Why do some startups skyrocket to success and others fail? Better ideas? More money? Good timing? According to entrepreneurs Ash Ali and Hasan Kubba, all of those may be true. In The Unfair Advantage, Ali and Kubba explain that founders of successful startups exploit their unfair advantages, the qualities or conditions that give them an edge over competitors. There are many types of unfair advantages, and everyone has at least one, according to the authors. To achieve startup success, you just need to find and use your unfair advantages to fuel business growth.
Drawing on over 20 years of experience building startups and coaching entrepreneurs, Ali and Kubba describe the steps you must take to achieve startup success—from identifying your unfair advantages, to choosing a viable business idea, to building a winning team. By following their advice—and applying your unfair advantages at every turn—the authors claim you’ll be able to achieve your entrepreneurial dreams. In this guide, we’ll cover three main elements of Ali and Kubba’s advice:
Throughout the guide, we’ll compare the authors’ ideas to those of other business leaders—for instance, ideas from Brian Tracy in Goals! and Grant Cardone in The 10X Rule. We’ll also share additional steps you can take to increase your chances of achieving startup success.
According to Ali and Kubba, the key to entrepreneurial success is leveraging your unfair advantages, the qualities or conditions that give you an edge over competitors. For example, you might have a lot of charisma, which allows you to easily influence others. Or you might have specialized technical knowledge that allows you to design innovative, time-saving software solutions.
(Shortform note: Ali and Kubba label these professional assets as “unfair advantages,” but Malcolm Gladwell would argue that these assets aren't necessarily “unfair” at all—in some cases, they aren't even “advantages.” In David and Goliath, Gladwell makes the case that the same advantages that give people power and success are often their greatest weaknesses. For example, in 1917, Lawrence of Arabia was able to defeat the much larger Turkish army in part because the Turks’ numerous troops and supplies hindered their mobility.)
But before we discuss how to find and use your unfair advantages, we need to examine the mindset Ali and Kubba say you need to be successful. Why? According to the authors, your mindset determines your level of motivation and your ability to set ambitious but realistic goals. If you lack the right mindset, any action you take is less likely to succeed. In this section, we’ll cover two main aspects of the right mindset Ali and Kubba describe: first, believing that both hard work and luck matter, and second, knowing your purpose.
(Shortform note: Many business leaders echo Ali and Kubba’s assertion that an entrepreneur’s mindset is the foundation for startup success. One key attribute is a positive attitude, which will give you the fortitude to withstand business challenges. To cultivate a positive attitude, focus on things you can control, such as recruiting quality team members and getting adequate sleep, instead of cultivating negativity by worrying about things you can’t control. Another powerful mindset characteristic to develop is resilience, which will enable you to rebound from setbacks quickly. To develop resilience, approach mistakes as learning opportunities, then incorporate insights you’ve gained into your future actions.)
To fulfill one key aspect of the successful mindset Ali and Kubba describe, you must simultaneously believe that hard work pays off and acknowledge that luck can be the difference between success and failure. While launching a successful startup requires dedicated effort, you may not be able to attain the same level of success as someone else, no matter how hard you work. In reality, we all have vastly different levels of privilege, luck, and opportunity that influence what we can realistically achieve. For example, if your competitor inherited a fortune from their parents, and you’re self-funding your startup, you can’t reasonably expect your success to equal theirs.
(Shortform note: Research strongly supports the authors’ assertion that people’s different life circumstances shape their odds of becoming successful entrepreneurs. People whose parents have high incomes are more likely to become entrepreneurs, and family money is one of the primary sources of funding for startups. When entrepreneurs have strong financial support from their families, they don’t have to do the hard work of securing startup funds to survive the critical early months of development, and they have a financial safety net in case things don’t work out. Although this financial support doesn’t necessarily translate into success, it gives entrepreneurs a significant advantage.)
However, if you believe that luck is the only determining factor in success, you may become resigned, thinking that nothing you do ultimately matters, so why bother trying? To avoid this pitfall, Ali and Kubba say, you should aggressively pursue your goals with the resources you currently have to increase your chances of success—while knowing that some factors are out of your control. This determined yet realistic mindset will help you stay motivated to keep pursuing your dream, even when you encounter setbacks.
