awareness

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Internet Start Up Mistakes and How to Avoid Them

December 13, 2009 in Bootstrapping as Method, Startup Challenges | No comments

I launched my first web business 2 years ago, and just like that the venture flopped. Resurrecting the whole thing was pointless, and I spent a fair amount of time reflecting on what went wrong, what went right, and why it was doomed to failure from the beginning. Since that time, I have met many people in the same boat, or who were heading in that direction. To help prevent others from facing the same situation, I compiled a list of the main mistakes I made and see others making, and some tips on how to avoid them.

1) Not seriously writing a business plan

Many first time entrepreneurs and even some long-term entrepreneurs make this mistake. Everything you read online will suggest writing a business plan, but many people take this step for granted. Perhaps it is hubris that they have skills others do not, and thus are bound for success with their great idea. The problem is that the idea may not be so great, or the execution of the idea may fail. The business plan forces you to consider this carefully and honestly, to assess if it will be a successful venture, and what your chances of success are.

This is an easily avoidable mistake to make. Don’t just commit to writing a business plan, but commit to writing a business plan which is honest, as harsh as it needs to be, and identifies as many risks as possible. The most critical section for new web startups is going to be the financial section and the marketing section. For finance, ask yourself very carefully about the business model, and realize that the vast majority of web businesses do not make money, even for very large sites. Is your model  a good business model? How many users will you need to turn a reasonable profit? What are your costs per user and revenue per user likely to be? How many other businesses have turned a profit using this model, and how long did it take them? Did those businesses have success factors you lack? There are many such questions you should carefully analyze and write down a formal response to, even if no one will see it but the internal team.

Secondly, marketing. The question I like to ask is “is this a <major blog in your niche> worthy story?” Would they write an entire story dedicated to your product, or not? If the answer is no, you may want to seriously consider if your product has a good potential of success. The second piece of the marketing section  is market research, and really understanding the ins and outs of your competition. On the web, every other site is a competitor, not only in your own niche. If someone would rather be on facebook then your page, they will be. And finally, a good knowledge of other similar sites is critical. What are their competitive advantages? Why will you be able to siphon off their users to your own site? Is your site unique enough or superior enough to cause people to change their habits? To avoid failure, be realistic, even if the answers are harsh.

2) The Me Too Syndrome

I constantly talk to web entrepreneurs who fall into this trap. They see a major success (Some bloggers, twitter, and facebook come to mind) and then say ‘if them, why not me?’ They set out to create an also-ran product with nearly all the same features. The problem is, even if you build something which is fundamentally better then the competition, you still have to make users understand that and accept it. This works sometimes, but is the rare exception and not the rule. Generally, if you are entering a competitive space with a successful competitor, go find a new business.

3) The ‘If you build it they will come’ Fallacy

Some people have the assumption that building something means people want to use it, so they will. I actually made this same assumption when I started my first web business a few years back – thinking that there was search volume for my product, it was well designed, and so people would naturally start to use it. In reality, a business has to build out a customer base through word of mouth, advertising, brand building, and public relations. You can’t sit around for Googlers to find you. They may, but they also may not.

To avoid this, always assume that no user will find your site unless you personally direct them to it. This will help you when considering the proper marketing strategy. Building up the business case and the marketing plan in your business plan will help here. Essentially, you will need to help users to find you. Having a great product only keeps users, it doesn’t generate them.

4) The design trap

I like good design. I am not so good at creating it. My strength lies in the more technical and business oriented areas of startups, not in overall product design or graphical design. Although this is one of my weaknesses, I realize that design is a very important piece of product development. The trap is when the design becomes the product, or when the design is never ending. In the first case, a really cool designed product has forgotten about the utility of the product for the consumer. Who wants a really nice looking lump? In the second, a form of scope creep, continuous refinements in the design space can leave a product less polished, or delay delivery far too long leading to high cost.

I see a lot of web startups who tweak and tweak without ever finishing. I would recommend setting the design early on, and then going through several rounds of refinement, but leave a limit up front, and only exceed it in extreme circumstances. Once you are successful, you can always complete a redesign.

5) Product worthiness

Is your product really something other people want a lot of? Really? Is it iPod good? If you can’t honestly answer yes to this question, then what are you really doing? Perhaps just starting a business without a good product. This, along with the also ran products, is one of the main reasons I have seen many new startups fail.

A friend of mine nailed it one day when we were talking about mobile apps. He said he sees a lot of applications on the iPhone which are ok, but not great. The truly great ones come about when an existing user searches for an app she really wants, but can’t find it, so designs her own, and designs it well. This leads naturally into…

6) Filling a gap

As a corollary from the previous section, does your product fill a gap in your customers needs? If it does not, then why would a customer pay for your product? Even if your product is free, if a customer wouldn’t be willing to pay for it, you should evaluate the overall utility the business you are starting really has. Making sure your product fills a customer need is a basic part of product design, and should be considered before any significant capital has been spent, whether in time or money.

Also consider the life space that your business will occupy and how that will affect price points, even for free services. Utility applications and web sites generally have a higher price point, because they can actually improve your users life. Entertainment or social applications are more take or leave, since they are unlikely to materially improve your users life.

