A Startup enters the highly competitive business arena handicapped by severe Operational Deficits including insufficient capital, no history, no clients, no products, no brand name, no supplier or subcontracting network, a micro human resource base, limited if any accounting or other formal management tools, no market analysis or strategy etc. So chances of survival are slim, but possible if entrepreneurs understand Startup dynamics and manage accordingly, and apply the below basic concepts that are advantages in the Startup phase:
1. Work surplus: Seek quality staff having entrepreneurial traits, with ‘fire in the belly’ – Strive to avoid staff turnover, yet plan for its inevitability – Be capable of accommodating surges in demand without negative effects on quality – Use work surplus productively towards meeting projected future demand and improving internal robustness of the business.
2. Flexibility: Keep a loose and flat structure – No hierarchy – Develop ‘client-driven’ instead of ‘market-driven’ products/services – Promote quality – Improve products/services based on client feedback – Blend “Short Term” & “Long Term” activities: short term necessary for immediate survival, long term as basis for continuity.
3. Lower fixed costs & overheads (bootstrapping): Borrow or buy used equipment (or lease) – Minimize personal expenses – Avoid all lavishness – Buy through discounts, Ebay, etc – Share office space and/or employees with other businesses – Outsource when possible – Apply guerilla marketing – Minimize fixed costs to avoid bankruptcy during a dry spell – Use saved profits to cushion dry spell.
4. And most importantly, never run out of money: CFIMITYM (Cash Flow Is More Important Than Your Mother – MIT 1988) – Obtain payments in advance from customers – Obtain grants – Plan for the inevitable ‘dry spells’ – Use friends & family ‘love’ money – ‘beg, steal & borrow’.
Another intrinsic advantage of a startup is its Relative immunity to competition; when still ‘under the radar’, the Startup escapes the ‘economic intelligence’ of the major existing players and hence does not constitute a threat.
As a final thought, all the above points, although necessary during startup phase, are no longer applicable when business is stable: Operational Deficits are gradually reduced, in parallel Startup advantages are also reduced, and entrepreneurs need to manage this transformation and adapt accordingly, else they will face eventual failure, even after having been a successful or even remarkable startup…