(Shortform note: Is believing in luck demotivating, as Ali and Kubba contend? Research indicates yes, revealing that people who believe in luck as a random, external phenomenon that determines outcomes are more pessimistic and anxious. In contrast, people who believe in their ability to shape outcomes tend to view challenges as opportunities. They’re also more likely to take initiative, adapt to change, and find creative solutions, thereby increasing their chances of success. Thus, the determined yet realistic mindset Ali and Kubba promote will likely improve your odds of becoming a successful entrepreneur.)
The second essential element of a successful mindset involves knowing your purpose. As Ali and Kubba explain, the entrepreneurial journey is treacherous and filled with unknowns. If you don’t have a clear and compelling purpose for starting your business, you won’t be motivated to stay the course. Therefore, think carefully about why you’ve chosen to take this route.
(Shortform note: Ali and Kubba assert that it’s important to have a strong, compelling “why” motivating you, but they don’t offer any actionable ways to make this mindset shift. In Goals!, Brian Tracy recommends that you list all the reasons you have for pursuing each of your goals, as the more reasons you have, the more determined you’ll be to push through obstacles. For example, if your goal is to make a six-figure income, your reasons might include providing a comfortable life for your family, being able to save for retirement, and having money to care for your aging parents.)
To motivate yourself, Ali and Kubba recommend setting both self-serving external goals (like earning a certain income or becoming famous) and other-serving internal goals (like trying your best to improve elderly people’s quality of life, or to connect college graduates to career opportunities). Self-serving external goals often make you feel good in the short term, and there’s nothing wrong with using them to motivate yourself. However, Ali and Kubba state that you need other-serving internal goals because they give a greater sense of fulfillment that isn’t dependent on external circumstances. In other words, if you’re internally motivated, you’ll feel like a success even if you don’t achieve the outcome you want because you know you’re trying to do the right thing.
(Shortform note: While Ali and Kubba claim that you need other-serving internal goals to motivate yourself and find fulfillment, the Dalai Lama asserts in The Art of Happiness that the only goal you need is the goal to make yourself happy. Like Ali and Kubba, the Dalai Lama acknowledges that external goals only bring fleeting pleasure. However, he claims that our focus should be on finding fulfillment inward, not outward in a grand mission to help others. Although working primarily toward your own happiness may seem selfish, the Dalai Lama points out that training yourself to be happy makes it easier for you to show kindness and generosity to others, adding goodness to the world.)
Ali and Kubba warn against being overly ambitious even when you define your other-serving, inspirational purpose. For example, don’t say you’re going to solve global warming, eliminate the gender wage gap, or become the first trillionaire, as those are completely unrealistic. Instead, identify a purpose that’s ambitious, inspiring, and realistically matches your circumstances.
Are Ambitious Goals Bad?
Ali and Kubba recommend that you avoid setting overly ambitious goals. However, others disagree. For example, in The 10X Rule, Grant Cardone asserts that you need to set lofty, unrealistic “10X” goals because they’ll keep you inspired and motivated to exceed expectations. He says that if you set realistic goals with an average payoff, you’ll likely devote only halfhearted effort because your goals aren’t big enough to inspire you. In Cardone’s view, the more ambitious your goals, the more motivated you’ll be to devote the effort needed to overcome obstacles and succeed.
Similarly, in The Obstacle Is the Way, Ryan Holiday asserts that you must boldly set unreasonably aggressive goals because they’ll energize and inspire you to produce your highest-quality work. Moderate, realistic goals, he says, are based on a fear of failure —people lower their expectations because they assume they’re less capable than they actually are. In effect, goals become self-fulfilling prophecies, so Holiday recommends stretching your vision beyond what feels comfortable.
Ultimately, everyone is different and will be motivated by different types of goals. Therefore, it might be best to experiment with goals of different levels of ambition to see what works for you.
Now that you know how to nurture a mindset that’ll keep you motivated throughout your entrepreneurial journey, it’s time to explore how to identify your unfair advantages. As Ali and Kubba assert, when you leverage your unfair advantages, you’ll be able to build momentum faster and achieve profitability earlier as you grow your business.
In this section, we’ll review five main categories of unfair advantages: valuable assets, knowledge and education, location and timing, interpersonal skills, and prestige and social connections. We’ll explain what each category includes and consider the possible benefits and shortcomings of each. We’ll also discuss how you can assess whether you have an unfair advantage and provide steps you can take to develop weak areas.
