AJ Prager Tells Us How A Start Up Can Succeed
It’s no secret that most startups fail. In fact, some statistics suggest that as many as 95% of first time entrepreneurs fail. So, what can be done to increase startup success? Shows like Shark Tank and Startup are helping to educate new business owners, but there’s still a tremendous need for educating new companies on how to survive. One of the biggest obstacles that small to medium-sized businesses face is understanding how to make smart business decisions. That’s the specialization of AJ Prager. He’s the founder of the Prager Strategic Group, which is a one-stop shop for helping small to mid-size companies make smart business and strategy decisions. In this week’s interview, AJ will teach us what distinguishes the successful from the failing startup companies, the key business insights that every small business show have, and the importance of early financial and strategic planning.
AJ, please tell us about your background and current work helping young companies with financial advising and strategic planning.
I began my career in investment banking, where I spent five years deeply entrenched in company capital raising, a very regimented and financially driven process. After two years in business school, I moved to the company side, working in-house at Warner Bros. Entertainment, in their Corporate Business Development & Strategy Group, essentially, an in-house M&A / strategy group. After five years in this capacity, I moved to a start-up in the TV production space. I soon realized many start-ups do not have the appropriate finance resources (they have product people, marketing people, but many omit the CFO role until later). My background and interests aligned to provide these entities with the proper advice on capital raising and building sustainable entities through efficient and purposeful capital allocation.
Many companies move too quickly to market without a proper strategic vision (building a business plan). The problem with moving quickly to market, without a business plan, is many costly mistakes can be avoided through proper planning. Ensuring all company actions are aligned toward the same goal will allow operational efficiency and proper use of limited financial resources. The business planning process allows owners to dump their ideas onto paper, and iterate; a highly valuable process in and of itself, allowing the owner to see his vision in different forms, and how the critical pieces (i.e. marketing, product design, target markets, etc.) will help him achieve his goal).
What, in your opinion, separates the most successful companies from those that have been unsuccessful in their market? How do you predict who will succeed?
There are many qualities that work for successful companies. And, one valuable quality at one company isn’t necessarily a recipe for success at another company. However, a few, fairly obvious qualities are helpful:
(1) openness to iteration and pivoting — many times, a company’s most successful version isn’t the first
(2) collaboration and delegation — the ability to utilize talent through the organization
(3) leadership — the ability to galvanize others and inspire confidence throughout the organization.
Success can also be defined in many different ways. If, you define success as raising capital, moving into “hot” markets is helpful. Right now, tech and ‘on-demand’ services are much easier to fund than a supermarket chain.
Does scientific research guide your work in any way? For example, do you read about research conducted by researchers in business schools, psychology departments, or other academic areas and incorporate their research findings into you work? If not, what can researchers like psychologists do to make their research more applicable to your life and work?
I use research regularly. Research provides data around trends, which in turn allow companies to predict or make educated guesses on where markets will be in the future. As such, data driven research is absolutely critical for my work.
Do you have any final comments or thoughts on how people (entrepreneurs, people looking for jobs in new markets, etc) can apply your work to improve their own successes?
Depending on one’s age and experience, aligning yourself with a true mentor can help jump-start your career (i.e., if you are just out of school, work for a small company where you can learn the ins and outs of the business, whereas, at big companies, employees are often task-driven or buried in corporate layers).
If starting your own business, financial resources drive a business. Early on, revenue can be difficult to control; however, costs are more easily manipulated. Cash is absolutely critical, so, make sure you lengthen your runway as far as possible. And, twice as long as you think you need.
- Don’t be afraid, just do it.
- A big network is a big help. Meet as many people as you can.
- Find a partner that compliments your skill set.