Becoming an entrepreneur is easier than ever. In the U.S., more than 600,000 new businesses are created each year. Sadly, about half of all companies go under before they turn 5-years old. To beat the odds, you need to think differently about what it means to run a profitable enterprise. Simply starting a website, creating your first product or getting a trademark is not enough. Fortunately, the secrets to success are not all that complicated.
Here are three quick tips to help you validate, pivot and grow your next startup.
1. Validate: Determine if the market exists.
To know whether your idea will work, first promote a landing page and invest in product development later.
Last year, serial entrepreneur and marketing expert Noah Kagan challenged himself to launch a business and earn $1,000 in under 24 hours. Kagan wanted to prove to so-called “wantpreneurs” that “there’s no reason you can’t start your business today.”
At the end of the challenge, Sumo Jerky was born. With $3,030 in sales with a cool $1,135 in profit, Kagan surprised the naysayers. Using just a domain, a newly crafted landing page, and a lot of hustle, Kagan built a profitable startup before he even produced his first product.
Other entrepreneurs can mimic his approach by brainstorming business ideas, selecting one or two to pursue, then developing a quick and easy landing page to measure consumer interest. Next, spend a few hundred dollars in paid advertising (on Facebook, Twitter, Google, etc.) to drive leads. Once you’ve validated your idea (either through a large-enough email list or product pre-orders), invest in delivering the goods or services you promised.
2. Pivot: It takes courage to change.
Albert Einstein is famously attributed with saying, “The definition of insanity is trying the same thing over and over and expecting a different result.”
There will likely come a point when you need to give up on your original idea. When your business plateaus, be prepared to move on. Entrepreneurs can be stubborn but to be successful, you need to muster up the courage to drop your first vision to pursue something better.
In an interview with Business News Daily, James Reinhart, CEO of thredUP, shared nine steps for a seamless pivot:
List your company’s strengths & weaknesses.
Initiate a company-wide conversation.
Call out threats and opportunities.
Consider alternative business ideas.
Think about the implications of each option.
Earn your team’s support.
Convince customers this is the right thing.
Strategize and execute your plan.
Stay lean and flexible
Remember that failure is always an option. Sometimes, it is the most noble one. Entrepreneurs who can shift their priorities to tackle bigger and better challenges have a greater chance of building hugely successful businesses. Companies that stubbornly do the same thing over and over again become irrelevant.
3. Grow: Agonize over opportunity cost.
Often, the smartest business decision seems reckless. That is because the best entrepreneurs regularly divert resources away from a “good thing" to pursue initiatives they believe will be a game-changer for their company.
If you could spend $100 on ads and generate $100 in profit, why wouldn’t you? Most people would and, in fact, they’d try to spend $100,000 to earn an extra $100,000. It’s practical and it’s profitable. But strong leaders realize when a "good thing" can be even better. They think about the long-term opportunity and invest their money in ways that will produce the highest return possible.
When we launched Amerisleep, it was a retail operation with lots of local customers and healthy margins. Six months after we introduced our ecommerce site, we closed our flagship location even though our revenues were strong and the store was profitable. Believing that the Internet would revolutionize the way people shopped, we focused exclusively on perfecting the customer experience online. At the time, other business owners mocked us for taking such a big risk. Looking back, it was one of the best decisions we ever made. We couldn’t have scaled as quickly as we did if we were locked into multi-year leases for our showrooms.
For us to grow faster, we had to be willing to sacrifice stability and short-term gain to free up cash so we could invest heavily in ecommerce. Although retail was profitable, it was a costly distraction. To scale a massive business, entrepreneurs need to carefully consider their opportunity costs and spend every dollar wisely.