The Formula for Success
By Julie King | July 31, 2004
Many businesses fail, yet every once in a while a new business is started that will achieve almost mythical success. Venture capitalist and angel investors are always looking for these emerging businesses or 'gazelles'. It may come as a surprise to learn that the human element - not the ideas - is the primary thing that investors monitor as they look for their next investment company.
Execution is the key.
Most entrepreneurs are goal oriented. A key difference with successful entrepreneurs is that they are adept at filtering through ideas; they have the ability to move forward without becoming distracted by emerging opportunities and markets. Ultimately this helps them deliver a return faster.
"What is going to make a difference ultimately is the talent and getting the resources and information that they need so that they can then execute properly," says Collins. "Everyone has ideas, but you have to filter through all of the ideas, you have to filter through all of the noise that comes with them and really sit down and say 'okay, with my resources and my money what are the things that I should execute on that are going to deliver the fastest return and get me towards our end goals the quickest?'".
Focus and determination are a big part of that formula.
Entrepreneurs tend to be intellectual people who tend to get bored quickly. The very characteristic that gives entrepreneurs their drive can also make it difficult for them to get through the mundane aspects of taking their ideas through to completion. At the last mile of building a business boredom always comes in. The entrepreneur knows exactly what needs to be done, but they lose enthusiasm and passion as this stage is not exciting. This is where the successful entrepreneurs outpace their peers, as they have the determination and focus needed to maintain their performance when the work becomes boring.
Passion provides momentum.
Many start-ups, focused on what they believe to be a unique idea, will think that they have no competitors. But if you look you will find competitors - they may be doing things a bit differently but they will exist.
"Ultimately, if you are going to succeed you have to like what you are doing in the business," says Collins.
Passion helps an entrepreneur maintain focus while doing the 'boring' work and this focus helps the entrepreneur build a better business.
Communication with the market a must.
It is not enough to do things better - the market must also have the perception that you are doing things better. Successful entrepreneurs understand how to develop this perception in the marketplace.
"Entrepreneurs always believe that they are doing it better or differently. Maybe they are, but to the market it doesn't matter," says Collins. "You as the entrepreneur can think that you are doing it better, but does the market think you are doing it better? Can you communicate it?"
Successful entrepreneurs know how to sell to the market.
One company that Collins evaluated was pursuing a fairly saturated service-based market. They were doing nothing unique, but what they were doing they were doing well. The company had a well laid-out plan that they kept up to date. Of equal importance, it was clear that they understood how to sell to their market.
"Every business and solution has to address business pain. Business people or clients are much quicker to spend money to solve pain than they are to have luxury. They will always spend money first on pain. In luxuries you are always having to educate the client in why they need it whereas with pain they know why they need it already."
Vision and the ability to build relationships are other critical components of selling to the market. You need to show your customers that you have a clear vision - you understand who you are, the market you serve and where your company is going. This way you are selling your product or services based on a relationship of trust and understanding, rather than how the features of your product or service compare to your competitors.
Money is used to do things bigger, better, faster
Some small companies assume that if they had more money in the bank they could build their business more effectively. However, that's not necessarily the case. When you take money from a bank or investor you can expect to find yourself under a microscope. Also, if you have more money but are not profitable you create the possibility for even bigger failure.
Understanding the business fundamentals that will enable you to achieve profitability - without getting additional investment - is an important aspect of building a successful company.
Star entrepreneurs are able to leverage what they have to prove out the business fundamentals. Once they have proven their core model, they may decide to look for additional money so that they can do things bigger, faster, and better.