What Startups Get Wrong

Bookmark and Share

Scenario: "Dude, we're selling our Web 2.0 online spreadsheet application software for $5/month. That's our strategy. We're focused. Yay!" Common business sense might tell you:

  • Focus = Good.
  • Stick to Plan = Great.
  • Execute Plan = Genius.

But what if you're like most startups:

  1. You're burning cash like a mofo.
  2. You have no revenue sources aside from your "revolutionary idea" -- that isn't generating cash, "yet!"

"Stick with it. You'll succeed if you never give up!" those pseudo-experts might tell you. But when you do that, you see your cash dwindling like Britney Spears's bald head:

  1. Day 10: $30,000
  2. Day 20: $3,000
  3. Day 30: $30
  4. Day 40: $0

Unless you rob Kevin Federline, your business = done. What do you do? Our recommendation: Generate enough cash to keep the company afloat -- and ready for some sexy action. We'll explain.

Why Most Startups Fail

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.

You know the typical entrepreneur's mindset:

  1. Yo, I have this next billion dollar idea.
  2. This can't lose.
  3. Oh, I'll make so much money.
  4. I can see my face on the cover of Fortune already!
  5. Our product is going to gain so much success, fortune, and fame. Yay. Woohoo!

The brutal realities however:

  1. You can't predict a product's success.
  2. 90% of "revolutionary" ideas fail.

And so what normally happens next?

  1. You build the product.
  2. You try selling the product.
  3. Nothing sells.
  4. So, you try to "enhance" the product.
  5. No luck.
  6. (Vicious cycle: Repeat Steps ^4 and ^5.)

"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: 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.

"What's the Purpose of the Startup Phase?"

We'll be a little controversial here: 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. 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:

  1. Get sufficient cash sources consistently that helps you survive monthly.
  2. Have enough leftover cash to fund what you really want to do (i.e. sexy action).

A company without sufficient operating cash is like you living without water: You can only do it for so long, but eventually you'll croak.

"So what do I do? What do I do?!"

If you're still in startup mode, ask your badass: "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?"

  1. If you're building a killer web application, that could mean seeking web development jobs.
  2. If you're building one super gourmet coffee franchise, that could mean selling wholesale coffee to businesses.
  3. If you're building the best choppers brand in town, that could mean repairing motorcycles.
  4. If you're building a mega burrito chain, that could mean catering for parties.

"So do I need to do the 'blah' stuff forever?"

Once the "sexy" stuff generates enough capital such that:

  1. it keeps your business alive monthly, and
  2. it generates more cash to fund more innovative shizzle,

then by all means: Drop the boring stuff. Just remember: Like H2-mutha-0, cash is your source for survival. Your startup needs it like a fat kid needs cake.

Seek some *&^%-!@^^%^ cash. It's delicious.


If you enjoyed What Startups Get Wrong, get a complimentary subscription to our freshest articles through email or through your feed reader.

Posted on February 22

WTH is Trizle?

Trizle helps you rock ___ with your business.


Get a complimentary subscription to our freshest articles through email or through your feed reader.

Don't Miss Out!

Subscribe to Trizle through email or through your feed reader.