Summarized by Saif Ali , President of Loupin Art
We live in an innovation-driven world. Start-up companies are everywhere, but the truth of the matter is that most start-ups fail and don’t make it past ten years. In Eric Riess’ book: The Lean Start-up, he outlines how to be a successful and long-lasting start-up company.
The first step is to understand how to run your start-up; you achieve this by understanding the following: Entrepreneurs are everywhere. They exist everywhere; you probably run into them on a daily basis.
The second thing to keep in mind is that Entrepreneurship is management; the goal of every start-up company is not to earn money, it’s to become a sustainable enterprise. The final thing to keep in mind is that start-ups are meant to learn and adapt as quickly as possible to their ever changing environment.
The next thing you need to do is build a customer archetype. A customer archetype or persona is knowing who your customers are; knowing their age, gender, certain preferences they have, how much money they have and what kind of products they like. All these things define who your customers are.
After you have successfully defined your customers you need to develop your ‘Minimum Viable Product’, which essentially is the best quality product you can create with the least amount of resources needed to do so. No matter how much you prepare for the market there will always be certain aspects that are beyond your control, thus you need to take a leap of faith once you planned your business.
Every business needs to have goals to meet, and so does yours. That’s why you must set certain milestones for you and your business; those milestones are specific goals in a set timeline. The first thing you need to do is establish the baseline, to do that you need to have the right metrics, beware of ‘vanity metrics’ where you overestimate you capabilities for an unreasonable goal. To ensure that your metrics are correct you need to go through the 3As test. The 3As are Actionable; is it possible to act upon that goal? Accessible; is it feasible, can you actually do it? Auditable; can someone else know and understand your goal?
The next step you need to do is to ‘Tune the Engine’. Changing a product to satisfy customer demands has little impact on customer behavior. The only changes you should do to your product are those that line up with the metrics you placed initially, changes should have a positive return on your investment.
There will come a time in your business that you will have to make a decision; whether you persevere and persist or you pivot to find a new angle. You will reach a point in your business development where you will have to make the choice to stick with your existing plan and push forward or change your plan and find a new angle to approach the market. With that you have now successfully established your company, now you need to grow it.
To grow your company you need to pick one of the three growth model engines. The first model is to create a ‘sticky’ growth engine. This engine relies on having a product/service that the customer will have to continue to pay for. This model ensures that you get new customers faster than you lose existing ones. You will need to pay particular attention to the retention rate of your customers in your metric.
The second engine is the Viral Engine Growth where you use existing customers to draw in new ones; the metric for this engine is the ‘viral loop’ where each customer brings in at least 1 new customer. The final engine is the Paid engine; this is where you use the money you made from existing to customers to bring in new ones, this is usually done through advertisement. The thing to keep in mind with this model is if the Lifetime Customer Value exceeds the Customer Acquisition Cost you will grow.
With these steps from Reiss’ book: the Lean Start-up you can ensure that your business is successful and sustainable.