By Juliana Jems
While you may not turn out to be the next Steve Jobs or Bill Gates who built their empires with little more than a great idea and an even greater drive to succeed, you might be able to achieve success quickly and join an elite list of startups that are now valued at $1 billion or more despite being founded no earlier than 2012.
Six of these companies (Pivotal, Zenefits, Flatiron Health, Uptake Technologies, Illumio, and Cylance) develop software for a wide variety of applications such as computer security, analytics in heavy industries, health, human resources, and even further software developments for old-school companies.
So how did these private tech companies achieve such a mean feat of surviving and thriving as small fishes in a very big pond where large fishes such as Google, Apple, Samsung, Microsoft, Facebook, and IBM, just to name a few, continue to patrol the waters ready to gobble up the small fry? There’s really no single answer, but all of them have followed these key steps when they were just starting that enabled their startup to reach success.
1. Establish Your Value Proposition
It does not matter if your startup is offering a product or service, what matters is, will people see it as something that will be beneficial to them? This is the essence of a value proposition, a clear statement about what your product can do for customers—will it solve their problem or improve their situation, and why is it better than the competition? As a startup, your company will have to work harder to come up with a better value proposition. Can you offer free delivery? Will you be available even after office hours? People must be persuaded that they really need what you have to offer.
2. Identify Your Ideal Customer/Market
Steve Jobs once famously said, “Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” He has been proven right when his iPhone became a hit at a time when Nokia and Blackberry were lording over the cellular phone business. Jobs realized that people were ready for an all-in-one gadget, and he delivered them the product they didn’t know they wanted. The rest, as they say, is history.
But how do you identify your target market? It starts with what you offer and the problem it’s designed to solve. Will it be homeowners looking to sell their houses as what Opendoor identified, and then bet on the fact that they would take a guaranteed sale over a higher price? Their gamble paid off and they have become a $1.1 billion company in just three years of existence. To know your customer like the palm of your hand is half the battle won.
3. Define Your Key Performance Indicators
Simply put, a KPI tells you if your business is doing good or bad, so that choosing relevant KPIs can mean the difference between a startup going further or folding up. One important KPI to set and monitor is current ratio, which shows your company’s ability to pay all short-term financial obligations. A business doing well will have a high current ratio while something in the negative should set off alarm bells.
4. Innovate Your Business Revenue Streams
Basically, a revenue stream is the “how” money is earned by your company. Revenue streams can be generated in many different ways. Usually, it is through the sale of physical products (customer pays in cash and they get the product for them to use how they see fit), usage fee (a fee is paid for a specific service like water, phone, etc.), subscription fee (customer pays once a month or yearly for gym membership or magazines), and others. The point is to have at least one innovative revenue stream to earn money like free delivery of products if customer buys a certain amount.
5. Focus on Your Strengths as a Company/Business
Have you ever wondered why a lot of restaurants heavily promote their “specialties?” It’s because they want to differentiate themselves from the competition by offering what they know they can do best, whether it’s an appetizer, an entree, or dessert. Of course they have other foods on the menu, but people will go to their place because of their specialty.
A startup business is no different. You may have different products in the pipeline, but if you are most confident about one product or service, then you must focus your resources and attention to it above everything else so that you can deliver the best product to market. It’s how KFC became the second-largest restaurant chain in the world, because Colonel Sanders only sold fried chickens when he first started out.
6. Invest in Good Talent/Employees with (High Levels) of Expertise
Being a startup doesn’t mean you have to settle for novice employees, too. On the contrary, you must be aiming to hire talented people or those with enough expertise already to help your company take off. But how do you entice them to join you when you know your budget is still limited when it comes to salaries?
You could start by coming up with a mission and vision that will excite them. There’s an oft-repeated anecdote of how Steve Jobs convinced Pepsi executive John Scully to join a little startup company called Apple by asking this now legendary question: “Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”
You can also market your company through social media, painting a work environment that, while not as great as Google or Pixar, is something that even experienced employees looking for another job will take notice. Of course, make sure you follow through with your promise, or you will lose those employees at a moment’s notice.
7. Check Out the Competition
In The Art of War, Sun Tzu wrote, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” He also mentioned something about keeping your friends close and your enemies closer. Sun Tzu’s idea is very much applicable in the business world, where there’s usually cutthroat competition (sometimes, literally). By doing an analysis of the competition, you will know what is working and what is not, their strengths and weaknesses vis-à-vis yours, and you will have valuable information without spending on research and development.
These key steps will be of tremendous help to get your company off and running. But once that happens, the next question is, “What now?” Will you be content with what you have achieved, or will you be shooting for the next level? Your next move can be as simple as opening a retail branch or expanding your product range. Or it can be something else entirely that you just can’t put your finger on. In this case, you may want to consider using a product market expansion grid that will help you plan your next move.
But for now, stay focused on the immediate goal, follow the key steps outlined above, and your startup company may well be on its way to its own billion-dollar valuation in no time.