Originally Posted by Blackhood
From what I've seen if someone has all the traits you're stating then they will be fine, as long as market forces ect dont fuck them up.
This is probably a bit of an exaggeration. There are plenty of unpredictable and uncontrollable factors, beyond just macroeconomics, that can dash a startup on the rocks. The emergence of a well-funded and previously unknown competitor, for example. This happens all the time in tech startups. It's pretty much a rule of thumb in Silicon Valley that, if your idea is solid enough and you've got decent funding, there are 20 other startups doing the exact same thing with even more funding. Not to mention that Google or Facebook is also doing it as a side project, but with enough fuck-you money and in-house engineers to blow you away just for the sake of doing so.
Even in non-tech startups and small businesses, competition plays a huge part. Marketing plays a freaking enormous part, as well. In my experience advising or working with friends who start small businesses -- highly intelligent, savvy, and credentialed people, mind you; many of them T1 MBAs with 5+ years at McKinsey or Goldman, etc. -- everyone takes marketing for granted. "If we build it, and we build it here, they will come" seems to be the mantra. This is a horrendously misguided assumption. Customer acquisition, retention, and growth should be the most important parts of your businesses in the early stages and even in the pre-planning stages. Without customers, you will not earn cash, and when you run out of cash, your business will die. It seems like a simple enough concept, but nobody takes it seriously until it's too late.
I guess what I'm saying is that experience, or lack thereof, plays an enormous role. And how many people out there are willing to invest their life savings into two, or even three, failed startups before they've built the knowledge base sufficient to succeed with their next one?
I've known guys with all the brains and passion but who failed because they over-spent at start up and dried up their cash flow. On the other hand I've known people whose attention to detail bordered on maniacal, but when it came to actually selling their product they were crap.
In my experience, 99 people out of 100 fail at the latter part. Overspending is a big problem, but is really just a symptom and not a cause of failure. The cause of failure is always
, at its core, that the business ran out of money. And you don't run out of money solely because you've spent it all (unless you're an idiot, I guess). You run out of money because you did not have enough money to survive the ramp-up to breakeven or
because that ramp-up was never going to happen, for lack of customers.
People wanting to start businesses should think of their seed money as a timer. Find out the increments at which your timer ticks. Is it days? Is it weeks? Is it months? You're on a race against this timer. Your goal is to get to breakeven (and beyond) before the timer counts down to zero. Stretching your dollars and being frugal helps slow down the timer. Good marketing/sales helps you speed up while the timer maintains its current speed. These are the two levers you work with: slowing the timer and accelerating yourself. But sooner or later, the timer will win if you can't start making money.