<p><strong>Scenario:</strong><em> "Dude, we're selling our Web 2.0 online spreadsheet application software for $5/month. That's our strategy. We're focused. Yay!"</em> Common business sense might tell you:</p> <ul> <li>Focus = Good.</li> <li>Stick to Plan = Great.</li> <li>Execute Plan = Genius.</li> </ul> <p>But what if you're like most startups:</p> <ol> <li> You're burning cash like a mofo.</li> <li> You have no revenue sources aside from your "revolutionary idea" -- that isn't generating cash, "yet!"</li> </ol> <p>"Stick with it. You'll succeed if you never give up!" those pseudo-experts might tell you. <span class="highlight">But when you do that, you see your cash dwindling like Britney Spears's bald head:</span></p> <ol> <li><strong>Day 10: </strong>$30,000</li> <li><strong>Day 20:</strong> $3,000</li> <li><strong>Day 30:</strong> $30</li> <li><strong>Day 40:</strong> $0</li> </ol> <p>Unless you rob Kevin Federline, your business = done. What do you do? Our recommendation: <span class="highlight"><strong>Generate enough cash to keep the company afloat -- and ready for some sexy action.</strong></span> We'll explain.</p> <h2>Why Most Startups Fail</h2> <p>That dude Billy over there thinks he has a billion-dollar idea. Sally J. in the corner over there thinks she has the revolutionary product that will destroy Billy's. And of course, we can't forget about you: You think you have the idea that kicks all of their booties.</p> <h3>You know the typical entrepreneur's mindset:</h3> <ol> <li> Yo, I have this next billion dollar idea.</li> <li> This can't lose.</li> <li> Oh, I'll make so much money.</li> <li> I can see my face on the cover of Fortune already!</li> <li> Our product is going to gain so much success, fortune, and fame. Yay. Woohoo!</li> </ol> <h3>The brutal realities however:</h3> <ol> <li> You can't predict a product's success.</li> <li> 90% of "revolutionary" ideas fail.</li> </ol> <h3>And so what normally happens next?</h3> <ol> <li>You build the product.</li> <li> You try selling the product.</li> <li> Nothing sells.</li> <li> So, you try to "enhance" the product.</li> <li> No luck.</li> <li> <span class="highlight">(Vicious cycle: Repeat Steps #4 and #5.)</span></li> </ol> <p>"Oh, I just know this product will succeed! I just need to find a way. Never give up!" you tell yourself. And then the cruel reality hits you: With no sales, cash = drainage. With no cash to support your operations, you have to close your business. The humble lesson: <span class="highlight"><strong>The longer you stick with a product that's generating no cash, generating a net-negative cash, or generating viciously ugly looking cash, the likelier you'll find yourself raising the white flag.</strong></span></p> <h2>"What's the Purpose of the Startup Phase?"</h2> <p>We'll be a little controversial here: <span class="highlight">Unlike the typical mindset that goes on in the Web 2.0 crowd, the purpose of the startup phase isn't to develop some "super-duper-revolutionary" product.</span> Oh no. The purpose of the Startup Phase: To generate enough cash that keeps your company afloat, and ready for some sexy action. That means:</p> <ol> <li> <span class="highlight">Get sufficient cash sources consistently that helps you survive monthly.</span></li> <li> <span class="highlight"><strong>Have enough leftover cash to fund what you really want to do (i.e. sexy action).</strong></span></li> </ol> <p><span class="highlight">A company without sufficient operating cash is like you living without water:</span> You can only do it for so long, but eventually you'll croak.</p> <h2>"So what do I do? What do I do?!"</h2> <p>If you're still in startup mode, ask your badass: <span class="highlight"><strong>"How can we generate enough cash from month-to-month to keep our business alive - then have some money leftover to fund the sexy stuff?"</strong> </span></p> <ol> <li>If you're building a killer web application, that could mean seeking web development jobs.</li> <li>If you're building one super gourmet coffee franchise, that could mean selling wholesale coffee to businesses.</li> <li>If you're building the best choppers brand in town, that could mean repairing motorcycles.</li> <li>If you're building a mega burrito chain, that could mean catering for parties.</li> </ol> <h2>"So do I need to do the 'blah' stuff forever?"</h2> <p>Once the "sexy" stuff generates enough capital such that:</p> <ol> <li>it keeps your business alive monthly, and</li> <li> it generates more cash to fund more innovative shizzle,</li> </ol> <p>then by all means: Drop the boring stuff. Just remember: <span class="highlight">Like H2-mutha-0, cash is your source for survival.</span> Your startup needs it like a fat kid needs cake.</p> <h2>Seek some *&amp;^%-!@#$%^ cash. It's delicious.</h2> <p>&nbsp;</p> 2007-02-21T20:36:20-08:00 true 486 what-startups-get-wrong 0 2009-11-06T21:45:45-08:00