According to Forbes, nine out of ten startups fail. This may seem like a discouraging statistic, but it doesn’t have to be. It can also serve as a cautionary tale about asking the right questions before launching a startup.
After gathering data from 101 founders of failed startups, Forbes found that the most frequently cited reasons for failure include:
- No market need (42%)
- A lack of sufficient capital (29%)
- They didn’t have the right team (23%)
- They got outcompeted (19%)
By asking the right questions, these problems can be avoided. It’s also useful to hear advice from a business founder who defied the odds and found success. In this article, Paul Saunders, the founder of James River Capital and venture investor, will share his list of must-ask questions.
Questions to Ask Before Launching a Startup
What questions did Paul Saunders ask himself before launching his successful business? What questions can you ask to ensure you’re fully prepared to bring your startup idea to life? Read below to find out.
Is there a significant consumer base?
It’s human nature to think our ideas are brilliant, but are other people going to buy what you’re selling? Before launching a startup, make sure that your product or service has a broad consumer base who will sustain long-term growth.
Who is your audience? Who will use your product or service? Who will want it and why? Are you solving a problem that your audience faces?
You can gather honest feedback from your friends, acquaintances, coworkers, and mentors. Ask them if they would buy your product or service. If so, why? Push for useful feedback about the strengths, weaknesses, and overall marketability of your product or service.
Is there a market gap in need of innovation?
As the Forbes study proves, some businesses fold because they can’t rise above the competition. So how can you gain a competitive edge? Paul Saunders says that it’s all about knowing what is missing within an industry.
Does your business idea address a need? Does it solve a problem? What are you offering that the competition isn’t?
Filling a gap in the market can also mean combining existing ideas or delivering an existing product/service in a completely new way. Consider Netflix, Uber, Airbnb, or Venmo’s digital wallet app.
Who will be part of your team?
At first, you may be the only employee. But as you begin to grow, selecting the right team is vital. The people around you must share your values and goals. They must be committed to the success of your business and have passion and drive for what you do.
When building a team, you also need to assess strengths and weaknesses, your own included. Wherever there is a weakness, find someone who can balance it with a strength. If each member of your team has clearly defined roles and valuable strengths, you’re more likely to succeed.
If you won’t have employees for the foreseeable future, you still need a support system. Starting a new business is a long and challenging journey. Make sure you have a few people in your corner who will motivate and encourage you along the way. You may need to outsource certain roles like legal, accounting and payroll. Make sure your outsourced partners are the right fit for your team.
What is your plan?
They say if you fail to plan, then you plan to fail. That’s certainly true when it comes to starting a business. Even the best ideas will fail without a plan.
You need to outline exactly what you plan to do and how you will do it. Consider your budget, how you will fund your business, what obstacles you may encounter, and how you will overcome them. You also need to determine how you will build your customer base and market your product or service. Set a reasonable time table with various deliverables at certain points.
A good idea is an excellent foundation for a business, but it’s not enough. Do your research, read business books, or even take an online business course if you feel completely overwhelmed. Whatever you do, you need to have a clear plan before you launch your startup.
Do you have the stamina for the long haul?
Paul Saunders points out that successfully launching a startup requires you to be the biggest believer in your vision.
The initial excitement of a new endeavor can quickly give way to difficulties, delays, mistakes, and failures, before you see real success. There will be times that you doubt yourself and your business, worrying that you’re sacrificing too much of your time and money for too little reward. You may face critics who don’t support you or your business.
If you don’t have confidence and stamina, you can’t overcome these obstacles. Before you launch your startup, consider if you truly have the motivation and perseverance to bring your business to life. Do you truly believe in what you’re doing? Will you see it through, no matter what obstacles you face?
Paul Saunders – Founder of James River Capital
Paul Saunders is the founder, chairman, and Chief Executive Officer of James River Capital Corp. and affiliated companies. Paul’s lifelong passion for finance led him to obtain a B.A. from the University of Virginia and an M.B.A. from the University of Chicago.
Paul’s career has spanned positions in Warburg Paribas Becker’s Corporate Finance Department, then in the Commodity Department at A.G. Becker. At Kidder, Peabody, and Co., Saunders was the Director of Managed Accounts and Commodity Funds. He eventually became the President of KP Futures Management Corp. Paul later acquired the business, renaming it James River Capital Corp. He has held his current position as Chairman and CEO since 1995.
Alongside his wife of nearly four decades, Vicki, Paul gives back through philanthropy. The couple support many charitable organizations and recently launched the Saunders Family Foundation.
James River Capital Corp.
James River Capital Corp. was founded in 1986. It was originally the alternative investment department of Kidder, Peabody, & Co. In 1995, it became an independent investment firm when Paul Saunders and Kevin Brandt acquired the firm from Kidder.
Located in Richmond, Virginia, James River manages portfolios with various asset classes, including corporate credit, equity strategies, global macroeconomic strategies, fixed income arbitrage, multi-strategy investing, managed futures trading, asset-backed securities, and more. Find out more here: https://investor.com/rias/james-river-capital-corp-133297
Launching a startup is a challenging, and sometimes nerve-wracking, endeavor. But with the right preparation, you can succeed.
After asking yourself these questions, revisit the drawing board as necessary. Changing your idea or even starting over is not the worst-case scenario. The worst-case scenario is launching a poorly thought out business, without the proper motivation, that wastes time and money. Answering these questions will help you avoid this fate and achieve success.
Just as Paul Saunders launched a successful business with James River Capital Corp., you can build a thriving business of your own.