More than half of small businesses fail in the first four years, and there has to be a reason. Undoubtedly, having a good idea is crucial in a startup. However, because many others hold the same ideas (For example, the idea of Facebook and disputes over its origins), what would set a business apart from the rest would be how the idea is executed and business is managed. Here are 5 issues that startups often overlook:
- A good team
Startups need a good team to materialise ideas. For that, a good team would need skilled technical expertise to translate ideas into reality, and a confident business person to sell that idea. According to CB Insights, 23% of startups cannot flourish because of the assembly of a wrong team. The team at Lignar Labs consists of a well-balanced mix of technical expertise and business people as the company’s leaders know that having more than one person to sell a business idea is of no use if the company cannot deliver their product or service without technical expertise.
- Business models
Startups also need to understand business processes and models well. Many aim to disrupt the industry with their innovations, but overlook the importance of understanding the models and processes in business. For instance, 42% of startups polled on CB Insights cite the lack of a market need for their product as the biggest reason for failure. Many startups create products and hope to convince their market that they need it, often times unable to do so. Instead, startups need to be able to identify an underserved market and create a product that would fill that gap. Under the advisory of Lignar Labs, KYCK! made a move to target Indonesian markets, where there is a large population of the underbanked. On top of that, business processes such as cash flow can also be a leading factor to why a business has to cease operating. According to a U.S. Bank study, 82% of U.S. businesses fail due to poor cash flow management and understanding. It is thus important that there is a good understanding of the business model and process within the team.
A lack of sufficient capital is also one of the many reasons why startups have to shut down (29%). Businesses can either choose to fund their operations by seeking investors or bootstrapping. A good balance is needed to ensure that they do not burn out of finances too soon. While bootstrapping may provide more freedom and a safety net for the company to experiment with its practices, it increases the financial risks on the entrepreneur. It might also put restrictions on the rate and amount of growth for the company – because of how cash flow works, growth increases costs. On the other hand, seed funding is widely available, and startups need to be able to know how to get them.
Ultimately, research has to be done to help the business understand their markets better. With good understanding of the market, the KYCK! team swiftly made the decision to reposition themselves in another market within a month, and the startup has since been adopted into Plug and Play Indonesia’ accelerator program. Similarly, it is through research that Lignar Labs understood the lack of a conducive environment for cleantech SMEs in Singapore to grow and put their theories into practices. Lignar Labs thus aims to incubate these cleantech SMEs, to help them reach beyond research academia in cleantech, a field that is definitely thriving.
For a new startup to get their brand in the market, it needs a broad network of people and businesses that can help make their mark in the industry. With Lignar Group’s 50 years of network building mainly in, but not limited to, the aspect of clean tech, Lignar Labs can increase its presence within and forge newer relationships with more businesses as we progress.
Needless to say, the right ideas, people and execution lead to success. Good, scalable ideas are crucial, but a good idea is nothing if it cannot be executed well. Through this balance, companies can translate their ideas into something tangible that could help change the world.
By Sherlyn Goh, Marketing and Partnerships