The modern epitome of the fact that startups fail is the dot com bubble (1994-2000). Not long enough ago to forget, but perhaps just long enough to ignore.
Do you remember how that in the mid-nineties there were scores of ‘investment-backed bright stars’ being launched into orbit almost continually, held by nothing other than our empty thoughts…
Why did markets crash this party?
We simply saw what seemed to be a new thing which promised the world – commerce through the internet.
They began backing anything that moved – they took no care for weighing up and simply piled in, just for the sake of it.
Common-sense was utterly forsaken.
We were being told more fantastical highs and persuaded that it could only go higher.
In a moment, it was all worth nothing & people who had poured in everything, lost it all overnight.
Because the vehicles that carried the promises were void.
Unfit for purpose and were NEVER ever going to come close to returning a single penny.
Their value upon which their stock was traded was based upon entirely false measures – flawed presumptions invented by and invested in the hasty.
Such dot com casualty companies were rotten at the roots and could never bear the fruits of profit…
Because what they offered lacked value. i.e. prospects were happy to stick with what they had, rather than exchange for what was offered.
- tons of money going in,
- no sales and massive capital stock,
- market sentiment flipped on its head,
- shareholders can’t sell what has become worthless,
- liquidation – selling off of assets at bargain basement prices,
- enormous losses to all involved
Pet.com was an investment vehicle which was purposed by its founders to become the n0.1 place online for Americans to buy any and every pet supply.
It launched in 1998 (Nov) and crashed in 2000 (Nov) having spent over $70million on marketing.
How and why did Pet.com fail?
According to this article, The Failure of Pets.com, posted on the University of Kentucky website:
“Many consumers just preferred to shop at local discount stores such as the grocery stores where they would be shopping for food anyway. Pets.com as well as the other online pet supplies firms failed to offer customers a better alternative to what they already had. Shopping online for these kinds of products was not any more convenient for them than shopping at an actual retail store. ” – courtesy of The University of Kentucky
A costly oversight.
It always pays to think things through.
As for me…
…self admittedly, the failure of startups is a subject which I am probably most qualified to speak on.
Over the last 8 years I have attempted to launch many an online start-up business venture…
…and largely, they have all failed.
Whilst gaining several successes on behalf of my clients projects as an independent consultant…
I have found making the transition from freelance income dependence to business start-up earnings very elusive.
Time and time again – having put in so much time, effort, strategy, smarts and engineering – I was left without any reward for my investment.
I can’t say such ventures completely lacked promise – for some it was impressive web traffic, others had abundant lead conversion, some daily list subscriptions – but when it came down to earnings:
Not a penny in ROI.
Confronted with this serial underachievement (no matter what I seemed to do) I decided to conduct a deep-dive analysis into the detail. I needed to ask some tough questions to prevent even further disappointement.
I wanted to separate out exactly what I was doing wrong. Then it would have almost been worth the failure. I felt that if at the least I could do this…
…then I would have a good chance of putting it right.
So, I sat down and combed through the detail of each attempt &…
…then it hit me…
…what I came up with was so simple and universal, I figured there must be great value in sharing it with you.
So, here it is…
My 7 step evaluation technique for predicting startup failure
Ask yourself the following 7 questions honestly…
…if your startup fails to satisfy any of them fully – then by my experience at least, you might need to revisit your strategy:
- Who does this startup business serve?
- describe them accurately – the same line of questioning applies for b2b or b2c
- use modifiers for location, specialty etc. if needs be
- What is their problem?
- don’t use your imagination here – make it real life and substantial
- lots of exploratory primary research material will be a priceless input at this stage
- How much does their problem really cost them?
- verify the figures against genuine, substantive fact
- consider both the long and short term cost
- qualitative and quantitative cost – sometimes the unidentifiable cost can be more of a motivator for customers than the obvious monetary cost
- Can they afford not to act?
- detail carefully the consequences that would be faced by a prospect should they not act to solve their problem
- this is a CRITICAL question & justification for your startup
- it doesn’t all hinge on this question in my opinion, but if you bypass this – you lose the leverage you need prize prospects out of their entrenched inertia and into initiating action to procure a solution
- in any sales conversation with a prospect either personally or remotely via web pages – this urgency driver MUST be used to best effect for pursuading prospects to ‘do something about it today’
- What are the alternatives?
- know where else your prospect
can gowill go to solve their problem
- understand how you line up against these alternatives (benefit vs. cost)
- make sure you make your offer worthwhile at the least – by a absolute winner and no-brainer at best
- know where else your prospect
- How is your business a feasible, low risk, convenient, attractive & profitable option?
- once committed, is a prospective customer likely to find out that it’s actually not a feasible trade after all
- cost effectiveness is a massive driver…answering the question: “can I get this or better elsewhere for cheaper?”
- although your solution might be cost effective, are customers exposed to other (qualitative or quantitative) losses should they invest with you ?
- How can I rationally dispel all objections?
- Line up a list of most common objections that prospects might still have (complete with your rebuttals for each challenge) despite your pitch holding up to questions 1-6
- produce knowledgeable scripted responses to cover all bases
- exhaust all avenues for cornering off doubtful trains of thought from prospects
Whilst startups fail: test yours to make sure it doesn’t
I reckon if your startup can comfortably ride the challenge of these 7 tackles, then you’ve got enough robustness to push on toward the goal line with real intent.
The key thing when running this trial however, is honesty. Don’t fudge the task at hand with looking the other way and allowing your idea to break through regardless.
If you do, you’ll be deceiving yourself out of genuine success.