Every business starts in the stage called Early Struggle, but no business wants to stay there for long. You will want to get out as quickly as you can. But 8 out of 10 businesses fail to get out of Early Struggle. In the best cases, a failed business can sell out to a larger company. In the worst cases, the Founder loses everything.
There are six common traps that founders and entrepreneurs unknowingly fall prey to during these early days. The first step to avoiding them is knowing that they exist. Let’s dive in and identify all six, so you can avoid them and get your business off the ground as fast as possible.
When you are in Early Struggle, you have just one goal: to get out of Early Struggle! To get out, though, you need to find a profitable, sustainable market before running out of cash. You’ll know you’re out of Early Struggle when you can achieve a weekly profit for a full quarter and believe you can continue to do so for the foreseeable future. Under normal circumstances, this can take 3-5 years.
With the right strategy and a little bit of luck, you can dramatically shorten that time frame. For more on that strategy, see the links at the end of this article.
However, if you don’t have the right strategy or lose your focus on that strategy, in theory, you can stay in Early Struggle for a long time. It’s a brutal existence. Here are the six traps that distract our focus and might end your business before it ever really began.
The artisan trap
If you fail to find a high-quality operator (someone who LOVES to get stuff done) to help you in your business, you will likely fall into the artisan trap. In the artisan trap, the main sales rep and service provider are the same person, leaving the business able to do only one thing at a time, sell or provide the service. Unable to do both, the business will float in and out of profitability almost indefinitely. This approach is fine if your only goal is to be a successful solopreneur, but it is no way to build a successful business.
You will often see this with highly skilled individuals like technicians, consultants, craftsmen, or other experts in their field. These types tend to BE the product they sell. They often believe that most problems are solved by expertise. They can struggle to hire and delegate for this very reason. They may also struggle to embrace an actual sales and marketing process. For many, sales and marketing are a bit dirty and gross, so they do as little of each as possible.
This leads to cycles of selling when things get desperate, followed by a retreat back into their work as soon as there are enough sales to get by.
A red flag you may fall prey to the artisan trap is if your Visionary style score is under 400. This is because the relative strength of one or more of your others styles may trick you into believing you can handle it all yourself.
To get out, you have to hire someone to help carry the load. You have to focus on narrowing your responsibilities and delegating and empowering others to handle the rest increasingly as time goes by. For more on hiring in Early Struggle, check out this article Who are you hiring next?
The family affair
Some businesses, especially knowledge workers who provide a service, can get lured into a slight variation of the artisan trap that I call the family affair. My best illustration is a somewhat embarrassing example from my college days. You’ll recognize this story right away because I can almost guarantee you’ve experienced it or someone in your (extended) family has.
At the end of my first year at college, I broke my ankle when I fell 20 ft while climbing boulders in Colorado. I was going to be in a cast or brace for most of the summer. This left me with a pretty big problem. In the two previous summers, I had worked for a local roofing company. Needless to say, roofing and broken ankles don’t play well together. I was broke and needed money to pay for school in the fall, so I had to do something. The answer came in the form of a job opportunity selling kitchen knives. Left with no other viable options, I got to work.
Things started well, sort of. My first sale was to my parents. I needed them to pay for my sample set, so we struck a deal that they would pay for them, I would use them for my presentations, then we would split them at the end. Buoyed by my newfound salesmanship, I was ready to go.
I called up all my aunts and sold most of the knives. You and I know their purchase probably had less to do with the quality of my presentation and more to do with their desire to help me. While I wasn’t raking in the dough yet, I could see this was going to be good.
Once I ran out of aunts, I started calling my neighbors, high school teachers, and my friends’ moms. I sold too many of them. I was climbing the ladder to knife selling stardom. But then I ran out of family and friends to call. I came to the painful realization that while I had found profitability, it did nothing to help me find a profitable AND sustainable market. It actually distracted me and blinded me to the real problem that was there all along.
I was unable to reach sustainability because I failed to find a repeatable way to sell to people who didn’t already know and trust me. I spent all my time developing and nurturing sales to those who knew me that I never took the time to build the capacity to sell to those who didn’t know me.
In my case, I was lucky, the summer was ending soon, and I had barely made enough for school. So, I rolled up my knives, gave my dad his, and went back to school. For business owners, the family affair is rarely this kind.
Your friends and family and colleagues probably do not represent a sustainable market. I’ve seen many founders start a business on the evidence they were able to make a few quick sales to people they know or to references of people they know. Thinking they’ve found a market they quit their job and go all in only to found out when those contracts end, they’ve done nothing at all to establish a truly sustainable market.Ensure your sales processes are built and proven to work with those who don't already know you. Click To Tweet
The false finish line
Some businesses want to get out of Early Struggle so badly that they stop and put a victory flag in the ground at the first sign of profitability and start doing the more of the things they want to do, often neglecting the things they need to do. Coming up short of sustainability, they inevitably find themselves back in Early Struggle frustrated and unsure of themselves.
To avoid this trap, you need to keep pushing hard to get yourself deep into stage 2: Fun before you can rely on your momentum to help carry you forward. You probably need to sell to the point that is just beyond your capacity, scramble to make it all work somehow, and keep selling in the process.