According to Ali and Kubba, valuable assets include money and anything that you can exchange for money, such as property, investments, or jewelry. If you have enough money to finance the initial launch of your startup and the first several months of operations—without having to struggle to pay for housing, food, and other life essentials—it’s a huge unfair advantage. Also, having sufficient money can give you peace of mind that you won’t be destitute if things don’t go exactly as planned, which can empower you to take more aggressive actions that hopefully translate into growth.
However, having a stockpile of valuable assets doesn’t guarantee success. As Ali and Kubba point out, many wealthy startup founders have failed spectacularly despite their privilege. Why does this happen? One reason is that excessive wealth sometimes makes people lazy and entitled, and thus less willing to do the hard work needed to succeed.
(Shortform note: As we mentioned previously, research supports Ali and Kubba’s assertion that entrepreneurs with access to money have a significant advantage. Research also suggests wealthy entrepreneurs think differently, which further boosts their success. They have an “abundance mentality,” which is characterized by the belief that resources are plentiful and there’s enough out there for everyone. This gives them a deep sense of security that emboldens them to think big and have an optimistic outlook. Thus, money has the potential to positively affect people’s external circumstances and their mindsets. So, while money can make people feel entitled, discouraging them from exerting the effort required to succeed, on balance, it’s a major advantage.)
How do you know if valuable assets are an unfair advantage for you? Ali and Kubba recommend that you consider this question: Do you have (or can you get) enough money to fund at least six months of operations? If you answer yes, this is one of your unfair advantages.
(Shortform note: To determine how much money you’ll need to fund your first six months, as Ali and Kubba suggest, take time to calculate your startup costs. You’ll incur different expenses depending on your business type—for example, online or brick-and-mortar. Typical expenses include permits, licenses, advertising, office space, equipment, utilities, insurance, and website construction. Consider reaching out to other business owners to see what they pay for expenses so you include all probable costs in your estimates.)
If your funds are currently low, here’s what Ali and Kubba suggest you can do:
Practical Ways to Get More Money
How easy is it to implement Ali and Kubba’s suggestions for getting more money? Let’s examine each of their tips in turn:
To launch a startup that doesn’t require a lot of money, experts recommend that you consider service-based businesses, as these have lower overhead than product-based businesses. For example, you could turn your hobby or professional skills into a business venture by providing online courses in yoga, knitting, or auto repair. Or, you could become a bookkeeper, translator, social media consultant, or handyman. This approach is relatively easy to execute if you have the skills and passion for a service that’s in high demand.
What about saving money from your full-time job? How realistic is that if you’re already stretched thin? According to George S. Clason in The Richest Man in Babylon, you should aim to save 10% of everything you earn, even if you’re in debt. He says this is relatively easy to do by determining your necessities and creating a budget to cover them while eliminating wasteful spending. Clason says if you do this, you’ll be able to save a year’s earnings in 10 years.
Lastly, if you have sought-after skills like writing or graphic design, you can make good money freelancing. According to research, 65% of freelancers who quit their jobs to start freelancing earn more than they did at their prior place of employment. You can turn your freelance gig into a full-time startup, or you can set aside money earned through freelancing to finance your startup in the future.
Therefore, depending on your circumstances—and as long as you’re not in dire poverty—Ali and Kubba’s tips are easily actionable and can generate at least a portion of the money you need for your startup.
Knowledge and education include formal or informal learning as well as insights you gain from life experiences. As Ali and Kubba explain, if you have a solid foundation of knowledge, you’re more likely to be aware of complex variables that can impact your startup’s growth. This allows you to make better decisions to increase your chances of success.
(Shortform note: Research reinforces the link Ali and Kubba make between education and entrepreneurship. In one survey of startup founders, 95% had a bachelor’s degree or higher, and 47% had more advanced degrees. Also, the vast majority of wealthy individuals hold at least a bachelor’s degree. However, more education isn’t always beneficial. Formal education can be expensive, requiring you to incur debt that can hamper your startup dreams. And not all education is relevant for entrepreneurship. For example, a philosophy degree may not be as helpful as a business degree.)
That said, as Ali and Kubba explain, knowledge can be a drawback. For example, if you have a huge bank of knowledge, you might become overwhelmed thinking about all the possible actions you could take and all the potential barriers that could disrupt your plans. This excessive deliberation can stymie progress.
