The laws of thermodynamics suggest that we are either on a path moving forward or one moving backwards (Stick with me this does relate to starting a business!).
Rarely, in our careers or in business, are we simply standing still going through time. The same is true with money. When we save money, it has a snowball effect, with compounding interest built up on our principle and newly earned interest. When we borrow money, the reverse is true.
Compound interest is an example of something called a Positive Feedback Loop. There are endless examples of this phenomenon in the world, and it helps to explain why some people succeed and why others fail. One of the best examples of a Positive Feedback Loop is seen in childhood sports.
Who remembers trying out for their schools cricket team? There was always one kid with a slight advantage over the rest. He might have been slightly taller or perhaps he had a natural batting technique. From this, he began to get preferential treatment from the coach, the team, and the parents on the sideline. He bats higher in the order and gets more time in the nets at training. Eventually, that small advantage at the start compounds over time to help him achieve greater success in the future.
Positive feedback loops work exactly the same way when starting a business.
So, what do all Founders need to get right to start a Positive Feedback Loop in their business? Here are 3 ways:
Start your business with savings or investment
Many people like the idea of starting a business with a bank loan, or using their mortgage as collateral. While this does have its place in certain cases, its important to think hard about whether you really need to borrow money to start your first business. Many successful entrepreneurs, such as Mark Cuban and Sam Walton, believe that capital or investment is never short, just peoples vision and creativity is what’s lacking. Also, we are always more careful when we spend money we have earned, rather than money that was borrowed. This is a crucial first step to get right; otherwise if your business fails to get off the ground, you’ll be spending many years paying back the money borrowed.
Get the basics done brilliantly
Once you have an idea of a product or service, you need to build a brand around that to sell it to the world. You also need to get the basics done brilliantly, consider the following:
Start with a great company name: it will be part of your brand forever and when done right it will help you on this Positive Feedback Loop. “I love your name! What do you guys do?”
Build your brand from day 1: the first step is commissioning a great logo and marketing your company brilliantly, including using the right language and developing brand values and a company vision.
Find Credible Partners: whether it’s an accountant, lawyer or business partner; finding credible and trustworthy partners early on can help you save time and money, and ensure you’re getting the foundations set up right.
Run experiments and get feedback on your product
Many people start a business with a complete view of what their product or service will be. This can be a fatal mistake. In business it’s more important to be stubborn on the goal, rather than the path that get’s you to your goal. By setting yourself up to embrace change and feedback you can continuously sculpt your product or service to the demands and needs of your customer.
When an experiment fails, stop it instantly and experiment in a new way. When something works, double down on that hypothesis. This way, when you receive enough positive feedback on your product, you know it’s time to sell it to the world and start to build exponential growth and momentum.