At the idea and validation stages, in particular, you have to be especially careful about the goals … [+]
It’s fun to project the performance of a startup idea. We’ve all taken the time to think about how many customers we can attract in the first year, how much we can make, and how far the business can go.
The truth is, a startup at the idea stage is nothing more than a series of guesses about the business model, revenue model, ideal customer, competitive advantage, positioning, and more. Focusing on startup performance assumes that all of your guesses are valid. Historical data shows that rarely do startups nail all the key pillars and make it big the first time.
Even the fastest-growing startups, ones that have crossed the billion-dollar valuation mark within the first two years, had gone through a series of iterations and pivots before they got it right. What every early-stage startup needs to do is focus on “getting it right.” Here’s what that means.
What you do in the earliest stages of your startup will shape the entire course of your business, primarily because this is the stage in which you prove that you have a business in the first place.
Accomplishments in business and life are the outcome of goal setting and execution. Setting the right goals, identifying and implementing the best course of action are two of the hardest things in business. They answer two critical questions: what to do and how to do it? If you do the wrong thing, the wrong way, you risk wasting your resources focusing on endeavors doomed to failure.
At the idea and validation stages, in particular, you have to be especially careful about the goals you set because you risk exhausting your resources before giving your idea the shot it deserves. Unfortunately, many early-stage startup founders fail not because their ideas lacked potential, but usually because they didn’t focus on the right thing, the right way. Many entrepreneurs lose interest and run out of resources before they could see it through.
For real entrepreneurs, failures serve as traffic signs leading them eventually to what they should focus on and how. But, wouldn’t it be better to identify the right goals and the best execution approach sooner?
As a rule of thumb, the easiest way to simplify life is by focusing on the things you can control. Usually, you can control the input but not the output. For an early-stage startup, the input is what you contribute to nurture and develop the app idea, while the output is where the idea goes next. You cannot set goals based on the output because it depends on too many variables, like what customers do and want, what your competitors do, what funding comes out of the woodwork, and the economic conditions you’re working with.
The ultimate goal of an entrepreneur launching a new startup is to prove a business. A business is proven when the created product is a solution that customers need and use. The question is, what do we need to do to create a useful product? Here are five key steps.
- Write down the problem, your solution, how it is different from the competition, why this differentiator is important for the customer, and finally, describe the ideal buyer in a sentence or two.
- Interview a dozen of your potential customers to validate or invalidate your hypotheses from the first step.
- Build a product based on the lessons learned from the second step.
- Launch and learn. Gather customer insights through data and interviews in order to make the necessary product changes.
- Build or rebuild until this product or other products, possibly a different idea, sticks.
SMART is an acronym used to guide goal setting. It stands for specific, measurable, achievable, realistic, and time-bound goals. Because an idea is nothing more than a guess, in the early stages, treat SMART goals as one of your hypotheses, even if they reflect the financial performance of your startup. Use this framework:
My goal is to solve [describe problem] with [describe solution] for [describe ideal buyer] by [describe your execution plan within a specific time frame] and to acquire [number of customers] that will generate [amount of money] through [describe marketing channel(s)] by [deadline].
Chances are you will go through several versions and iterations of your goal before you reach it. The goal may change, but the formula won’t. In the early stages, smart startup goals are not only specific, measurable, achievable, realistic and time-bound, but also iterative.
If you train very hard for a marathon, you will finish it no matter the distance. The startup journey is like running a marathon in a maze. Assuming you can last to see the end, you’re constantly faced with important decisions and challenges. The only way to make it is by taking it one decision at a time while keeping the end result in mind.