ChatGPT how effective for small business & startups?

ChatGPT is now being used for all kinds of things, like writing emails, creating content, and even analyzing the tone of customer feedback. I decided to see how it might advise someone interested in starting a business. To do this, I prompted ChatGPT to answer some of my questions and provided my own commentary in blue on its responses.

Here’s what happened.

Why do startups need funding?

Startup business funding is crucial for turning innovative ideas into thriving ventures. It involves obtaining financial support to cover initial costs, operational expenses, and growth strategies. Funding options vary, including bootstrapping, angel investors, venture capital, and crowdfunding. Entrepreneurs must craft compelling business plans, demonstrate market potential, and showcase their capabilities to secure funding. Successful funding enables startups to fuel their development, attract talent, and bring their visions to life in the competitive business landscape.  This is a legitimate answer, but nothing creative.

What are some common mistakes of new business founders?

New business founders often make several common mistakes that can hinder their success. These include:

1.      Lack of market research: Failing to thoroughly understand the target market and its needs can lead to developing products or services that have little demand or fail to address customer pain points effectively.  Yes, but also misunderstanding market research, or not seeing it from all sides/aspects of the customer base.

2.      Poor financial planning: Neglecting to create a comprehensive financial plan can result in underestimating expenses, overestimating revenues, and running out of cash. It's crucial to have a realistic financial forecast and contingency plans.  Also, understanding that a financial plan for a startup is constantly evolving. It needs to be revisited at the least, quarterly.

3. Ineffective team building: Building a strong and capable team is essential, but founders sometimes rush the hiring process or fail to prioritize cultural fit. Hiring the wrong people or neglecting to delegate effectively can hamper progress. I cannot stress this enough. Back in the day, one of my CEO’s went with the “Devil You Know” theory hiring on recommendations from employees and acquaintances. Another CEO decided to hire without involving any others in the company.  Needless to say, the latter didn’t end well. Good employees left, investors left, and the company never really came to fruition.  While in the former case, the excellent cohesive team worked very well together.

4. Lack of focus: Spreading resources too thin by pursuing multiple ideas or markets simultaneously can lead to diluted efforts and slow progress. I call it the “spaghetti on the wall model”.  It's important to identify a clear target market and concentrate on delivering value to that specific segment.  Pivoting can happen, but a focus that the team is on board with is very important.

5. Insufficient marketing and customer acquisition strategies: Neglecting marketing efforts or relying solely on word-of-mouth can limit growth potential. Founders should develop effective marketing plans and allocate appropriate resources for customer acquisition and retention.  As a scientific Ph.D. entrepreneur growing up through product management and marketing in business, I love this!  Especially in the social media w     orld we live in, marketing can make a huge difference to an organization. Don’t underestimate it!

6. Ignoring customer feedback: Dismissing or disregarding customer feedback can be detrimental. Founders should actively listen to their customers, adapt to their needs, and continuously improve their products or services.      “Make it and they will come” does not work.      Do early Voice of Customer research.

7.      Poor execution and planning: Inadequate project management, lack of attention to detail, and failure to set achievable goals can lead to missed opportunities and delays in achieving milestones. By avoiding these common pitfalls, founders can increase their chances of building successful and sustainable businesses.  You should always be on top of things     and know your strategic end game (try to avoid using game twice). That being said, understand where things can go wrong and identify how you might mitigate each inevitable setback.

What is the failure rate of startups?

The failure rate of startup businesses can vary depending on the industry, economic conditions, and other factors. While it is challenging to provide an exact percentage, research suggests that a significant number of startups do not survive in the long term. According to a study conducted by Statistic Brain, about 50% of all U.S. startups fail within the first five years.  (I looked up this      reference from 2017 https://www.statisticbrain.com/startup-failure-by-industry/ – way too old).However, it's important to note that failure rates can differ across sectors and time periods. True, but not particularly helpful.

For more up-to-date and detailed information on startup failure rates, you may refer to industry-specific reports, research studies, and publications from reputable sources such as the Small Business Administration (SBA), Kauffman Foundation, or reports from consulting firms like Deloitte or McKinsey & Company. These sources often provide valuable insights into startup success rates, trends, and contributing factors. These are definitely reputable sources.

After going through this process, I found that ChatGPT provided a mixed bag of answers when considering relevancy, currency, and creativity. While some answers provided relevant and useful information, I found that they weren’t always complete. Through my vast experience in the industry, I felt there was advice and additional information I would provide if asked the same questions. I also found that the resources and references it provided were sometimes out of date. Having up to date information on the current landscape is imperative when starting a business. All in all, ChatGPT is a great place to start when seeking out information, like how to start a business, but don’t let it be your only resource.