According to the Small Business Administration, the majority of all businesses will fail in less than five years. The largest percentage of failures occurs in year one itself. That means that these startups could not create a sustainable business model before they ran out of resources, time, and money. Do you think if they had more time and money, it would have increased their odds of success?
In designing the lean startup methodology, Eric Ries defines the concept of the Minimum Viable Product. An MVP is totally focused on identifying the right product and the right business model. But is that enough? Although an MVP is an important part of the process, the end goal is not a successful product but a sustainable company.
How many times do you meet an entrepreneur or team that has a very successful product and they clearly get the customer need, but they struggle to create a sustainable company? Why? Because startups are comprised of people and not products. It is the people who failed, not the product. When people are healthy, the business is healthy, and when the business is healthy, customers thrive.
Hence we should extend our thoughts to go beyond thinking MVP into thinking MSC – a minimum sustainable company. The method of building an MSC can be boiled down to building four core areas: entrepreneur (who), culture (why), systems (how), and brand (what). It will take more than a blog post to understand it all, but here is a brief overview.
Businesses never fail. It is always the entrepreneur who does. If you as an entrepreneur are not internally ready to be successful, no matter what you do externally, it is always going to be hard. Hence preparing the entrepreneur internally is the first step in creating a Minimum Sustainable Company. One key piece of advice to entrepreneurs is to know thyself. When you know your purpose and why you do what you do, this fuels your alignment with your startup.
Although generating a profit is a requirement, a team built around purpose and passion will thrive. If you build and attract a team of people who resonate with your “why,” they will join forces with you for a purpose. This will create a sustainable business because the team will always be willing to walk the extra mile.
As an entrepreneur, you must also realize that your team is your biggest asset. You are nothing without them, and you are here to serve them.
We buy on emotions; that is a biological fact. We then support our emotional decisions with our logic. Your brand tells your story and your promise to your customer. When they understand why you do what you do, you create a company like Apple. Apple stands for challenging the status quo. What do you stand for?
Your “what” can give you some initial momentum, but, as with a lot of startups, it can fizzle out. However, if you focus on building a tribe who resonates with your “why,” you are building high customer loyalty and exponentially increasing the odds of your success to form a Minimum Sustainable Company.
The systems component is about execution, integration, and implementation. The process and structure set the stage for building your MVP.
Here, an important area to focus on is your runway. A Runway is simply defined as the time and money you have before you have to call it quits. Can you build something that can start making money immediately? Can you sell before you build? Can you generate income or get funded to support your endeavor for longer? These are the questions you continually answer when you are conscious about stretching your runway. It even helps you make decisions for features to include in the MVP. You have to keep a continual check on your runway, ensuring you always have more time to go as you validate your MVP.
Focus on building a Minimum Sustainable Company, and you are already increasing the odds of your success dramatically.
Guest author Jinesh Parekh is the founder of Idyllic Software, a Ruby on Rails development shop which exclusively works as technical partners with startups and small businesses. He has 10+ years of software development experience working with startups and large businesses in Chicago. Having realized the need for a reliable technical partner that not only delivers software, but helps build a business, he founded Idyllic Software. Apart from his business, Jinesh proactively mentors students and entrepreneurs in their hero’s journey as time permits, thus giving back to the community in his own little way. You can reach out to Jinesh at jparekh [at] idyllic-software [dot] com.