(Shortform note: According to research, high intelligence is strongly correlated with anxiety, validating Ali and Kubba’s assertion that more knowledge may work against you. People who are more knowledgeable detect more threats in any given situation and tend to continuously scan for new information, which contributes to anxiety. Also, smart people are more prone to overthinking, which can stall forward momentum in your startup when you need it most. To avoid “analysis by paralysis,” experts recommend breaking through anxiety by getting into action. Create a simple plan and identify little steps you can take to work toward the results you want.)
To determine if knowledge and education are an unfair advantage for you, the authors recommend that you consider what formal training you’ve had, how adept you are at understanding difficult concepts, and whether it’s easy for you to identify unmet needs in the market. Also, consider if you’re generally good at coming up with creative solutions to problems.
(Shortform note: A professional self-assessment, such as Gallup’s online CliftonStrengths test, can help you determine how strong your knowledge and education are. In StrengthsFinder 2.0, a companion book to the online test, Tom Rath says that if you score high on critical thinking and problem solving—indicating that you have knowledge and education as an unfair advantage—you can make the most of these skills by discussing your ideas with others. Feedback will help you further increase your effectiveness.)
If you’re weak in this area, here are some steps you can take to improve:
(Shortform note: The steps Ali and Kubba suggest to expand your knowledge—seeking insights through reading, courses, and professional contacts—coincide with the habits of successful entrepreneurs. According to research, successful entrepreneurs prioritize learning. The more successful they are, the more time they devote to reading. They also focus on building powerful networks they can tap into for support or resources. To start developing in this area, aim to read at least 30 minutes a day, either first thing in the morning or before you go to bed. Meanwhile, to expand your network, start making connections online, where you can connect with people from all over the world through email, instant messaging, or video chat.)
According to Ali and Kubba, startup success often depends on location and timing: being in the best position or place at the optimal moment. Location includes your city, neighborhood, business site, and online presence. If you live in an area with a lot of talented workers, eager investors, quality internet connection, and reliable transportation, you can potentially tap into those resources to facilitate business growth. Also, if your business is in a safe, easily accessible, and highly visible area, you’ll find it easier to attract customers. Further, your business prospects improve significantly if you have a clear, user-friendly website that appears frequently in organic search results.
The Post-Location Business World
If you need a physical location for business, location absolutely affects your ability to attract customers, as Ali and Kubba say. However, the move toward digital business activity is arguably making location less important. In June 2020, only 26% of people were working on their business premises; 42% were remote, and 33% were not working. About 16% of all retail sales occur online, and some analysts predict 95% of all retail sales will happen online by 2040. So, it might make more sense for you to forego a physical business location altogether.
If you choose this route, having a professional, easy-to-navigate website is non-negotiable, as 88% of consumers research product information before they make a purchase online or in a store.
Timing refers to how closely your business idea coincides with customers’ changing interests, which are shaped by cultural and technological advances. For example, home office design solutions surged in popularity only after the number of remote workers rose during the Covid-19 pandemic. As Ali and Kubba explain, getting your timing right is critical. If you launch too soon, you’ll likely have to work extra hard to increase awareness of your product and convince people of its benefits, potentially incurring high marketing costs in the process. If you launch too late, the market may be saturated with established competitors. Ideally, the authors say, you should aim to capitalize on a growing, long-term trend.
(Shortform note: How much does timing matter? In one study of 200 companies, timing accounted for 42% of the difference between business success and failure. One way to gauge timing, experts say, is studying relevant websites and blogs. If a trend is developing, people will likely be talking about it in a few places online. Also, research the current market to see if there’s a current need or desire for your business idea. For example, if you’re starting a small brick-and-mortar business, local business trends—such as whether other small businesses or startups are succeeding—will help you determine if the environment is ripe for your business venture.)
Are there drawbacks to having good location and timing? Although living in a good neighborhood, securing a desirable business location, and building a robust online presence can support growth, it can also be expensive, according to Ali and Kubba.
(Shortform note: Some argue that a good “location” doesn’t have to be expensive thanks to the modern convenience of the internet. In The $100 Startup, Chris Guillebeau says you can now launch a business for as little as $100, with only a sound business idea, a website, a way to process payments, and basic marketing.)
Further, Ali and Kubba say that if a good location and timing cause you to achieve success early in your business journey, you might become reckless, arrogant, and delude yourself into thinking you’re more capable than you actually are, causing you to stop learning.
