How to undertake and not fail in the attempt

How to undertake and not fail in the attempt

Statistics show that while in Europe 80 percent of MSMEs survive the first two years of existence, in our region only 40 percent of them manage to survive after that time.

What should draw the attention of the state authorities and the official and financing agencies that serve this sector is that they occupy 90% of all existing companies and, in addition, represent 28 percent of the region’s GDP.

There are many reasons why this failure is so recurrent and historically sustainable over time, but to start by sorting out the reasons, we will begin by talking about the stages through which all entrepreneurship must go. According to Barça Innovation Hub, the following phases can be identified in the entrepreneurial process:

  1. Ideation: The entrepreneur and his team start working on the idea, analyzing different perspectives and versions, exploring, researching and working on the vision (sometimes without knowing what they are doing). Sometimes the ideas arise from the context of the entrepreneur and that is why initially they already know about the subject, although this can work against them for assuming too much, perhaps without validating. Another way of conceiving a project or undertaking is the well-known copycat or action of copying ideas from businesses that already exist and are operating in some other market in the world. In this case, what the team must validate is whether that idea and that way of doing business can be adapted to the market where the venture is intended to start.
  2. Development of the “minimum viable product” and validation: Once the idea has already taken shape, the problem has been validated and the best version of the solution has been identified, the process of building the prototype or minimum viable product begins, to then validate different issues of the business model and the solution with potential clients. .
  3. Scaling and growth: The minimum viable product goes through different stages until it becomes the product or service to scale. In this learning process of the previous stage, enough information was collected to determine the customer segments, the monetization model, the communication channels, distribution and price. In this stage the entrepreneur must focus on growing in quantity and quality. of clients, advancing in the development of the product or service, as it develops commercial channels. It is here, where the basic procedures of legal constitution of the company, search for financing and hiring of employees must appear.
  4. Constant innovation: In the entrepreneurial world, it is difficult to consider a company as a consolidated company, since, due to the aggressive competition in which businesses are developed, constant innovation is a necessity rather than an option. That is why huge companies like Google, Facebook or Amazon continue to innovate in different ways to stay as leaders in the market. Initially, it is the founding partners of the enterprise or the entrepreneur himself (in the event that he is the sole founding partner), who carry out all the activities simultaneously.

Following these steps or stages generally leads to making the right decisions, although this does not guarantee success, but it increases the probability that they will lead to it. However, during this period obstacles can arise, according to Eric Ries in his book “The learn startup method” (2013) the problems related to the failure of startups can be:

  • Bad Idea: The creation of a good plan, a solid strategy and a thorough market research, since there is a tendency to apply these elements to the startup and it is wrong, because they operate with a lot of uncertainty and without historical data that can be used to predict the future .
  • Bad management: Chaos arises as a response to a lack of management. Clearly, MSMEs need optimal administration to take care of very valuable resources. The majority think that the management process is boring and tedious, while startups are dynamic and exciting. But what’s really exciting is seeing startups succeed and change the world.
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Likewise, Barça Innovation Hub considers that there are other reasons for the failure of a venture that we generally find in the advice we give to clients, namely:

  • Don’t create something that people love.
  • They don’t have customers or at least enough to use and pay for their products or services.
  • They run out of capital to continue scaling the business model. This is linked to customer growth and loyalty, since they cannot generate enough income from the sale of their products or services because they did not create something that people really need, nor do they solve a need in a way that the customer pays for it.

There is no doubt that the work group is fundamental, since 80 percent of the success of the enterprise depends on those who carry it out, so the ideal is that the team that we form has these characteristics:

  • That the founding partners have full-time availability, more so in the initial stages of the project.
  • Have experience in the sector in which the venture is developed and, if not, have an expert partner. Here it is important to add that the partner who does not manage certain areas of the company must have enough ego flexibility to transfer it to the partner who does fully manage those areas, in order to bring the company to a successful conclusion.
  • Have well defined budget, strategic plan and business plan of the company.

Getting a start-up requires a lot of dedication, precision, emotional intelligence, awareness and perseverance to be able to achieve the objectives that have been set, and in general an external advisor is the fundamental key so that everything can be seen from the outside (“watching the bulls from the sidelines”), since sometimes the daily operations and the passion of the entrepreneurs cloud their vision to take the right measures, which in some cases can go against the love that can be felt for the project.

Likewise, governments must generate attention, advice, financing and follow-up programs for entrepreneurs so that we can grow that percentage of success of the ventures in our region. In some cases, the entrepreneur who does not have all the skills acquires them along the way, on their own, and with the help of mentors or guides.

In other cases, the entrepreneur dedicates himself to what he likes, product development, customer sales, strategic alliances, among others, and leaves an experienced manager to lead the daily operations of the company. To do this, the entrepreneur must first see and acknowledge his own weaknesses and strengths, and then have the ego flexible enough to step aside. Sometimes, it is the startup’s investors who force these changes.