Why You Should Build A Business Not A Startup

Wait, isn’t a startup a business? Investopedia tells us that a startup is a business founded by one or more entrepreneurs dedicated to bringing a product or service to market. Immediately, it’s evident that a startup is a business, but whether it’s a thriving business comes down to how the owner decides to build it. A successful business has strong fundamental values behind its operation. With so many startups finding their legs in today’s business world, it’s not uncommon to see owners building a startup and not a business. Unfortunately, in these situations, the startups fail to catch the wave and end up failing. So how does an entrepreneur build a business and not a startup?

Step 1: Focus on Your Value Proposition

What is it that you’re selling? No, not the product, but the value. When you boil it down, the most successful companies sell value, not a product. According to the Corporate Finance Institute, a business’s value proposition is how its service or product will benefit the consumer and why they should purchase it. If we look at one of the world’s leading retailers in Amazon, we immediately see the power of defining a value proposition. Amazon has tons of products, but its value proposition focuses on convenience, low prices, and massive variety. People subscribe to Amazon’s flagship service Prime for those reasons. By building a resilient business that focuses on those value points, Jeff Bezos managed to stave off competition from several areas and become the go-to marketplace for online shopping.

Step 2: Start Generating Revenue From Day One

Most startups focus on building their product and audience base first before they start making a product. Yet, some of the most prominently successful businesses decided to start running from the time the gates were open. How does a company do that? You need to have a ready and willing consumer demographic that’s winning to pay for your product. Secondly, you’ll need to have a unique effect that the buyers can’t get anywhere else. Once you have those product or service details sorted out, the rest is selling the idea to the customer. the more unique and undifferentiated your product is, the less actual convincing you have to do to get the buyer to buy it. Generating cash from day one means that the business can stand on its own two legs and needs less support from investors.

Step 3: Explore the Unexplored

Niche markets sound like they’d be small and difficult to cater for. Yet the markets that tend to have the strongest brand loyalty are these. Niche markets offer a business a chance to reach out to a ready demographic of customers that may be under-represented in the larger collective of society. The worst thing you can do as a small business is to hope to compete with a giant in the same space. Instead, look at the edges of society. Our best examples come from disruptive companies that focus on a niche product. Once their service or product builds interest and enters the mainstream, they can start competing with larger companies on their own terms.

Step 4: Understand Unit Economics and Scalability

A consumer will only pay what they think your product is worth. This tenet is something most business people come to realise. Unit economics represents the value of your unit product to the consumer, less its costs. For a high cost business that delivers pets to customers travelling across the world, like Flight Nanny for Puppy, this is critical. As a business scales, this cost is likely to go up since acquiring more assets means that the company has sunk more capital into its growth. The consumer, therefore, must pay more to allow the business to recoup the cost. In some cases, that amount is negligible, given the lifetime of the product in question. A business that wants to succeed must pay attention to its unit economics and avoid pricing itself out of its own market. No matter how good a product is, buyers aren’t going to pay a price they consider too much to access it.

Building Businesses Requires Changing How You Think

As entrepreneurs, we see businesses in a unique way. When you start a business, you look at what it can do for people and what it’ll cost us to set up the infrastructure. However, these things aside, how does the business benefit the customer? Unlike Field of Dreams, businesses in the US don’t operate on the “build it, and they will come” rule. Instead, a business needs to know how it’s going to bring value to people’s lives. It shouldn’t sideline buyers because they’re in a strange niche and should aim to profit from its first day in operation. It needs to revisit its value proposition daily and see if it’s viable to continue on this path given the unit economics at scale. By balancing these steps, a business can change from being just another startup to becoming an excellent business idea that can stand on its own two feet.

Brett Sartorial

Brett is a business journalist with a focus on corporate strategy and leadership. With over 15 years of experience covering the corporate world, Brett has a reputation for being a knowledgeable, analytical and insightful journalist. He has a deep understanding of the business strategies and leadership principles that drive the world's most successful companies, and is able to explain them in a clear and compelling way. Throughout his career, Brett has interviewed some of the most influential business leaders and has covered major business events such as the World Economic Forum and the Davos. He is also a regular contributor to leading business publications and has won several awards for his work.