Entrepreneurial Research

  • Builderpractice: Focus! – the key to success

Every startup should initially focus on its core business and thus on the core functionality of its product or service offered. Successful are the ones who solve a customer’s problem in an innovative and excellent way. Only this way can the startup convince potential customers, generate business and thus revenue.

Customers who can be convinced in the long term will tell their peers about the new and unique service or product. This attracts new customers and creates new potential revenue, which a startup will need for growing.

No special requests

The service offered should ideally be designed together with early bird customers in an iterative process in which their feedback and wishes feed into the development. That’s how you can avoid to provide a range of services or products that don’t match with customer’s needs and therefore have no market potential.

Yet herein lies also the danger of developing highly tailored products or services to match the specific needs of few customers only. Accordingly, one must be cautious in taking special customer requests and make them part of the own service or product, especially if the requests are extraordinary and resources to implement them are not available.

The major goal of any startup should always be to avoid unnecessary complexity and not get lost in details. Especially in the beginning it all comes down to focusing on the essentials. They should keep you well occupied anyway.

Going international too early – often a mistake

Many startups consider going international and often opt too early for expanding into other markets. This is justified with terms like first-time mover advantage or predatory competition.

Founders are often not aware of the enormous complexity and the high costs associated with international expansion:

  • Complexity and costs rise disproportionately
  • The service or product offered will hardly work the same way in other countries
  • Customer needs and market potential differ in some cases considerably across countries
  • Cultural, social and legal frameworks differ considerably

All this promotes unnecessary complexity and takes the focus away from the startup’s core business. It’s more promising to conquer your home market before starting to think about going international.

Adequate preparation before expanding

Early internationalization needs to be prepared well. Unfortunately, the resources needed for adequate preparation are simply not available. Business plans dealing with international expansion (with focus on specific market conditions, the different legal framework and on financial planning itself) are rarely to be found in the founders’ drawers. External assistance may well be useful and help to overcome the obstacles of pushing your business across borders.

High complexity = high costs

High complexity increases the costs and thus accelerates the burn rate of a startup. A higher burn rate means that the startup has less time available until the day it must start to operate cost-effectively.

Coping with complexity involves more work (i.e. in juristic and administrative ways and in terms of processes) and demands more resources as a consequence. This regularly means that you need to employ more staff or outsource the additional work to expensive external service providers. Especially in the early stages you don’t want to deal with more complexity in your startup than necessary.

Tip for founders

The young company InStaff from Berlin has demonstrated impressively that a clear focus on the core business leads to success. Accordingly, the founding member Max Kunz explains to Buildership that he considers a lack of focus on the core business as one of the most serious mistakes that young entrepreneurs can make.