Most startups close early.
Both offline (normal) startups and online startups. But there is a massive difference in the cost of closure.
A basic offline venture costs a whole pile of money before making that first sale. The government wants you to register before you start. Then you might need a shop (or office or factory) with its long lease, deposit and surety. Of course you need a website as well. Then you need a business bank account and some money, both of which come with sureties.
In other words the world wants deep commitment before you even know if the idea can work. It is like paying for the wedding before the first date.
If it doesn’t work out then the costs and the pain continue for a long, long time. Maybe that’s why most folk prefer a real day job?
The offline process is kinda:
- Have new idea;
- Nurture it, breathe it into life;
- Discuss with close friends and family, most of whom agree it is a winner;
- Borrow money from friends, family and bank to start up;
- Register business to legally sell stuff;
- Set up shop (or office);
- Set up website;
- Open doors and wait for the buying hordes;
- Wait some more;
- Run out of money while friends and family tell you it was a bad idea;
- Find real day job to pay the bank for the next few years.
It sounds brutal and with 70% of startups in SA not making their first year-end, it is. Closing a regular business is slow, complex and expensive.
Contrast that with a simple online business. (There are many variants on this theme that work just as well.)
The online process is kinda:
- Have new idea;
- Then Research Google to see if enough people interested;
- If NO, expand idea and go back to research step;
- If YES, then build a basic website just to see if those interested people like your idea; (total costs so far are a couple of hours and R150 to register and build the site, and R500 to advertise on Google, both of which you pay by card)
- If NO, refine website; (a few more hours)
- If YES, refine website to turn visitors into buyers;
- If still NO buyers, restart process with new idea;
- If buyers come then grow it until it is big enough to leave your real day job;
- Or let it earn money while you do the same with your next idea…
- At some point choose to register formally or work as a sole proprietor for a while more;
The online process is fast and safe. The upfront cost of an idea not working is close to zero. You get to test before you invest big time or money. No need to borrow money up front. No need to sign sureties. No leases to sign. No fallout afterwards.
By testing your market at each step you ensure that you stay focused on the income flow.
I make one assumption in the online process above because this is what I teach folk to do: I assume that you know how to do each step yourself.