You’re at the helm of a new company. Things are going along pretty well. You’ve successfully navigated past the new-born and toddler stages of your business, and are ready to spring into full-blown business adolescence. Then someone knowledgeable whispers in your ear, “You need to join a business accelerator program.” Should you heed their advice? Here are five questions which will help you determine your readiness.
First of all, make sure you know the purpose of a business acceleration program. Check out "What Startup Accelerators Really Do" from the Harvard Business Review. (Spoiler alert: The HBR thinks that accelerator programs can have positive effects on entire business ecosystems and can provide boosts to the performance of well-run startups.)
Now, on to the five questions:
1. Do you have the will to succeed?
The research of psychologist K. Anders Ericsson indicates that motivation is the most significant predictor of success in any field. Do you have a vision of the future? Do you have faith that you can succeed, even when times are tough? Are you coachable? Are you willing to listen to sage advice even if it makes you squirm with discomfort?
“… among a group of equally capable colleagues or companies, the one who puts in the most time and effort is the one who is going to be most successful.”
2. Do you have a strong team?
Many times a new business results from one individual’s idea or vision. But, in the long run, continuing solo far after the initial formation of a business is not necessarily a good idea. Look at it as if you are a one-person-band. Let’s say you are perfectly competent at playing a piccolo, clanging a pair of cymbals, and beating a drum all at the same time. What are you going to do if someone tosses you a tuba? Your whole body is already busily engaged in multi-tasking. You need a tuba-catcher! More than that, you need an experienced tuba-catcher. Otherwise, at least one of you is going to get knocked flat by forty pounds of flying brass.
In other words, seek out team members and business partners who already know what they are doing. You need depth. You need backup. The first thing a business acceleration program is going to look at is the quality of your team. Be sure you assemble the most experienced, qualified team you possibly can.
3. How are your finances?
In the startup community, a word that gets tossed around a lot is “runway.” But we’re not talking about flying a plane. Your cash runway is equal to how long you’ve got until you run out of cash. Your burn-rate is how fast you go through that cash. If you have a high burn-rate and a short runway, chances are you’re going to crash.
Just like a too-short airport runway doesn’t work out well for a speeding airplane, a few short months of financial runway is simply inadequate for a startup. Take a look at burn-rate and runway articles on the internet. Ask a business acceleration program representative what they recommend. Some startup experts believe that a new business needs an 18-to-24 month runway. You might need less than that. How will you know what’s best for you? Go back and take another look at Question 2. If you don’t know how to plan for all financial contingencies, find someone who does.
4. Do you already have customers?
If your business is still in the “just a dream” stage, then you are not ready for a business accelerator program. Don’t delude yourself with the idea that your concept is so special that customers will spontaneously flock to you at some magical moment in the future. You need to have traction. Traction means having a measurable set of customers or users that proves to a potential investor that your startup is going places.
You might already know who your customers are, and how to reach them. Great! But what do you do after your cousins and aunts and uncles have all bought your product? If you don’t know how to sell to the rest of the world, then it’s back to Question 2 again. A business accelerator program will ask if you have a team member who understands the ins and outs of effective marketing and selling. Make sure you have one.
5. Do you know your market?
A business acceleration program will also expect you to know the other players in your field, and how your product stacks up against theirs. One of the best things you can do before meeting with a business accelerator representative is to conduct a comprehensive competitive analysis.
BDC, a Canadian bank that works exclusively with entrepreneurs, has an excellent online article entitled 5 Steps to Conduct Your Own Low-Cost Competitor Analysis. They suggest that new businesses should
a. Identify competitors (primary, secondary, and substitute)
b. Gather information about the strongest competitors
c. Analyze the competition’s strengths and weaknesses
d. Talk to competitors directly
e. Identify your competitive advantage
Don’t be afraid to really dig in and find out what you’re up against. If the market you are aiming for is already saturated, without solid knowledge and a plan of action you run the risk of getting lost in the crowd even if you have a unique offering. You must be poised to take the steps needed to make you stand out.
If your answer to each of the above five questions is a resounding “YES!” and you are not afraid of the challenges ahead, then investors are going to be looking at you in a very positive light.