Again, you need to develop a repeatable system for creating consistent revenue month in and month out. For many founders, this means spending a lot more time in sales and marketing than they expect. For those who enjoy sales and marketing, it probably means you need to spend more time delegating, coordinating, and just following through on all your sales and fulfillment activities.
For everyone, you need to stay on the gas, pushing the pedal to the metal. I know you’re working 80 hour weeks, and you have been for a while. I know it’s been hard. It’s physically, mentally, and emotionally exhausting, but you have to keep pushing. If you do, you’ll get your business deep into Fun. And fun it is! In Fun, you work hard and win big. These are the glory days of a startup, the days that you’ll remember for the rest of your life.
The Early Struggle addiction
There is a small group of Founders, Visionaries, Entrepreneurs, business owners, (or whatever you’d like to call them) who love Early Struggle. We call them Early Struggle Obsessives. In a way, they need the adrenaline that comes from having your back against the wall to get clear and stay excited.
Here are a few ways this shows up
- Unknowingly self-sabotaging their growing business, keeping it from ever making it to Fun.
- Starting and abandoning new business projects before they ever take off
- Always searching for the next great idea
- Overpromising and underdelivering
If you find yourself doing any of these things, you may want to stop and examine why that is. We tend to chalk it up to some specific circumstance, and that may well be the case. But if the same pattern is playing out, there may be some changes and even beliefs you may need to adjust personally.
If you find yourself partnered with the Early Struggle Obsessive, here’s some advice. First, don’t jump to any conclusions without first sitting down to examine the past and have an open and honest conversation with your partner.
If, after all that, you are still convinced your partner is an ESO, steer clear. Find a way out because things probably will not change. You can read more about this in this article: Do you want to struggle for growth, slow your growth, or scale your growth?
The Wal-Mart® dilemma
You cannot truly get out of Early Struggle if one client represents a majority of your revenue. Things will go well for a while, but you’re “cheating” the stage, and it will catch up with you.
Finding a large buyer of your product or service feels like an incredible win. Suddenly you have more demand than you could have imagined. All the dials on your business dashboard are pinned at 10 out of 10. You’re scrambling to keep up with demand. It’s incredible.
However, you are not building any sales and marketing muscle. This painful truth becomes a reality when your big buyer exercises their power over you, crushing your margins and potentially killing your business.
I’ve seen this happen with service and product-based companies alike. A marketing agency I know of had one major client and a few side jobs here and there. The client demanded so much time and attention that the agency had no time to spend doing their own marketing and developing their own sales system. Then the company started to push for more and wanted to pay less. When I was speaking with the owner, she was pretty upset. She felt like she had no choice. She had to accept their terms, or she was out of business. She started the company so she would be dependent on someone else for her paycheck, but this was even worse. Not only was she dependent on that one company for her income but also for her team members. She was under so much stress.
I’ve also seen this with consultants who leave their job and then stay on as a consultant for their previous company. It’s also common for entrepreneurs who create a great product and get it listed on Amazon or placed on the shelves of a box store. In all these cases, they are taking a significant risk and don’t even realize it. The future of their company is being decided by someone else, and the entrepreneur is not even in the room when the decision is made.
If you’re in this trap, you can get out, but it’s going to take work. You’re going to need to work double duty keeping your client happy while working ruthlessly, developing a profitable, sustainable market apart from your big client.
Fortunately, a big client can be great for your marketing as long as you don’t have an NDA or some kind of non-compete agreement. You can name drop the brand and quickly build trust with new prospects. You also have access to plenty of real stories where you added tons of value to your client. These are gold in the currency of persuasion. Use them to their fullest!
The loss-leader startup
Some founders and entrepreneurs I’ve counseled have wanted to intentionally price their product so low that they take a loss on every unit. They use fancy language like “loss-leader” and point to Uber and Tesla, but they’re wrong. To make the loss-leader approach work, you need to have about $1B. Seriously.
I don’t know about you, but I don’t remember many founders sitting on access to $1B. If you don’t have that kind of capital, all the loss-leader approach will help you sell an unprofitable product or service until you run out of cash. You need to ruthlessly pursue profitability from day one. Sure, you’ll have a period of unprofitability, but that doesn’t mean you accept it or build toward it. You need to set your sights squarely on profitability.
Taking a loss, in most situations, is due to either inadequate pricing or runaway costs. Very few business owners I speak with are pricing their products or services high enough. There are plenty of reasons, but underneath them all is insecurity. Insecurity can be solved by pricing your product lower. In all seriousness, if you’ve been around for a while and are still barely making it, you probably need to increase your prices. You may even need to double it.
If your prices are right and you’re not profitable. Your costs are too high. You need to take a long hard look at your payroll, overhead, rent, and other expenses. Cutting deep hurts, but it may be precisely what you need to do to survive.
If you’re in Early Struggle, it’s time to get out! These traps will try to keep you stuck, but there’s a proven strategy you can use to get your business off the ground and rocketing upward. While you are careful to avoid these six traps, here are some steps and resources that will help you get out of Early Struggle:
- Stockpile cash, ruthlessly pursue profitability and don’t stop until its sustainable READ MORE
- Don’t overdevelop your product or service at the expense of your ability to market and sell your product or service effectively READ MORE
- Find one or more operators who love executing on your vision and getting stuff done READ MORE
- Build your sales and marketing muscle READ MORE (I have a whole category on this one point)