Nowadays, we are constantly hearing the term ‘start-ups’ along with the numerous success stories of some of these enterprises. It is however a relatively new term and quite a few people may not be aware of what a startup is.
So, What Is a Start-up?
- A start-up is a new company that focuses on a product or service for which the founders believe there is a market.
- It can be founded by one or more persons.
- Start-ups typically focus on a new, never before seen product. Or alternatively, they might also look to improve drastically on an existing one.
- Because of this, they are capable of changing the way a particular business has been done for many years. This has rightly earned them the name disruptors.
- Start-ups look to quickly build and improve their products. For this they employ what is known as iteration in which they keep modifying their products based on feedback.
- They also use what is known as a minimal viable product (MVP). An MVP is the most basic form of the product that is continually improved upon, till it is ready for the market.
- Start-ups also look to expand their customer base fast. This is to help them establish themselves in the market quickly so that they can increase their revenue to invest in their product.
- Start-ups are usually funded by the founders themselves and typically need outside investment to take their operations further.
- They might look to friends and family for funding; they might also go in for loans, venture capitalists or crowd funding.
- An important point to remember is that as exciting as start-ups are, the possibility of failure is also quite high.
Start-ups – Their Impact
What is the fuss around start-ups all about? How do they actually benefit the society?
- Start-ups might be small companies initially, but their contribution to the economy is quite substantial.
- They create much needed jobs and in a country like India where unemployment and underemployment are big concerns, opening up of new job venues is always welcome.
- When more people find employment, the economy automatically improves.
- Start-ups also create competition thus inducing the need to be innovative to stay relevant. They push people to make something that is already good into something even better. This translates into a better experience for the customers.
Nowadays, more and more youngsters prefer starting their journey into the corporate world with start-ups. There are quite a few reasons for this.
- For those who are employed in a start-up, the opportunities they come across are more. As a start-up cannot afford too many employees, multi-tasking is essential. This exposes employees to new experiences and helps them learn more.
- Working hours are usually flexible and new ideas are encouraged and welcomed.
- As employees are encouraged to be innovative, their superiors give them considerable freedom at the work place.
- Such an atmosphere also affords employees tremendous job satisfaction and they automatically work better.
However, this is not to imply that working for start-ups has only benefits with no drawbacks.
- As already mentioned, start-ups also have a high risk of folding up and hence the employees do not enjoy the job security they would with bigger organizations.
- Multitasking can also translate to increased working hours and the possibility of employee burnout.
- During the initial days of establishing the start-up, holidays might be difficult to come across as the company is still finding its footing. Sometimes, the pay too will not be commensurate with the work.
Factors Start-up Founders Should Consider
With the growth in technology, a global market and an encouraging start-up ecosystem, more and more people are considering the possibility of their own start-up. While this brave move is to be welcomed, people should also do their homework and understand what they are getting into.
A great deal of planning goes into the launch of a start-up and there are a number of factors the founders need to have the answers to.
Start with Market Research
Study the market carefully. Learn about the competitors in the field, their customers and also who your possible customers might be.
Have a Business Plan
This forms the foundation of the business. A proper business plan shapes the business, says how it will be run and gives the future possibilities for the business. A well-laid business plan can also attract investors to a business.
Having a thorough plan will count for nothing if its execution is flawed. The timing of execution is important too and it is important to take into account current market conditions before putting the plan into action.
Nothing is possible without financing and the business plan also has to state where the money to run the business will come from. Is it going to be financed by the founder(s)?If not, where will the money be borrowed from?
What kind of store does the start-up need? Does it actually need a physical store or will just an online presence do? When it comes to physical stores, the owners have to figure out whether they need a proper store accessible to customers or just a home office. All this will influence the investment the start-up will need. The answers to these questions depend on the type of product/service on offer.
Make sure to package the product well. As superficial as it may sound, branding does play a crucial role in the success of a product. Many a times, inferior but well-marketed products have ended up doing better than a good product that wasn’t branded properly.
Leadership is important anywhere but more so in start-ups. Leaders set the tone for the company’s work ethic. Start-ups need enthusiastic leaders who are dynamic and inspiring. An uninspiring leader could seriously impact the performance of the employees.
We cannot plan for everything. Something unexpected and unplanned for is going to pop up sometime which will be a true test for the start-up. Having a crisis leadership team which reviews all possible risks, finds out the impact on the business and comes up with a response will be useful. Being prepared for risks will help in handling them better.