For entrepreneurs: how to survive the "death valley" of a startup
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Who does not dream of being able to be their own boss, manage their times between work, family and friends, and, why not, aspire to have a quiet economic pass.Surely they are illusions that many people have. In order to materialize them, they fully enter into a project through a startup. This, whenever you come up with an idea or discover a solution for a need.It is just the beginning, because having detected it and the "desire" to face an initiative is not guaranteed success, far from it.Moreover, at that moment you may run into the first cause of failure, since many fail to even pass this first barrier to fall in love with their idea and not be able to clearly see what is demanding the market.In this framework, what any traditional book for entrepreneurs argues, is that the steps to follow are: have an idea or have detected a need, based on it generate a business model, then put together the team with whom to carry it forward and, finally, look for financing that allows you to take the first steps.The statistics tell us that even if all these requirements have been met, 90% of the initiatives fail. Why? This is where the ghost known as "valley of death" appears.And what is the valley of death? It is the stage that the enterprises go through when they begin to generate expenses and that lasts until the point of equilibrium is reached."When the venture is crossing the valley of death, is when all the problems or errors come to light, but perhaps the main drawback is that they have not been detected in time." Here comes the first recommendation to leave as soon as possible from that place: enter the best prepared for that stage of the project ", warn Nuria Plez and Pablo Argento, co founders of RPA Consulting."Common mistakes that may have been made and that can now complicate us is having sought funding in the early stages without really knowing my value proposition, not knowing the segment of clients we should point to. Worse yet, not being aware of the needs of my client, what he wants, what problem I have to solve and why he should buy me, "they warn from RPA.That is why in the planning stage, in which the business plan is put together, you have to go out to the street, interview potential clients, stop thinking about assumptions, to inquire about the reality of potential buyers, experts recommend. ."This is the best tool we can use to model our project in a much more focused manner in which the business works and, above all, to reach our point of balance in the shortest time possible," said Plez and Argento."In this instance, depending on the project, it is also possible to evaluate the continuation of the work in relation to the dependence that the entrepreneur may have, so as not to burden the project with greater pressure to generate income," they add.Once the initiative is modeled and begins to generate operating expenses, it will be the moment in which officially enters the "valley of death" and where you should leave as quickly as possible."Our objective will be the generation of sufficient income, in order to achieve a break even." To be able to travel this process with greater certainty, it is essential to minimize the economic and financial risks, the fixed expenses and the opportunity costs. are related to the chain of collections and payments: it is essential to charge customers before paying our suppliers, "experts warn.The economic have to do with the gross margin of the product or service, it is essential to know what is the optimal percentage for the business, so that once you reach the necessary units you are able to cover all the expense of structure."At the beginning of the project the fixed costs must be zero to be able to quickly undo any decision and, if necessary, change strategy." All of us at the beginning believe that we need office, employees and a structure for our clients to visit, but This is a mistake that many people do not commit anymore, the key is not to burden us with fixed costs, in order to be as light as possible, "they say from RPA.If we are sure of something, it is that when an initiative reaches a point of equilibrium, it ceases to be a project to become a company. There are only 10% of the proposals that are generated in the world today, but the key is that every time there are more prepared entrepreneurs, and especially people willing to share past experiences, with the aim of avoiding the dreaded valley.Undertaking in relation of dependence: what to take into accountMany people have the goal of launching themselves into the world of entrepreneurship, but by working in a relationship of dependence they can not make the "leap" towards new challenges. This, however, can serve to adopt another more experimental approach that serves as a basis for a future business.Becoming an intrapreneur is a good option to undertake within the organization in which you work. Creating a project within it related to one's own entrepreneurial desires allows one to learn valuable notions about self-management and, at the same time, draw conclusions about strengths and weaknesses.Another plus of the corporate world is the opportunity to train in different disciplines. Many courses, seminars and coaching lessons can be used by future entrepreneurs, since they represent a valuable set of skills that can be acquired without spending a fortune.The advantages do not stop there: working in this field makes it possible to build solid contact networks. In this sense, if you are skilled at generating links, it will be strategic to connect with people in a different way, since you will go from the transactional mode of the moment when a company is represented, to a more collaborative mode that will serve as a basis for undertaking.One more step in the immersion in the entrepreneurial universe is to associate as a minority in another enterprise. This will allow participants to participate in meetings, contribute ideas and immerse themselves in that spirit of doing things differently from what happens in a traditional company.Finally, a part of the salary can be invested to open a new business. Since it is essential to obtain a financing fund for the project, allocating a percentage of the finances can be a good idea. Although then the rounds of financing and other ways of making money will arrive, the initiative will serve to learn essential aspects that will have a direct impact on the success or failure of a startup.The take-off of the enterpriseFrom INICIA, Susana Silvestre, specialist in the development of organizations and assembly of equipment, details the aspects that contribute to the take-off or not of a business plan."The enterprises fall not only because of lack of money, but also because they do not identify contexts or align themselves to the needs and projections that this moment poses," he says."The conjunctural matters, but even in difficult situations there are actions that can be done or avoided that make the bad moment less worse," the expert points out.Then, from INICIA they give a summary of the topics that, like the economic-financial aspect, affect the continuity or not of a project:-What started as an idea, was developed in a plan of actions and was shared with different collaborators or partners. "However, it is highly probable that the original idea put into motion will not give the answers that were planned, only once the project starts to roll can we know its performance and evaluate its potential as a feasibility", warns Silvestre.-To fall in love with the initiative does not help it to develop: here is one of the first important decisions: Continue with the initial plan or accept that the market asks, chooses, decides something else and makes the necessary changes ?.- What helps to grow can be what stops growth: just as it is not good to fall in love with the project, it is not good to think that the needs and possibilities are always the same. "Identify the changes, review what helps and what stops allows to find the most appropriate tools and answers at the moment".-The participants of the venture can change: often they start as an idea of several, but as the demands of time, skills and money increase, the interests do not coincide. Changing partners does not mean failing. We can have different companions along the way.-The projects require investment to develop and those who participate need money to live. While entrepreneurship demands little, work time can be shared. There is a time when you have to choose between full time and part time.The conversations about time and economic possibilities of each one, possible forms of retirement and contributions for this stage are uncomfortable but necessary for the harmony between the participants and the sustainability of the business.For the specialist, "nothing ensures per se the success of a company, but there are things that can be done and that help strengthen it." In any case, the decisions made regarding the cessation or continuity will be made in a context of experience and learning".In turn, there are also actions that add value and allow personal and professional development:- Training and knowing other entrepreneurial experiences helps to understand the dynamism and complexity of the moment we live.- Sharing with other entrepreneurs through networks and forums generates collaborative learning spaces.- Participate in communities of entrepreneurs where enterprises with different stages of development participate.According to Silvestre, "when the contact networks are intensified, they generate more opportunities and challenges, it is a win-win, in short, the growth of the entrepreneur also makes the company grow".