(Shortform note: Many business leaders acknowledge that rapid success can lead to complacency, as Ali and Kubba warn. According to scientists, motivation is the number one reason people succeed—beating self-confidence, initial resources, and luck—so complacency can derail your business growth. One way to overcome complacency is to set aside 10 minutes a day to reflect on what you accomplished and how you can improve. Write down what actions you’re going to take, and ask people to hold you accountable.)
To assess whether location and timing are unfair advantages for you, Ali and Kubba say to consider whether your business sites—both brick and mortar and online—are accessible and welcoming to customers. Also, evaluate whether your business idea is merely tapping into a fleeting trend, or if you’re latching onto more sustained, long-term interest that can carry your business into the future.
If you think you fall short in location and timing, here are steps you can take to develop in this category:
(Shortform note: SEO is free but incredibly time-consuming if you do it yourself. If you opt to pay someone to handle SEO for you, cheap providers generally cost between $500 and $3,000 per month while high-end providers range from $15,000 to $30,000 per month. Is the expense worth it? According to research, 70% of businesses say SEO generates more sales compared to pay-per-click advertising, so this step will probably pay off in terms of increased visibility (and sales), just as Ali and Kubba say.)
Assess Your Business’s Availability
According to Byron Sharp in How Brands Grow, even if your business is welcoming and located in an accessible area, customers will ignore it completely if they aren’t looking for it or don’t recognize it. Therefore, you should not only assess your brand’s “physical availability,” as Ali and Kubba recommend, but also its “mental availability”—how recognizable it is to customers. To increase your brand’s mental availability, one step Sharp suggests is to advertise regularly, which will create memories that customers draw upon when making buying decisions.
If you’re considering relocating, per Ali and Kubba’s suggestion, see if you can expand instead and keep both locations. Sharp contends that expanding into an additional location would pay for itself if you pull it off correctly, as the additional store will increase your brand’s physical and mental availability. To execute a successful expansion, be sure to devote extra attention to making your brand highly visible in the new location—for example, by using bold signage in high traffic areas. This will help you grab people’s attention and lure them into your store.
Create Your Own Trend Instead of Waiting
Instead of waiting for the right trend, as Ali and Kubba suggest, many argue that it’s more profitable for you to start your own trend by innovating in a space that’s never before been explored. In Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne say it’s best to operate in an uncontested market—a “blue ocean”—rather than an intensely competitive “red ocean” market filled with ruthless competitors. One way to get this edge is to design a product that’s clearly superior to the competition and benefits customers in a new way. For example, the company Ring did this by creating doorbells with security features like video cameras and motion detectors, allowing customers to know when someone is at their home even when they’re not there.
Interpersonal skills are your ability to relate to—and persuade—potential customers, employees, and investors. As Ali and Kubba assert, excellent interpersonal skills give you a huge advantage, as startup success hinges on your ability to win over and influence others.
(Shortform note: Research supports Ali and Kubba’s claim that interpersonal skills are valuable when launching a startup. Data shows that 85% of financial success comes from the ability to communicate effectively with others, whereas only 15% comes from technical skills or knowledge.)
Ali and Kubba say that everyone has unique strengths and weaknesses when it comes to relating to others. The key is to accentuate your strengths and accommodate for your weaknesses. For example, if you’re more introverted, you might need to make a purposeful effort to put yourself in situations where you’ll meet new people. Alternatively, you can partner with someone who’s naturally extroverted, an approach we’ll discuss more later in the guide.
(Shortform note: Although introverts may benefit by tapping into the skills that come more naturally to extroverts, they don’t necessarily need to transform themselves into someone they’re not to achieve success. While startup founders are often portrayed as hard-charging, outgoing extroverts, research shows that roughly four in 10 top executives identify as introverts, including Google CEO Larry Page and Facebook founder Mark Zuckerberg. Introverts tend to foster a better team environment than extroverts and are better listeners, a major asset for effective leadership.)
How can you tell if interpersonal skills are one of your unfair advantages? Evaluate how easy it is for you to connect with people. Do you intuitively adjust your communication style to match others’ moods and personalities, or do you consistently “rub people the wrong way”? If you’re unsure about your skills in this area, Ali and Kubba recommend asking your friends and family for input.
