Yesterday I talked about the number of “moving parts” that a business may have can be a huge turn off to investors. So what exactly does it mean to have a lot of moving parts in your business? Well to put it simply, moving parts can be related to a chain; this is because each “part” of your business that is required in order to create revenue or work, then each chance you have for less than expected results to occur. When this happens, much like a chain the weakest link can be your undoing and ultimately lead to business failure.
Business is a lot like logical reasoning, the most simplistic answer is usually the right one so do your best to create simplistic value that everyone can understand. For example, instead of trying to be “The new Digg + Yahoo – Flickr with Facebook Intergration” just try to do one simple thing, but do it EXTREMELY well. Examples of this streamlined business example could be things such as Groupon. This start-up company does one thing (creates group initiated coupons), but does it so well that is essentially printing money for its investors that is has snatched up a staggering 1.35 BILLION dollar valuation only months after launch. It is now on a war path to acquire other businesses and disrupt the entire coupon market.
Keep in mind that Twitter recently received a 1 Billion dollar valuation after being in business since 2006, and while the idea behind Twitter is simple, the revenue model is still being defined. Given that, a key to success for a simple business is a model where only a few functions take place, but they make sense financially for everyone involved. If you were to list all the features of your tech related start-up, how long would that feature list be? 10? 20? 50? History has shown us that business with less than 10, and closer to 5 are the ones who have the highest chances to succeed.
