10 Ways to De-risk your Startup

Quitting your job to launch a startup can be a daunting decision, particularly if your tolerance for risk is not very high. It’s still possible to be a successful, self-funded entrepreneur and take calculated rather than extreme risks - I know because I’ve done it! Here are my top recommendations.

Start in an industry you know inside-out

It goes without saying that your chances of success will be higher if you know the sector you’re starting a business in, inside-out. You can speak the lingo, you know the players, and you understand the market dynamics. This gives you a massive headstart compared to someone trying to learn the ropes from scratch, and makes you sound credible and knowledgeable when you’re pitching to potential clients.

Identify the key skillset required for early success – and make sure you have it!

If your business is a sales and marketing machine at its core, you had better have sales and marketing skills! This seems like a really obvious one, but it’s surprising how many founders start ventures where they don’t have the core competencies required to walk the talk and take the business forward.

Fill competency gaps with consultants

If you have a need for specialist advice or knowledge, and don’t have it internally, don’t let this gap fester into something big. Find a consultant quickly to identify and help you manage any risks or opportunities that you might be missing otherwise.

Keep your workforce agile

There are so many unknowns when you are starting out – how many customers will you get? Will they come back? Will there be many customer service issues? Will the website perform well? It’s almost impossible to accurately predict exactly what resources you’ll need. So rather than hire a permanent team before you’ve even launched, find partners, contractors or offshore resources to stay agile and nimble. In this way, you can turn resource capacity on and off, or ramp it up and down, as you’re feeling your way around the potential demand.

Make the “front end” gorgeous before the back end

The biggest mistake you can make is to invest all your effort and funds into a functionally fancy, fully automated back office, while neglecting the front end, the website which your customers see and which forms their first and lasting impression of your business. The cost of a fancy back end is far greater than a fancy front end, yet the priority should absolutely be the front end to begin with. Back office processes can always be managed manually – and yes, this may involve long hours initially – but you can’t fudge a front end. Your website needs to be free of spelling and grammar errors, easy to use, and look beautiful, professional and enticing. Once you’ve proven you can attract customers, then your risk of spending money on automating and streamlining back-end processes is dramatically reduced.

Hit runs at home before getting international stars in your eyes

If you live in a relatively small market, it’s easy to get starry-eyed about the potential of overseas markets and their huge scale. But the risk of going international before you’ve proven your model on your home turf is high. Of course there are exceptions, but a slow and steady approach to growth first domestically provides you with the funds – and confidence - to invest in international markets.

Spend more time growing your business than trying to save pennies

Perhaps it’s no coincidence that two startup guys I know with an accounting background both collapsed their businesses within two years. I saw their relentless focus on cost, which would be great in the finance department of an established company, but in a startup, where revenue and customers are king, you can’t spend more time trying to nickel and dime suppliers than finding new customers. Spend smart, but keep focused on creating demand and engaging with customers so they'll come back and buy more.

Write a business plan – even if it’s for your eyes only

Not many people enjoy writing business plans, but when it’s your own business, it’s an absolute must - even if you’re the only one that sees the document. The writing process helps you organise your thoughts, put structure to your ideas, articulate risks and opportunities, and set clear goals. It’s worth investing time in a proper business plan, and running it by any trusted connections who will give you honest feedback. You’ll love it when it’s done!

Get those around you on-board

If you have a partner, it’s critical that they will support you in your startup phase – which can be a taxing time mentally and physically. We all have personal lives, and if your partner is against your venture and the associated financial risk, this can cause stress, unhappiness and lack of focus which in turn can impact your startup’s success.

With kids, I’ve found one of the best ways to get them on-board is to get them involved in the business in a fun way (check out this blog for some ideas: Why I want my kids to be Entrepreneurs).  

Ask people what they think

It’s incredibly easy to put together a quick survey in a free tool like Survey Monkey, distribute it by email or social media, and ask people what they think of your idea – the product or service, the pricepoint, the beta site. Calling people you know and getting verbatim feedback is another approach. It’s risky to make assumptions about how people will react to your offering, so what better way than to ask them before you launch?

Sharon Melamed is an award-winning Australian entrepreneur with 3 online businesses, Matchboard and FindaConsultant, and AboutMatch in the UK.