Heads up for ECM, BPM & BPO software executives by Mark Edwards, CEO - Document Boss

Start-up Alchemy Chemistry

02 November 2015

By Mark Edwards

"Leaders must invoke an alchemy of great vision."
                                                                                                                 Henry A. Kissinger

With the latest figures for the failure rates of start-up businesses reportedly ranging from 50% to more than 75% over the first six years, then the current entrepreneurship culture, which is attracting increasing numbers of young business people wanting to start their own business, is going to leave some disappointed casualties. 

The calculated failure rate, above, is defined as not simply missing some pre-defined business goal or plan but the total extinction of the business. Even with VC backing, the odds are only marginally better, with businesses still facing an uphill struggle to become successful.  The stats say that VC backed businesses do have a better success rate but that is not really too surprising.  The manner of finding investment is a good toughening process, since the key idea, thinking and business plan are vigorously tested under detailed questioning. 

VC funded businesses also have the cash to prolong the duration of survival - even for the worst of business ideas or plans - during which time changes and refinements can be made based upon market feedback. Increased time increases the opportunity for entrepreneurs to find the right success formula. 

Over the sixteen years that Document Boss has been in operation, we have seen many start-up and fledgling businesses fighting to stay alive and thriving in this industry sector. The businesses vary in type and personality as much as the people who run them. Yet, there are some common elements which, if not exactly a map are, at least, road signs that could point the way to success.


The Big Idea or Story 


One of the first things I look to hear and understand from the founders is what is the big idea behind the business?  What is the story behind the company - the reason for being?  Firstly, I am looking to see if they can articulate the ”big idea” succinctly and in a way that talks less about them and more about the benefit to the user.  Too often, I see founders getting bogged down in the minutiae of their offering and forgetting to communicate the main reason for their company’s existence.  (By the way, the main reason for being is not to make a profit; that comes after the company has delivered a benefit or service of some kind that is seen to be worth the money paid for it.) What is the vision behind the business?  Does it excite and is it truly a vision of the future or simply a rehash or copy of what already exists elsewhere in a different colour? 


The Key Executives


Secondly, the key executives involved in this new operation - Are they credible, knowledgeable and likeable? If they are also experienced in this sector and have a record of other successful ventures, that also adds confidence.  


Go To Market Sales Strategy


I like to hear their go to market sales strategy to see how much thought has gone into this area of the business. Will they be selling direct or via resellers or do they have distributors.  Most often there is an element of two or more channels.  If not going via the direct sales route, have they allowed enough margin for promotion to make it attractive for their channel to take on a new untried line?

If they intend to go direct, how will they reach their market and facilitate a sale?  How many sales do they need to reach break-even, how many sales to reach their plan and can they handle that level of sales?  I am also interested to hear their main sales messages.  It’s amazing how often I hear a pitch from two executives from the same company which say very different things.

How will their sales teams assist their marketing teams and feed back their successes - or not – generated via marketing leads?  What key areas of information will they be feeding back to stimulate consistent improvement in their marketing efforts?

Does the overall sales strategy seem well thought out, realistic and rational? 


Strategic Marketing


Does this company have a strategic marketing plan?  Do they really understand what a strategic marketing plan is and why they should have one?
Can they articulate a competitive advantage over the competition that is sustainable and of interest to their target market?  This also necessitates knowing your market sector.  I have seen many strategic marketing plans that have been built upon false foundations of not knowing the competition, thinking they have found their differentiator and being completely unaware that there are several well-established, bigger players already offering what they offer.

Also, very importantly, does their target market understand their differentiator and do they want it - or care about it?  I know this may seem obvious but I have come across too many companies who have made this mistake, not to list it.


Tactical Marketing


Does the company have a realistic and sustainable plan to consistently be marketing and communicating to their target audience?  How will they build a relationship that is built upon trust and familiarity?  Or will in twelve months’ time if I see this company again will they say "We didn’t have time" or, “We created an email campaign a couple of times and it didn’t work, so we stopped”.  The skill here, is to see how their marketing can be consistent. No matter what size company or how few executives within the business they must have a way to communicate with their target market.  

It can also be useful to see examples of their communication skills.  Watching a 5 minute presentation will tell you a lot about their powers of communication. I could write a whole book on the subject of poor presentations. I have seen many - Too many!!  Presentations say a lot about a company. How clear is their thinking and communication?  How skilled are they at presenting their core points?


Financial Control & Measurement


Do they have the skills in-house or will they hire in the skills to ensure that the business is financially managed in the correct way?  In-house or not, they need the ability to ensure correct financial control.  They also need to set up measurement for their performance to monitor progress. This is their dashboard of performance. In the same way that a sportsperson has a time or a score to measure performance, a business has revenue and, more importantly, profitability.  


Have They Kicked Their Business Idea Hard?


Have the executives taken this idea and kicked it really hard to see if it stands up.  It’s easy, in a small group, to get carried away with an idea. Being blind to the business weaknesses won’t help you to create a solid business plan. You need someone to scrutinise the business idea and plan with a critical eye.  I have seen some charismatic or forceful founders who set up a business with executives around them who do not challenge. You don't want pessimistic nay-sayers, who continually drain you and your fellow workers of energy, but you do want people who can speak their mind and say if they see something that is wrong.  Has the team looked at the business to see where it might go wrong or where maybe, they could have made some important assumptions that may be rather too optimistic. Kick the plan hard and see if it stands up.

I have seen many, many forecasts and business plans and I give no prizes for guessing whether the reality generally turns out to be above or below plan and whether it is quicker or takes longer than expected. 


No One Answer! 


One of the most interesting aspects of business is that there is never just one answer or one way of successfully launching or even assessing a start-up.  This short list is not an exhaustive inventory of things to look out for when assessing a start-up as the potential variables in any two businesses are usually vast - even in companies of roughly the same size and in the same sector.

One thing that has been shown to increase the likelihood of success is experience.  Executives with ten or more years of relative experience, leading a start-up, typically have a better chance of success.  All of which is very good news for Document Boss as all our senior executives have more than twenty years’ experience. Perhaps we should create two start-ups : )  Though I’m pretty sure it doesn’t work like that..

About Mark Edwards
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