If you want to turn your great idea for a startup into a real business, it won’t just happen because you want it to. In fact, the odds that you can succeed are stacked against you. While you’re trying to beat those odds, you will be putting your reputation, the time of your co-founders, and possibly the cash of your friends and family at risk of loss.
Startup success depends on how well you make six vital decisions.
1. Set goals.
When you start your venture, you will probably have nothing to offer the people you will try to recruit. Successful founders create a mission that gives the new venture so much meaning to investors that they cannot resist. You will also need to set a long-term goal for investors and short-term goals that will help you learn what you need to do to grow without burning through your resources.
2. Pick markets.
You need to figure out who will use or buy your product and pick the markets that you’re going to target. You have to have a personal passion for solving that market’s problem, and the customers in that market must see your product as a compelling answer to a problem that none of your competitors are solving.
3. Raise capital.
Initially, the best place to look for money is probably your customers. If you can get them to pay you more for the product than it costs you to build it—and cover your fixed costs—you are going to be in a good position.
I’ve found that you may want to match your efforts to raise money from other people (friends and family, angel investors or venture capitalists) to the stage of your startup’s development, moving up that ladder as you ramp your sales.
4. Build the team.
You can’t do it all yourself, but resist the urge to hire friends unless those friends have skills in areas critical to your venture’s success that complement your own. The most successful ventures do a great job of dividing up the work that must be done among the most talented people. And they create a culture that binds them all together to focus on shared goals.
5. Gain market share.
Many customers are afraid to get too dependent on a startup that could go out of business and leave them in the lurch. To overcome that, you have to offer the customer a “quantum value leap” (QVL)—a product that solves a problem that customers care about better than the competition, and to give that solution away. If that QVL actually delivers, those early customers will tell all their friends. And you can eventually upgrade the product and start charging customers to use it.
6. Adapt to change.
You might think getting those five decisions right would be enough, but you would be wrong. That’s because customer needs, technology and competitors all evolve, and the very success you achieve by making those first five decisions well could doom your venture to destruction. Unless you can adapt to those changes, your customers will flee and your venture will decline.
Editor’s Note: Peter has interviewed as many as 180 startup CEOs for his new book Hungry Startup Strategy: Creating New Ventures with Limited Resources and Unlimited Vision, released in November 2012.