4 Important Facts Every Entrepreneur Should Know In Order To Succeed
An entrepreneur is a person who creates a business through innovating new ideas, products or processes to replace old ones. To be successful, an entrepreneur should have an eye for discovering unnoticed profitable opportunities and acting on those opportunities.
Here are 4 important facts every entrepreneur should know.
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Fact 1: Entrepreneurship requires hard work
Most people when they think of entrepreneurship they envision easy money and quick success. This is partly because the media is awash with stories of instant billionaires who "work smart but not work hard". Most of those stories are full of misconceptions. They mislead people into thinking that all you have to do is create a concept and go out to seek start-up capital.
Entrepreneurship requires hard work. You have to make sure your idea is original as well as viable in order to increase your chances of success. That requires hard work in terms of market research and learning customer behaviour. You need to come up with a product or service that customers are willing to pay a premium for but at the same time be better and cheaper.
Fact 2: Entrepreneurship requires creativity
When it comes to creativity, you don’t necessarily have to reinvent the wheel.
- Study the products and services your competitors are offering.
- Research on how the market is responding to the existing products and services.
- Take note of the missing or inconvenient features that customers are complaining about in existing products.
- Come up with a creative solution that allow your products to have premium features at an affordable cost.
I understand that most entrepreneurs do not have enough float to deliver a product or service that is lower priced than their well established competitors without risking a loss. An affordable product does not necessarily mean a cheaper product. A product can be made cost effective by replacing costly unnecessary features with more premium quality features that consumers are willing to pay for. That requires planning and creativity.
Fact 3: Too much capital is as dangerous as too little capital
Ask any failed entrepreneur, they will mourn about not enough capital as the main reason for their failure. However after researching about many failed entrepreneurs I realised that the opposite is also true. Many entrepreneurs fail because they have too much capital at their disposal.
Too much capital usually lead entrepreneurs into spending foolishly and unnecessarily in vain attempts to capture market share. The entrepreneur ends up using investor money, rather than profits, to sustain operations. I have seen a lot of startups renting expensive offices and hiring unnecessary staff at the expense of investor capital when yet providing products or services at a loss.
If you are not careful, too much capital can cushion you from the real market tests and cloud your ability to determine whether your product or service has the potential to earn sustainable profits. You should always perform market research to determine whether your customers will pay enough for your product or services to sustain the firm.
A tighter budget tends to give you a heads up earlier as to whether your products or services are performing well. This gives you time to adjust your business strategies before its too late.
Fact 4: The first mover’s advantage is an urban legend
When it comes to entrepreneurship, the early bird’s advantage doesn’t really help. I hear a lot of entrepreneurs saying, "my advantage is that I will be the first to do this and that." They call it the First Mover’s Advantage. Well, is it really an advantage?
Many startups believe that their main competitive advantage comes from being first. However, history is full of product pioneers that got left in the dust. Reality is that most market leaders right now are not pioneers of the products or services they base on. For example:
- Friendster was the first major social network, picking up three million users in its first few months of operation. That was a year before MySpace was launched. Though Friendster had head start, it failed to MySpace. That was half a decade before Facebook was founded. MySpace became the biggest social network in the world. Then Facebook came and beat MySpace to pole position. Now, more than a decade later, Facebook is still ruling.
- When people think of spreadsheet they think of Microsoft Excel. What everyone has forgotten is that Visicalc created the first spreadsheet, only to be dethroned by Lotus 123, which was then dethroned by Microsoft Excel.
Being first in the market doesn’t guarantee that you will own the market. It only gives competitors a better chances of learning from your weaknesses and provide better product and services. Most of today’s market leaders got where they are by capitalising on the pioneers mistakes and weakness.
Here are some of the reasons why most first movers fail:
- Being first in the market is sometime expensive. Selling a product or service that people don’t know or trust is very difficult. You have to educate a new market about the product, which is usually expensive especially for a startup on a tight budget.
- Being first means that there is no prior experience to rely on. Costly mistakes are inevitable. Your competitors may gain an advantage by learning from your mistakes.
- First movers usually face a lot of resistance from lobbyists, legal systems, governments and other businesses. This can add up to the operating cost of the business.
- First movers tend to get complacent due to the high level of market domination.
- The moment your product becomes successful, competitors will attack your product left, centre and right, building similar products with slightly better specs, offering cheaper alternatives to your customers, and trying to learn about your customers than you. You will have to continuously grow and innovate your product.