Startup Entrepreneurs Beware Of These Pitfalls
Entrepreneurs are usually aware of the significance of the idea, timing, market and capital, however what is more important is ‘sizing them up rightly’. This articles points out why it is important to get them right.
Sizing up the idea: Once you hit on an idea discuss it with people who can give expert feedback. Most often entrepreneurs discuss ideas only with their family and friends and based on such discussions bang goes their idea or the idea ultimately gets the bang for their bucks. Instead, gather a professional team of advisors, whose expertise can be of use along the road, when the venture takes shape as well. While your friends and family provide you feedback based on experience and hearsays the expert panel will be able to assess the potential of the idea more professionally by citing examples of why a similar idea succeeded or failed, what can be improvised, what should be trimmed etc . But spending too much time on sizing up ideas may delay a potentially successful product or service to a market or may result in waste of precious time on a not-so-good idea. So, when you get the gut feeling, take the leap of faith.
Sizing up the time: Timing is crucial in business, the launch of a new product service or a campaign must be timed appropriately. A launch that is too early may find few or no takers and a launch that is too late will make you one among many. Pioneers always have a first mover advantage but leaping into a market which is not yet ready for the services will be fatal. An e-learning application may become a surefire hit in a developed market where the IT infrastructure is superb and adaptation is widespread but e-learning applications are sparse. Launching the application in a market where the connections are slow, IT adaptation is nascent, networking is expensive will prove to be a recipe for failure. At the same time launching the application in a market which is replete with similar products will prove to be costlier, because however strong your USP is, you have to shout really loud to be heard in the milieu.
Sizing up the market: Start-ups must estimate the market size accurately; dealing with a market that is too small will fizzle out the business too quickly. Too large a market will make it a daunting task for a small start-up to effectively capitalize on. Niche markets are attractive only if the market value is high and the competition is small or totally absent. Large markets are attractive but if you are flying solo without proper partners such as a network of distributors or representative dealers, it will take too long a time to reach out to the market and it will drain the resources fast before you make any actual sales. So focus is very critical when you assess the size of the market.
Sizing up the capital: Startups that underestimate the required capital often hit the wall soon while entrepreneurs who overcapitalize their venture tend to spend the valuable resource on image building exercises that bring too little results. When the resource is scarce the management has a tendency to scrutinize more closely and spend it more judiciously. Lavish spending and paying more than what is worth will ultimately dry up the resources leading to pandemonium among investors who become restless to reap the result at the same speed at which the funds flew out of the coffers. Similarly a myopic approach when estimating the costs involved will lead to under financing a venture which will severely impact the momentum of the company. The working capital should take into consideration all possible contingencies and adequately cover them, otherwise too much of penny-pinching will eventually lead to compromise in quality of everything right from raw materials, personnel to marketing campaigns which may ultimately doom the venture.
Sizing up the price: Pricing the product and service optimally is essential. It should not be too low that the productivity of the company comes at a high cost and it should not be too high that potential customers turn away from the product and service. A product or service that is priced incredibly low from that of the competition may give an impression of substandard quality. Contrarily a product that is priced significantly higher than the competition will end up promoting the competition on the retail racks. So go with the market and make the prices in sync and also ensure the product or service offering delivers the due value for that price. If you are new and there is no base for comparison, do not get tempted to skim the cream of the market, you may not find that many takers. At the same time, do not price yourself too low that you cannot sustain the promise. Optimum is the watchword. Price cannot be changed too frequently, especially the upward revisions, therefore provide ample room for inflations, supply crunches etc., while arriving at a price for your product or service.
For startups it is important to hit the ground running, therefore above aspects must be closely analyzed and done right at the outset, so focusing your thought process on these issues are more crucial. Singapore offers a great business environment for startup entrepreneurs. Leave the process of business incorporation in Singapore and other legalities to the professionals and focus instead on building the core competencies of your business venture.