There have been many success stories of startups that eventually become multi-million-dollar companies. Microsoft, founded by Bill Gates and Paul Allen, famously started in a small garage. It is now a $2 trillion company. Facebook was started by Mark Zuckerberg in his dorm room at Harvard University. It is now the biggest social media platform in the world with over 2.80 billion monthly active users.
However, not all startups end up becoming successful empires like Microsoft and Facebook. In fact, too few small businesses survive long enough to expand and claim a significant chunk of the market.
Why Startups Fail or Succeed
There is around a 90 percent failure rate for startups, as of 2019. About 21.5 percent of new businesses fail in their first year, 30 percent disappear in their second year, and 50 percent close by the fifth year. By the time startups reach their 10th year, the failure rate is 70 percent.
There are many reasons why startups fail. Many ran out of money because they were spending more than they earn. The business might also be in the wrong market and pushing the wrong product to its target consumers.
On the other hand, the success of a startup comes down to the decisions that the chief executive officer makes right from the beginning of the venture.
The CEO is responsible for making the decisions based on the long-term vision and goals of the startup. Employees look to their boss to steer the business in the right direction.
Every business requires a decisive leader, one who weighs all the factors before making a clear and final decision. It is not a skill that comes naturally. It is learned through experience from working in the field or from going back to school. CEOs that have a thesis or non-thesis MBA are equipped with the tools they will need to become decisive leaders that will lead their organizations toward success.
Here are the key decisions that every business owner has to make that can determine whether their venture will succeed or fail.
Team Building
The hiring decision is, perhaps, one of the most important and will become the most expensive in a startup. A CEO should not just choose to take in whoever is available or who asks for the least compensation. Every person that joins the team should make a valuable contribution toward achieving the startup’s short-term and long-term missions.
Finding, hiring, training, and retaining top talent is the challenge that will persist throughout the lifespan of the startup. Bigger companies spend a lot of money toward building a capable staff. The future of the venture depends on having the right people who are all working toward a common goal.
Managing Finances
Money will always come up in business. Every startup is bound to encounter some money problems, especially at the beginning of the venture. It will inform the CEO to develop strategies that will improve cash flow by either decreasing spending or boosting revenue.
This is where many startups fail. In most cases, money runs out. The role of the CEO is to understand how much money is left, figure out how to use it to guarantee the survival of the business, and raise more funds to enable growth. It is not always about spending more or hoarding what you have. It is about taking the step that benefits, not destroys, the startup.
Becoming an Effective Leader
Leadership involves making choices. The CEO must choose the techniques, strategies, and tactics they want to employ to inspire employees and to execute their vision for the startup.
Piloting an organization, especially one that is made up of multiple members, does not involve barking orders at people. The CEO is expected to oversee the entire operations, including setting milestones and goals, monitor the processes and resources in use, and managing staff. The CEO must know who to choose to lead a project or a department and what to do when an employee makes a mistake.
Many leaders fail to optimize the business which hurts its chances of survival and growth. Too much corporate bureaucracy wastes time and resources, preventing the organization from becoming productive. Having useless office policies can also decrease employee morale and negatively impact output.
A CEO needs to make good decisions because the entire organization depends on their ability to analyze factors and visualize potential outcomes. But, while a decisive leader is confident of their decision and decision-making skills, they are flexible, too. Part of making decisions as a business leader is to acknowledge when they made the wrong move and immediately pivot toward the right path.