool, but a paperweight. Too often businesses large and small will smartly discuss goals, create a plan, normalize it across functional areas, print it out in color on glossy paper, put it into custom binders, and then put it on the shelf to be updated the next year when it is pulled down, dusted, and updated.

That approach only works for holiday decor.

So, sanity check: We are now halfway through the second calendar quarter, and have you even looked at your annual plan? Have you evaluated the assumptions and how they've played out? Did your competitors introduce new products, services, distribution? Did you or they change pricing strategy, pursue M&A or new partnerships? Is the same team in place? Did you hire someone for their experience and expertise and then quietly encourage them to follow a plan to which they did not contribute, wasting their insight? Did the market change? The environment? Did taxes increase? Were new products and versions and functions and services added precisely on schedule as outlined in the assumptions in the plan?

The plan document is not the objective of the planning process, any more than drawing a map is the purpose of a holiday. Planning documents are useful tools in guiding strategy and providing touch-points - so that even if the signs on the street change, you can still guide the organization to its destination.

Focusing on the map instead of your destination is a sure way to get- and stay - lost.

The price is falling! The price is falling!

Just a note for the editors of marketing pubs out there: "how to market in a sagging economy" articles have been done. To death. Okay, we get it. Preaching to the choir here. Move on.

Its a valid subject, but most of these articles are promotion-oriented. What hasn't been discussed as much is the role of price strategy in a sagging economy, and generally. This especially occurs to me today because of a current client project, where pricing strategy is the current key gating concern prior to product launch.

Obvious Secret #1: Pricing strategy, especially in a weak economic environment, has little to do with, well, price.

Even in the best of times, great products, great promotions, clever ads and a loyal base can be undone by a misguided or misapplied pricing strategy. This is because left to their own devices, finance and sales executives will see sagging demand as a numbers issue and not a brand issue. Plus, it is expedient to react instinctively with a red pen (cutting prices) when profits shrink and sales falter.

Bad plan.

Unstudied discounts are not as easily undone tomorrow as they are done today. Price cuts are a short term solution to a larger, longer term issue; that is, the product hasn't established the brand position to maintain margin in a discount environment. Understand that price cuts are welcomed by consumers but always create subtle dissonance - an inability on the part of the consumer to properly relate price to value, so when the market returns upward, as it always does, this results in a nearly Sisyphean effort to re-establish a brand position held prior to the discount. Pricing is not a cost issue - it is a value issue.

Understand the way customers make buying decisions and become far more visible, and more efficient, in delivering on these criteria; this will always be more effective in building recession-proof brands. This is because pricing is a long-term strategy, not a short term tool. When the economy sours, there are other levers to pull - operating costs, added value, extended hours, free upgrades. Think about supplier pricing and work new billing models to manage cash flow. Invest in money-saving IT investments such as Unified Communications and collaboration products. Reevaluate your market position and consider new marketing initiatives to go after markets competitors might have recently abandoned. Fire some costly customers. Adjust invoicing offers and procedures to improve cash flow and reduce defaults. These tools and others are manipulated in good times and bad with far greater flexibility than price, which can only move in two directions: up, or down.

Its easy to be Chicken Little and think in blocks of fiscal-quarter-bound panic over a current fiscal situation, but creating and applying the right principles for pricing allows for decisions that over time not only weather current storms, but position a company for consistent growth over the long haul.

The Rules Of Business Still Apply

Remember the dot-com days? When profits didn’t matter, and the new currency was ‘click-thrus’ and ‘page views’? The bubble was built by the general public’s fascination with this new thing, ‘the Internet’, and e-commerce companies along with their telecom counterparts (installing ever-greater capacity) rode the bubble toward a sudden and inevitable burst.

Social Media is beginning its shakeout. MySpace is struggling. YouTube is gaining traction as watching video online becomes a standard media, and Facebook is seeing continued growth, but much of it outside the U.S. as this market becomes saturated and curious Boomers drop off the site. LinkedIn integrates a number of useful applications and solidifies its position as a professional’s social media rolodex.

Now comes Twitter, off its highs of the CNN / Ashton battle for a million followers, a month after an Oprah mention, a curiousity to most and not yet monetized. Studies have indicated that most new visitors stop visiting after a month, and now a report that May’s growth on Twitter was anemic, although, importantly, the time spent on the site (by its active members) grew substantially.

So what’s next for Twitter? I’m not certain, but it is critical to recognize that Twitter’s celebrity users are essentially spokespeople and pitchmen for the site, not a business model in and of themselves. According to the rules of business where a company has an established and vocal ‘tribe’ of followers in its niche, the focus should be to provide value to its most loyal customers (visitors). This may mean perhaps, more integration with the hordes of third-party Twitter applications being developed, recognizing its role not as an interactive medium but a broadcast medium and provide services accordingly, and determine the best way to monetize the platform without alienating a customer base that is not used to be ‘pitched’ with advertising. It is then that Twitter can begin to expand and regain interest among businesses and individuals who will leverage the platform and applications using methods tested and proven by the early adopters.

‘The Oprah Effect’ will only get you to the lip of Geoffrey Moore’s chasm. The rules of business still apply as Twitter attempts to cross it.

Full disclosure: www.twitter.com/jimgardner

Know when to fold 'em.

I know. With that title, I've put a tune in your head you'll not get out for some time. Still, you could do worse than a 70s classic from Kenny Rogers. In any event, my point, and I do have one, is that that lyric has never been more appropriate in a business context than it is to the changes made possible by today's electronic media.

The Pirate Bay case (click here if you are not familiar) came to a conclusion today, complete with jail time and seven figure fines for its founders. So now the entertainment industry has a win in their column based on foggy reasoning, short-sighted strategy, and a desperate effort to hold on to their buggy whip business plans. Now they just have to leverage that surprising win by filing the same suit against thousands of copycats.

Good luck with all that.

The newspaper industry is no different. Teetering on extinction, there has been no shortage of attempts – legislative and otherwise – to support the newspapers' clearly flawed business model. Think of the effort to start a newspaper today with new investors: The ten-second pitch for venture capitalists? "We deliver news and opinion late, in a cumbersome and environmentally suspect format to individuals whose iterative feedback takes days and requires postage."

Well, sign me up!

From efforts to reduce regulation (rarely a bad thing in my mind) to subsidize newspapers through tax policy (rarely a good thing in my mind) the concept of a newspaper is so central to our culture, or so it is argued, that its simply 'too big to fail'.

Like banks. Or car manufacturers.

It's long past time to simply face the reality that newspapers, records, movies and other media are competing not just with new media, but in a brand new context. Traditional distribution methods for everything from news to music to movies are obsolete, and there isn't a tort or an injunction or any lawyer in the world that can stop it.

One of my favorite quotes on the subject is from US Army General Eric Shinseki: “If you don't like change, you're going to like irrelevance even less."

Or perhaps more succinctly put by that other sage, "You gotta know when to walk away, and know when to run."

UPDATE 4-23: Excellent opinion piece regarding Susan Boyle sensation that indicates that the amazing viral nature of the clip has yet to monetize for YouTube or ITV as a result of the battles between old, new, and newer revenue models.

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