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A Meditation on the Subway

November 30, 2009 in Career Satisfaction, Personal | No comments

This weekend, I found myself alone in a central subway station. I had a lot of time to kill – a couple of hours before I would be leaving the trains. I played around with my phone for a little bit, watched people walk by, and purchased a bottle of water. Then I sat on a bench, pulled my legs into a cross-legged seated position, and began to meditate. It was a challenge at first, what with people coming and going, sitting near me or standing and waiting, screeching trains every few minutes, the nonstop bustle of a major city. Still, I was able to slowly follow my breath into the center of my body, and push away the sights and sounds around me, finding happiness. The time passed, and I was content.

It was later that I realized that this story makes a good metaphor for life. The people and trains that parade through the subway like clockwork mirror the emotions and events in our own lives. If we allow them, they will happily distract us for our entire lives. Only when we are forced to do we stop and look inside… otherwise we are just another blank face in the crowd, waiting for our train to come.

Sometimes it’s hard for me to take time out. I work a lot, and necessarily spend a lot of time moving from one place to another. Finding time to reflect on oneself is always difficult, but among the most rewarding things. When I was young, I would frequent the dark corners of my mind, and see what was hiding there. As I got older, this natural tendency towards thought led me to classic novels, meditation, and a propensity for long, solitary walks in the woods. Unfortunately, the more I see of the world, the harder it is to find time to reflect upon it. I continuously strive to escape the daily grind, which in modern society is a loose requirement for a satisfying life. I always want a unique, individual business to succeed so I can make optimal use of my time and increase my own awareness and happiness, but the workings of getting there leave little time along the way. The casualties of starting something new are many, and sometimes I playfully wonder if I should not just accept the everyday life most Americans enjoy, and jealously guard the petty hours left to me by world.

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Turn Every Opportunity Into A Business Opportunity

August 29, 2009 in Bootstrapping as Method | 2 comments

A few months ago I joined a local social club to relax and meet other people in the area. Before long, I had made a few friends, and we would occasionally meet up for dinner to relax and talk about our lives. One of the other members had been hatching a plan to make money off the stock market, and began talking about his ideas. Unfortunately, he had no finance or stock market experience, and I knew from my financial training and past experience that what he was proposing was almost guaranteed to lose money rather then make it. Still, I listened carefully, offered a few suggestions, and mentioned my financial background. Before long, he asked me to join a group he had formed to start this venture. I agreed, and have since been meeting with them regularly.

It may seem backwards to join a venture I am sure will fail. How could such a situation turn profitable? The other members are smart, motivated, and experts in their fields of programming, networking, data mining, and so on. Their downfall is only their lack of financial information, and nothing else. I know that little will come of this venture, but that doesn’t mean these relationships can’t be leveraged into partnerships in the future. If I had simply disregarded my friends ideas as a failure, I never would have met these talented people.

One of the keys to starting a small business without help from venture capital, banks, or your friends and families cash flow is to look for every opportunity, and leverage it. That doesn’t mean you should take the human aspect out of your relationships. I only suggest you might add more into the relationship then just a fun factor where you can.  In fact, some of my most rewarding long term relationships have come about when I have recognized beneficial qualities or skills in another, and they have seen the same in me. Many times, we have called on each other for advice, career counseling, or job leads, and we are each happy to lend a hand where we can.

So how can you start to evaluate every day occurrences for opportunities? Like most things, it starts with looking inside yourself. Getting to know your own strengths and weaknesses (and not the kind that we might state in a job interview, but the real “I’m scared of this thing inside of me so I’ll pretend I know everything and argue with anyone who says differently” kind of weakness). There are three main places to find long term opportunity: The people you interact with, the events you observe around you, and the random everyday happenings of life.

The people you interact with is an easy group to leverage and also the scenario I have spoken about already. The most frequently cited business use of those around you is the complementary skills and mentoring you can receive. I urge you to listen carefully when people around you talk of everyday things – to get a deeper understanding for human nature and emerging trends. Hearing that your best friend will stop shopping at store X may give you a clue that some kind of trend might be starting you hadn’t heard of. Likewise, if your friends are complaining about lacking something, this indicates a need unfulfilled. Perhaps a perfect business opportunity…?

The events you see around you can also be a powerful way to become aware of sudden trends and opportunities. When you do everyday things like going to the grocery store, commuting to work, or watching TV, keep your eyes and ears open. Often, we spend this time lost in the clouds of our mind, and hours could pass without our realizing it (Have you ever driven on autopilot?). You might miss a lot of interesting information that you would otherwise pick up. Keeping your mind alert to everything around you is critical.

Finally, taking advantage of random happenings in your life is one of the best ways to find opportunities you would not normally see. If your car runs out of gas in an unfamiliar place and you stop at a gas station you have never been to before, a chance has arrived for you to see things you have never before seen. As above, keep your eyes and ears open, and never let the unexpected put you in a foul or negative mood, which can blind you to opportunity, and drive strangers away without you realizing it.

In all, what I am really getting down to is awareness. If you are aware of yourself, others, and your surroundings, and open to the possibilities, you will suddenly find life is full of openings waiting for someone to come along and fill them with ideas. All you need to do is pick the one where you will be the happiest.

Now, all you have to do is practice, and watch.

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