Part three: The one thing you need to create a successful start-up.

Misleading sayings

Regardless of the origin of the saying “the more I practice, the luckier I get” or “the harder I work, the luckier I get” I truly hate it. Whether it is a modern sound-bite or a butchery of ancient proverb, I wholeheartedly refute it. Don’t use it in your start-up.

Why? 

Well for a start it is, by definition, utter rubbish. Luck is “success or failure brought by chance rather than through one’s own actions”

True luck has absolutely nothing to do with how talented you are, what you do, how you do it or the decisions you make, by definition. True luck exists, but is outside of your control.

Success

There are many things you can do to maximise your chances for success (in creating a start-up or growing a business, for example). There are also many things you can do to minimise risks of both known and unknown threats to your success.  But there remain things totally out of your control or influence upon which success depends.

Last week I discussed two of the three most important things you need to create a successful start-up (You can find them at http://tinnoco.com/ under News). Later I will go on to explain why I talked exclusively about start-ups rather than business in general when I talk about The Business Capacitor. 

To maximise your chances for success as a startup you need a great team and customers.

A great team can create, recreate, pivot, flip, destroy and rebuild the business model and plan with ease and speed in order to find customers. 

Conversely finding customers with known or unknown, unmet needs for which they are willing to pay to have solved in a way that enables you to create and grow a profitable, sustainable, scalable business will lead to success on its own. However without a great team the chances of maintaining that success are massively reduced.

To minimise the risks there are a huge range of things you can do. If you be interested in hearing about them [do tell me], they might become the subjects of future posts.

Luck – it is all down to the throw of the dice

Many years ago I went to talks by successful entrepreneurs. Some of whom would talk about their ability, how they alone saw the potential of an invention, how they created a new burgeoning market, how they overcame this or that adversity to become the multimillionaire they now were.

With skill and determination success was, it seemed, certain.

Many years later when I hear these people talk, particularly those who have gone on to try to be successful serial entrepreneurs, the story is vastly different. Not only is it now more customer focused rather than product focused – “find the need” not “invent a gizmo”, but they all, every one of them, talk about luck and the importance of having enough luck.  Perhaps the saying should be “I was increasingly lucky, until it turned bad.”

However even with a great team, clearly defined, eager customers and all the many risks reduced to below the level you believe they could cause failure, there remains the element of luck – totally out of your control, with no regard for how prepared you are or how much you deserve to succeed. 

Take two nominally identical companies, one closing a deal for investment in early 2000, the other later that year. Imagine they served the same market, could coexist as competitors healthily and produce great financial returns for the investors. 

If everything was in your control as the founders of either of these companies, if “the more I practice, the luckier I get” held true, both companies would be invested in, grow, employ, contribute to their country’s GDP and deliver rich founders and investors.

However happening at the same time, in an entirely separate business world, the bursting of the dot-com bubble would mean that the first company did have this glowing future, but for the second company their investors had disappeared into the wind and with them, all the hopes and dreams of the founders of that second company would be crushed. They were simply unlucky.

The Business Capacitor

In business you can beat luck….

So far I have talked specifically about start-up companies even though many of the points I raise apply strongly to companies of any size. Why? 

Because start-ups have the most meagre Business Capacitor.

In electronics a capacitor is a small component that is a massive store of electrical energy that drives the circuit.

In a similar fashion, the Business Capacitor is the store of the life force of a company. Cash is the most prevalent constituent here, though the network and influence of the board members does make up an important slice, as does reputation, brand, customer-loyalty, market traction and the many other aspects associated with business success  of established companies. 

The larger the Business Capacitor is, the longer you can weather not only the storms created by bad luck, but also damage created by poor teams or mismatches between customer and product.For a company that has been going for decades that has massive coffers filled with the gold of previous success, it can do so for many years. You can see examples of this everywhere you look.

For the start-up, in stark contrast, the Business Capacitor is as good as empty. One piece of bad luck intersecting with the company is all it takes to potentially vaporise it.

Perhaps a case of “the larger my cash reserve, the luckier I am” is the real, inescapable truism.

The next article to look out for will be titled “Business Leaders Handbook #4: The Customer Need”. Moving away from focusing on start-ups, it will be as applicable for start-ups and scale-ups as for established companies and international brands.

In closing, I wish you luck!

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