You’ve probably already heard the somewhat-alarming statistic that 90% of eCommerce startups fail before they even really get anywhere. As a business consultant specialising in eCommerce, I’m sad to admit that there is a lot of truth to that fact. When many of my clients come to me for support, they are facing a number of issues that likely could have been prevented at start-up had they gone in with the right mindset.
Yup, you heard that right. As important as strategy is, there’s a lot to be said about the power of a strong mindset when beginning your journey as a start-up owner.
Specifically, three major problems I see frequently have to do with poor market fit, lack of proper cashflow management, and unrealistic expectations.
Let’s break down exactly what this means and why it can adversely affect business owners who are in the early stages of start-up:
Poor Market Fit
Product-market fit (PMF) is what happens when you create a product that is exactly aligned with what your target customers want and need.
Oftentimes, there are major gaps in the market that your target audience doesn’t even know about! When you are able to come in and present them with a great solution to the problem (your product), you create demand and ensure a good PMF.
The number one reason start-ups fail is because they don’t have a good product-market fit. It makes sense — if your audience has no need for your product, why would they purchase it in the first place?
Creating a product that you know has a great market fit takes some of the pressure off of you, too. Instead of having to “reinvent the wheel” to convince your customers to buy your product, you know they already want it. Assuming you have a strong marketing strategy, your product should sell well because it’s something that your audience genuinely wants or needs.
In order to ensure a great PMF for your product, you’ll want to keep the following in mind:
Who is your target customer? Before you can develop a product that this individual needs, you need to have a solid handle on who they are, what they want, and how you can help them achieve it. This is incredibly important when it comes to creating an excellent, sought-after product.
Creating a minimum viable product before developing your entire product line will save you valuable time and resources if there doesn’t end up being a great product-market fit. Don’t put all your eggs in one basket!
- Getting feedback on early versions of your product will help you finetune the features and customer experience until they’re exactly where you (and your audience) wants them to be.
Here are two great examples of product-market fit that we all know and love include:
- Netflix. When consumers started to get tired of having to trek to the rental store to pick up a DVD, Netflix introduced a DVD-by-mail subscription service, so that movie watchers could have DVDs sent straight to their front door. Later on, when DVDs began to lose popularity, Netflix once again filled a gap in the market (how to watch a wide variety of movies and TV in the most convenient way possible) by bringing streaming into the picture.
Spotify. Spotify had a feeling that music lovers would rather pay a monthly or yearly fee to have access to millions of streaming songs than have to pay per song, which is what the previous market standard dictated. Now, they’ve mastered the art of music streaming and have even taken user feedback into account and added exciting features like personalised playlists and offline feedback.
Lack of Proper Cashflow Management
Another extremely common problem that start-up owners run into is how to manage cashflow. As a consultant, I see many start-ups that seem to manage cash with no real rhyme or reason. In the best case scenario, this can prevent your business from reaching maximum profitability. In the worst case scenario, it can mean having to put your own cash down to cover the losses of your business — and that’s the last thing you want!
I have an entire blog post on tactical ways you can manage your cashflow at start-up, but here are three tips to focus on for now:
Keep your books extremely current. Reconcile them as often as possible so that you can get a sense of whether or not your company is on track to meet important financial goals.
Business can be wildly unpredictable. It’s always a good idea to have a solid cash reserve on hand in the event that unforeseen circumstances arise.
Minimizing the money you spend on everything from office space to the number of software subscriptions you forgot to cancel after the free trial ended will make a big difference in the long run. At start-up, the last thing you need to worry about is securing a ton of “bells and whistles” for your company. Invest in what is truly important — you will thank yourself later on!
It’s easy to think of entrepreneurship as a fast ticket to the good life. What could be better than making a ton of money while getting to manage your schedule on your own terms?
The truth is, life as a business owner isn’t nearly as glamorous as it sounds, especially at start-up. While it’s always great to approach business with a positive outlook, it’s also important to temper unrealistic expectations early on so that you aren’t left feeling disappointed or not motivated to move forward.
Expect to work hard even though you may not necessarily reap the rewards right away. If you stay consistent and committed during the start-up stage, you can expect to go much farther in the later stages of running your business!
Need further support navigating the start-up phase of business?
Trust me, I get it! There is so much to focus on when you’re first starting out — it can be overwhelming to know what to do, where to invest your time and resources, and how to start bringing in a profit.
As a business and marketing consultant, it’s my job to help you figure out a smart, strategic approach to your business that goes hand-in-hand with reaching your goals. They don’t call me the CEO’s wing woman for nothing, so if you crave actionable support and strategy from a 7-figure industry leader, learn more about booking a strategy session or joining my consulting waitlist.