What makes a new company succeed or fail?

[Pointedstick]

I was thinking of asking Mark some questions via PM after seeing his latest post in the corporation thread, and then figured that others might be interested in the info too.

For the people here who have a lot of experiencing starting and mentoring businesses, what are some of the the things that make new and newish businesses succeed or fail? What are some tips and things you absolutely need to know? What kind of corporation is the best one to use in which circumstance? Etc.

I ask because I'm considering starting another business at some point in the short to medium term and I want to run it better than my last one, but I'm extremely aware of my ignorance of the kinds of details that make a big difference.

For some background, I started a small online retail business a few years ago, set up as a sole proprietorship. I knew nothing about business, finance, or the relevant laws. The business did pretty well for a couple of years, achieving profitability from day one, and I came extremely close to quitting my day job to pursue it full-time. But as it grew, I didn't hire any workers, limited its growth, and burned myself out. I was afraid of the complexity and, stuck in "do everything myself" mode, failed to bring in help when I needed it. I'd like to avoid the same kinds of mistakes next time and make sure I'm in the best position for the product itself to be the limiting factor, not my business acumen.

[Xan]

I've found the LLC to be a great tool.  You can opt for pass-through (federal) taxation, so that the owners personally pay taxes on everything that the company earns.  That means you avoid the double-taxation of a normal corporation.  But, legally, you're a corporation in every way.  The availability/efficacy of this may depend on the state of course.

[Mark Leavy]

I was thinking of asking Mark some questions via PM after seeing his latest post in the corporation thread, and then figured that others might be interested in the info too.

For the people here who have a lot of experiencing starting and mentoring businesses, what are some of the the things that make new and newish businesses succeed or fail? What are some tips and things you absolutely need to know? What kind of corporation is the best one to use in which circumstance? Etc.

I ask because I'm considering starting another business at some point in the short to medium term and I want to run it better than my last one, but I'm extremely aware of my ignorance of the kinds of details that make a big difference.

For some background, I started a small online retail business a few years ago, set up as a sole proprietorship. I knew nothing about business, finance, or the relevant laws. The business did pretty well for a couple of years, achieving profitability from day one, and I came extremely close to quitting my day job to pursue it full-time. But as it grew, I didn't hire any workers, limited its growth, and burned myself out. I was afraid of the complexity and, stuck in "do everything myself" mode, failed to bring in help when I needed it. I'd like to avoid the same kinds of mistakes next time and make sure I'm in the best position for the product itself to be the limiting factor, not my business acumen.

This is a great question PS - and thank you for starting the topic.  I'll give it some thought.

Let me just put revenue out there as a stakeholder.  I just came back from a visit with a small Santa Cruz startup where I had advised the principle to come up with a revenue plan - even if it was .25c per day.  She insisted that market share was way more important.  Now... 2 years later she is looking for side jobs and admits that she should have focussed a bit more on revenue.

This could be a fun discussion.

[Mark Leavy]

PS, one other thought...

Jake, a commenter on this forum, has a podcast called "The Voluntary Life".  A large number of his podcasts detail the complexities of entrepreneurship.  He, very accurately, describes:

1) the need to measure everything.
2) The need for the CEO to establish processes and procedures that can be delegated.
3) The need for the CEO to focus on marketing, sales and revenue generation, etc.

In fact, I don't think he has ever said anything that I disagree with.  Listening to Jake's podcasts would be the second thing I would recommend.  The first thing is to plan to succeed without taking on any loans or outside investments.

[Pointedstick]

This is a great question PS - and thank you for starting the topic.  I'll give it some thought.

Let me just put revenue out there as a stakeholder.  I just came back from a visit with a small Santa Cruz startup where I had advised the principle to come up with a revenue plan - even if it was .25c per day.  She insisted that market share was way more important.  Now... 2 years later she is looking for side jobs and admits that she should have focussed a bit more on revenue.

This could be a fun discussion.

Revenue from day one was my approach with the first business. I bought $142 worth of product and sold it for $284 within a week, repurchased $284, and went from there. This was a very easy business to set up--it kind of happened by accident, in fact, after someone on another forum I was a member of complained about not being able to buy a specialized machine part that he wanted from a wholesaler. I bought them and re-sold them to fellow forum members as my first customers.

I love the idea of this approach because I hate debt and complication, but the business I want to start next is a homebuilding firm that will eventually serve to showcase a new building material I'm designing, and I don't feel rich enough to buy the land, materials, etc with cash. I'm still developing the material and worry that I would not be able to find a market for it unless I make that market myself, due to the entrenched traditionalism and conservatism of most in the building industry. This has happened before to firms that sold (in my opinion) brilliant but unconventional materials in the American construction market. They didn't take the initiative to create the market they wanted to sell into, and it never materialized on its own.

If this sounds like a dumb idea, that would be a good thing to know now before I start.

[Pointedstick]

I love Jake's podcast. I haven't listened to every single episode but that sounds like an excellent idea. I did beta test his latest book before publication and found it to be wonderful.

[Mark Leavy]

If this sounds like a dumb idea, that would be a good thing to know now before I start.

This doesn't sound dumb at all.  I look for "non sexy" businesses that solve real problems.  Construction and building materials can be very lucrative and are something that you can explain to anyone.  I have a large stake in a Redmond, WA company that uses iPhones and Drones to measure the volumes of piles of aggregates for concrete and road construction.  That sort of thing is good money.

And NM is a great state for anonymous incorporation.  Make sure you use a good firm as one mistake will pierce the anonymity.

[Tyler]

It sounds like my background is a lot like Desert's.  I've never run my own company, but have launched many new products and have consulted several startups in the process.  I tend to agree that one of the most common mistakes is when people get lost in the long-term vision and lose sight of simple and achievable incremental goals.  People really under-appreciate how important it is to learn and iterate.  In my experience, the biggest successes rarely resemble the original vision.  They succeed because they adapt to new opportunities they discover along the way.

Building a market from scratch is tough, but it sounds like you've got a good idea.  The first step is to get something out there.  Personally, I'd probably first focus on identifying a market (even a small niche one) who would benefit from your product and I'd pitch a simple but useful application that minimizes the cost of entry.  Building a home from a new material is a big ask, but perhaps a smaller project using your materials might be an easier sell.  You'll learn something in the process and will pick up some happy customers along the way, which will make you that much more credible to investors when you take the next step after that.