In his latest blog post, Will Abbott, Partner at UK200Group member firm Randall & Payne and UK200Group YESS Mentor, examines the fundamental questions every start-up needs to be able to answer.
It is part of my role that I frequently talk to start-up businesses, even though I make no particular attempt to do so. Successful start-ups are notoriously hard to pick – witness Dragon’s Den. Venture Capitalists are apparently happy if they find 4 success stories in every 10 investments (and that is after rejecting hundreds of others).
In my mind there are a couple of reasons for this. Firstly, the reality is that many successful start-ups are not doing what they originally set out to do. Amazon is a great example – they have morphed into a different business.
The second reason is not unrelated. My experience is that individuals are very good at finding solutions to a problem that no one else has. Fundamentally, if no one has the problem you see, there is no market.
What is exciting about this issue though is the “long tail”. Technology and the internet are making it increasing possible to make money by servicing scattered, niche markets. There is an infinite number of niche market segments, if we think like artisans and less like global market leaders. The rise of the micro-brewery and craft beers is testament to this.
UK200Group are working with Coventry University London Campus to mentor budding entrepreneurs on their MBA programme. A rewarding experience for sure, but also valuable in seeing how the next generation of entrepreneurs think and see the world.
For me, whatever the generation, the fundamentals do not change. An entrepreneur needs to be able to answer the following questions
1. What are you going to make?
2. Who will need it and why?
3. How do you know that?
4. How will you win customers?
5. What other solutions are there?
The questions are primarily about understanding the market demand – what is the problem you are fixing and what is its scale? Ultimately the pain of the problem needs to be greater than the pain of switching to your solution.
As a mentor and adviser we have to ask those questions and ensure we bring objectivity. Of course, having clear answers is no guarantee of success, but it will help to focus on what is critical in the very early stages of the business.
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