Most start-up business owners soon realise that gaining traction in the early years is hard, and that’s true. There are however, things that you can do to make it simple, and today I want to share with you two principles that if not understood and overcome, can become a blockage to growth, even increase the likelihood of failure.
If you want to grow your business at the rate you want to grow it, in an industry where your competitor landscape is getting increasingly complicated, you must embrace technology, social responsibility and sustainability or you will end up losing opportunities to others who are. You need to hire faster and smarter in those areas because you know you now have what’s called a ‘product market fit’. The market needs the product, you have proved it and you have 100+ customers. Now it’s a matter of expansion, and that usually requires some investment.
That’s 2 to 3 years in, but in the early days, it’s survival mode all the way trying to keep your head above water, invest and grow all at the same time as finding your feet as a business owner.
The first problem is this – because you are creating something that nobody has fully accepted, you struggle to gain clients beyond the first flourish. It’s like being the first to own a new iPhone. There are people who would stand in line all day to get one, those who must have the latest and newest thing, those are the early adopters. Once you’re done with early adopters, what do you do and how do you get to the mass market. That takes time and investment, but the mass market is where you start to become profitable.
First year start-ups, and anyone else who hasn’t done this yet and is stuck, your focus should be on ‘problem market fit’.
There are two distinct principles here, one is a ‘problem market fit’ and one is a ‘product market fit’. The first year of every start-up is, or should be, focussed on ‘problem market fit’, which means that you ask the question does your market care about the problem you’re solving? Many start-ups fail because they assume that the market needs their product. The reality is your products could and probably will change, most younger businesses find their products and services changing quickly in the early years, mine did. I set out like many, by thinking that something I was good at would make a good basis for a business. Whilst that’s true to a certain extent, I missed that I should have focussed on refining the problem I solved, not refining the product I offered. When you focus on the problem you solve, you’re not tied to the product, so innovation and development becomes easier.
The first year in business is all about solving your ‘problem market fit’ and that doesn’t require a lot of capital. It requires a lot of focus on the right problem, but then in the second or the third year, if you’re doing everything right, you get to a point where you figure out what the real product is. Now you’re focussed on the ‘product market fit’.
I hope you can see the difference because many mix these two principles up, they swap them around because they fall in love with their product, or the idea of the product, so much that they forget that they’re solving a problem. They sometimes believe it’s all about them because they love what they do so much that it becomes hard to hear someone say “that’s not what I want”, they then begin to think “you should want this thing, why you don’t want it”. It took me a long time to recognise that it doesn’t matter if I like it, what matters is, have I clearly defined the right problem for the right market right now.
Perhaps this explains why many start-ups never get past their love of their products and reach a plateau they just can’t seem to break through, even if they are cash rich or have capital investment.
Like many, when I started out on my business journey, I started with a great idea and the drive to make it work. I think it’s vital that we take a moment to think about the personal impact of starting a business. My decision to start a business was made following a long discussion with my wife about what we wanted to achieve in life and for our growing family.
What I missed was not putting a timeframe and milestones in place. It was like asking my wife to hold a heavy rock without telling her how long she needed to hold it – to carry the financial and emotional burden of starting a business without knowing if or when success would come. It took me 9 years to grow my first business, most of those years were profitable of course, but it took me too long to get started because I didn’t tell my wife how long she needed to carry this heavy rock, which in turn perpetuated the belief that if I just kept doing more and working harder, it would all work out in the end. Thankfully it did but I sacrificed a lot along the way.
Why share this?
Simply this. I started by falling in love with the products I sold, it became all about the products and I became tied to those products. It was difficult to develop and innovate and let go of those products if they weren’t right for the market. I missed that starting up is all about ‘problem market fit’ not ‘product market fit’ which meant that growth was delayed.
Sometimes start-up businesses fail because it becomes too hard on them and their family, or their cash reserves and patience run out before they reach the tipping point where they become profitable. That’s as much true for small and medium businesses as it is for start-ups.
Of course, hindsight is a wonderful thing and now I’ve learned how to start, grow, scale and sell businesses, it’s easy for me to make the points I have today. I hope you can take this concept of ‘problem market fit’ and make it a priority in your business before it’s too late as statistics show that 6 in 10 of start-up businesses do fail in their first 5 years.
If you want some help clarifying the problems you solve for your markets, or would like to talk with me about any aspect of business, get in touch here.
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Remember, there are only three types of people – those who make things happen, those who wait for things to happen, and those who talk about why things don’t happen for them. Which one are you?
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