Jaime Parodi Bardón is an entrepreneur and business innovator, with a career background as project manager (SONAE – Worten) and consultant (IBM, Accenture and PwC). Co-founder of Viable, Lisbon Entrepreneurship Club, Piñata Productions and Mastropiero Gastrobar y Jardín, he is also the author of research about data analytics for entrepreneurial finance, entitled “Viable Framework 1.0, evaluating the viability of startups by using a data-based framework”. If you’re thinking about to create your own business, stay tuned. His wise words can be an answer to some of your questions.  

About 10 million startups are created every year worldwide, and the fact is that 60% of them fail. This means that 6 out of 10 startups are not viable. In my case, these numbers don’t add up, they are actually even worse.

I contributed to creating 2 successful businesses while I failed at creating 4. So, you can think that maybe I’m not the right person to talk about viability. However, those experiences also made question what works and what doesn’t. A viable startup is an exception and not the rule. That’s for sure. But actually, the first question to answer is: what is a viable startup?

The viability of a startup will be determined by its capacity to survive and be successful. In other words, a viable startup has to be sustainable in the first instance and profitable with continuous growth in the long run. Then, the second question is: How to achieve viability? What are the factors that make a startup to be successful? I came up with different factors during my research that, well managed, contributed increase the chances of achieving success. These factors were categorised in the following dimensions:

1) Idea

Plato had his theory about the ideas to explain the world and its reality. However, in the business world is the other way around: the idea has to come in the form of a solution to a real problem. No problem, no solution and therefore, no viable startup. An idea needs to be solving a problem that at least a group of people have and the more value they give to the problem the more value they will give to your solution. This is the beginning but not everything. Amazing ideas on their own do not achieve success.

2) Team

The team is the engine that drives the idea from a concept to business. A good leader is necessary to implement the vision, create the culture and enable the proper environment where the rest of the management team and collaborators will work together to deliver at the highest performance. Also, even though this sounds cliché the team needs to complement each other – we have seen some teams developing a technological problem with no tech person or a team with only engineers – been there, will not do it again.

3) Market

Some guys started selling a rock (yes, a simple rock) whose main feature was its heaviness, and they sold a few of them. It might look like there is a market for anything but how big is it? Once the opportunity is detected, the market has to be analysed and measured properly. What is your story? How are you different from others, and how can you take advantage of that? Competition exists, and if it doesn’t, it will, so make sure you know how to tell your story in a way that taps into the market.

4) Execution

During execution is when the potential of the idea, team and market combination is validated. Good execution can overcome a poor idea and vice versa. Products based on ideas worthless, like carbonated water mixed with sugar and packaged as happiness, could become a huge business thanks to a brilliant execution. On the other side, marvellous ideas wreck due to poor execution. The dotcom era provides great examples of dramatic falls; Myspace is a good representation. Execution requires excel at planning and control. The favourite part of the MBAs.

5) Financial

Talking about business, we could say that financials are the most relevant side of it. Financials reveals the health of the business. How is the income now? How is the potential income for the future? Revenue is key but… What about the expenses? Is it the expenses structure sustained under the income? You need to take into account the burn rate as well… Cash is the oxygen so make sure it flows… Is your business healthy?

6) Legal

A company is a group of people with a concrete mission. A legal structure is required to ensure rights and responsibilities. You need to figure out which is the best legal form to support your company goals at a concrete stage and geography. You should write crystal clear contracts and agreements among the partners, investors and rest of stakeholders to avoid any problem in the future. You should know the specific rules (commercial, fiscal…) where the business is playing at. And don’t forget to consider patents and copyrights that could protect the main assets of your company.

As you can see, the recipe to build a viable startup requires a lot of ingredients. The more ingredients you have, the more likely your chances to achieve success are. And now, back to the basics: do you have any good idea to start cooking with?”