“Test Drive” Your Startup

Picture this – you wake up one morning and decide you need a new car.  You go to the first car dealership you can find, see a “shiny” car you want and with no questions asked and no research done, you buy it on the spot.  The sales person hands you the keys and you roll your new vehicle off the lot, only to find out that you hate how the car performs and immediately regret your decision.  In all your excitement, you are out thousands of dollars for a car you don’t want.  Why?  Simply because you never took it for a test drive.  Sounds crazy, right?  No one would ever do that.  However, when it comes to startups, many entrepreneurs make this same kind of mistake every day.

What do I mean?  Let’s take a look at just how closely this car buying experience mimics the launch of many startups.  You’re an entrepreneur – you wake up one morning with an unbelievable idea.  In all the excitement, and with little to no due diligence, you quickly assemble a team (often buddies who “get” the idea), launch a company and start racking up expenses – incorporation fees, shareholder agreements, accounting fees, bookkeeping services, legal services, logos and marketing material, salaries…the list goes on…and you haven’t even “driven” the startup off the “lot”!  After months of development (and more operating expenses!), too many starters disappointingly discover that they aren’t as far along as they wanted to be, sales are dismal, and overall the founding team is just not performing as expected.  Like the car buying story, the entrepreneur invested in a startup without first taking it for a “test drive”.  They launched their startup based solely on the excitement around their idea – and they are out thousands of dollars with little to show for it.

So how can entrepreneurs “test drive” their startups?  Before I launch any new venture, these are my three strategies:

“Test Drive” the Market

Before investing in a new idea, take your time to review the market.  Who are the competitors?  Who is your target market?   Is your product idea really as unique as you think it is?  How much time and effort will it take to bring your product to market?  Can you sell your product with high enough margins to sustain a growing startup?  Know these answers before proceeding.

“Test Drive” the Problem / Solution Fit

Based on the Lean Startup model by Eric Ries and Steve Blank, you need to make sure that the problem your product is solving actually exists.   Speak directly with potential customers in your desired market segment –  don’t pitch them your idea, rather validate your hypothesis by determining if they 1) have the problem you assumed they had, and 2) are willing to spend money to solve it.  If “yes” to both these questions, then continue with the test drive.

“Test Drive” Your Team

This is the most important part of the startup “test drive”.  The team you assemble (the founders) must be able to execute.  What I’ve learned is before incorporating, distributing shares, signing shareholder agreements, etc., you have to prove that everyone 1) can work together effectively, 2) can “hold their own” when it comes to executing.  Prior to setting up your startup, challenge every member of the team with several simple tasks (coding, meeting with potential customers, market research, etc.) and determine if they can execute.   It is much easier (and cheaper) to remove team members PRIOR to launching a startup than it is after.

Don’t make the mistake of investing in a new, exciting idea without first taking your startup for a “test drive”.  Just like buying a new car, you’ll know it’s time to launch when the “test drive” feels right.

This article was originally posted as a guest blog on Spotlight Entrepreneur.

If you enjoyed this article, please subscribe and follow me on Twitter (@tburke_quark) for more on tech startups, entrepreneurship, leadership and innovation – thanks!

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