(Shortform note: To expand your insight into the strength of your interpersonal skills, you may consider the approach Olivia Fox Cabane suggests in The Charisma Myth: assessing your presence, power, and warmth. Do you give others your full attention when talking to them? If so, you have presence. Do you appear confident, secure, and assertive in getting what you want? If so, you have power. Do others feel that you genuinely care about their well-being? If so, you have warmth. According to Cabane, these three characteristics determine how likable and persuasive you are to others.)
If you want to develop your interpersonal skills, consider the following action steps:
(Shortform note: As Ali and Kubba indicate, being inquisitive and self-aware are both effective ways to improve your interpersonal skills. Research shows that curiosity expands our empathy and enhances our ability to understand people whose experiences and worldviews are different from ours. Being self-aware helps us think more objectively about our feelings and actions, allowing us to align our behaviors with our values. In turn, this enhances our ability to relate authentically to others and make a positive impression.)
Lastly, prestige and social connections interact to provide another unfair advantage. Prestige refers to the value others attribute to you and your expertise. As Ali and Kubba explain, when others hold you in high regard, they’ll be more likely to trust you, which is essential as you work to gain traction in your startup.
(Shortform note: Some business leaders say that your reputation and perceived status are the most important factors in your business success, affirming Ali and Kubba’s contention about the importance of prestige. When people trust you, they’re more likely to repeat business with you and forgive mistakes. Therefore, it’s critical to proactively build and protect your reputation, especially online. According to research, 91% of consumers trust online reviews as much as personal recommendations, and 65% of internet users believe an online search is the most trusted source of information about people and companies.)
Your social connections encompass both personal and professional relationships. The people you know and interact with routinely can influence your level of motivation and your access to opportunities. For example, if you’re surrounded by people who are business-oriented and driven, you can benefit from their knowledge and draw inspiration from their success. Also, the wider your network, the greater chance you’ll have of meeting or being introduced to potential funders and business partners.
(Shortform note: Decades of research link networking to entrepreneurial success, as strong networks increase your access to opportunities, resources, and information. Entrepreneurs have on average twice as many online network connections as non-entrepreneurs. Although the size of someone’s network doesn’t necessarily correlate with startup success, research shows that people who actively and strategically use their networks achieve more success, validating Ali and Kubba’s advice. One tip experts recommend to improve the strength of your network is to leverage the business networking site LinkedIn. Update your profile, publicize your milestones, and secure endorsements from investors, mentors, and customers.)
As for how to determine if prestige and social connections give you an unfair advantage, Ali and Kubba say you likely already know. If you’ve experienced significant recognition, support, and privileges throughout your life, the answer is probably yes.
(Shortform note: People with prestige and social connections may not be as aware of their advantages as Ali and Kubba assume them to be. Research shows that those in a higher social class generally believe that they’re more competent and skilled than those in lower classes, even environments where this isn’t the case. Thus, they may be likely to attribute their success to their own merits instead of their prestige and social connections.)
If you feel that your prestige and social network are weak and want to improve, here are some steps you can take:
Be Strategic to Boost Your Prestige and Social Connections
Ali and Kubba offer a couple of strategies to improve your prestige and social connections—let’s examine each of them a little more closely.
In The Go-Giver, Bob Burg and John David Mann note that the only way to build a network through generosity is to give without keeping score. They state that it’s common for business acquaintances to keep track of how many favors they owe to one another, but doing so reduces generosity on both sides. Don’t look for win-win situations—generously allow others to win entirely, and they’ll be loyal to you for life.
The authors also recommend attending business development or networking groups, but how do you know if a networking group is worthwhile? Experts recommend you look for some key features. One attribute to look for is a consistent structure—regularly scheduled meetings, a clear agenda, and definitive start and end times. This provides members a reliable way to build relationships over time. Also, look for a group that carefully selects members rather than just allowing anyone to participate. The best groups place a high value on members’ commitment, openness, and the quality of their relationships in the community.
By now, you know how to identify your unfair advantages and take action to strengthen your weak areas. As we’ve discussed, you must proactively apply these unfair advantages—in combination with hard work and a resilient mindset—to launch and sustain a successful startup. In the final section, we’ll cover the advice Ali and Kubba give to further increase your likelihood of achieving startup success, which includes three main topics: choosing the right type of startup, identifying a viable business idea, and building a winning team.
According to Ali and Kubba, there are two main types of startups. Let’s review the features and goals of each and explore how to choose the right type based on your unfair advantages.
First, niche startups (what the authors call “lifestyle startups”) are local small businesses that provide founders with a sustainable income. Some have physical locations while others are online. Niche startups generally provide services or products that target a relatively small customer base, and are thus hard to scale. Examples include a specialty tea shop, a virtual dance academy, an auto repair shop, and a mobile dog washing business.
Niche startups are almost always self-funded and have limited appeal for external investors. Why? As Ali and Kubba explain, the aim in niche startups is to turn a profit quickly, not dominate a whole industry as investors aim to do when they put their money behind a startup. While niche startups can be highly lucrative and usually provide a comfortable life for their founders, profits are generally more modest. If you choose this type of startup, the authors say, you’ll have to work extremely hard to achieve success, but you should be able to create a work schedule that affords you some degree of freedom once you get some traction.
The Good and Bad of Small Business Ownership
Despite the limited scope and scale of niche startups, many entrepreneurs choose this option.
Statistics show there are 32.5 million small businesses in the US, accounting for 99.9% of all US businesses. Small businesses form an integral part of the US economy, creating 1.5 million jobs annually and offering job opportunities as well as a plethora of unique products and services.
Why are so many founders willing to take the risk of starting their own business? According to research, freedom and passion—not money—are the main motivators. Nearly two-thirds of small business owners say they started their businesses to be their own boss and to create something from the ground up. Only 8% say money was their motivator. Although niche startups can provide owners with a sustainable income, as Ali and Kubba say, the average small business owner salary is a modest $62,000 per year, and many company founders take no salary in the first years of running their business.
Also, as the authors note, the demands of small business ownership are extremely high. According to research, small business owners work twice as much as regular employees, with 39% working over 60 hours a week. Nevertheless, the appeal of this career option doesn’t seem to be waning. Studies show that 66% of millennials have a career goal of starting their own business, and 70% of current small business owners say owning a business is the best job they’ve ever had.
Second, rapid-scale startups (what the authors call “hyper-growth startups”) almost always distribute a technology-based product or service. The focus is outpacing competitors to quickly capture as big a portion of the market as possible. As Ali and Kubba explain, costs are often very steep initially, then taper off when (and if) the business gains traction. Why? Once digital products are created, they can usually be mass produced with moderate expense.
(Shortform note: According to the World Economic Forum, startups qualify as “hypergrowth” when they maintain an average annual growth rate of at least 40% for more than one year. As Ali and Kubba mention, most hyper-growth companies launch digital products or services. Other business leaders point out that these companies also harness technology as part of their strategy to expedite rapid growth, lower costs, and keep teams connected. For example, many rapid-growth startups rely on artificial intelligence solutions to enhance customer service and streamline operations.)
Rapid-scale startups require generous funding from outside investors given their incredibly high upfront costs as well as the priority placed on accelerated growth, according to Ali and Kubba. Rapid-scale startups often remain unprofitable for a long stretch of time, sometimes losing vast sums in the push to strike it big. However, those that do succeed reap massive profits, which make the risk worthwhile for investors.
(Shortform note: As Ali and Kubba say, investors are often willing to risk their capital because they know their payoff will be huge if the company they invest in succeeds. However, investors’ high risk tolerance may be changing. Supply chain uncertainties, geopolitical conflicts, inflation, high interest rates, and uncertainty about demand are making investors more reticent about pumping money into unproven companies. Instead, they are shifting toward companies that can demonstrate current profitability, at least until conditions stabilize.)
As Ali and Kubba say, entering the arena of big money and influential investors with a rapid-scale startup can be exciting, and you can potentially reap huge financial rewards. However, very few rapid-scale startups succeed, so you’re more likely to walk away empty-handed than become a millionaire. Also, to have any chance of success, you need to focus nearly all of your time and energy on growing your business. Your work schedule will be relentless.
(Shortform note: According to research, nine out of 10 startups fail. One common reason is that founders often overestimate market demand. While initial adopters are enthusiastic, mainstream customers have needs that differ from those of the first customers, so growth slows to a grind unless the startup reengineers its product, which can be costly. Amid the relentless demands of launching a rapid-growth startup with a high chance of failure, founders often work over 80 hours per week, and the average startup CEO salary is $150,000 in 2022.)
When deciding which type of startup you want to pursue, Ali and Kubba say to reflect on your purpose, the type of lifestyle you want, and the strength of your unfair advantages. If it’s important for you to have a humane schedule, a greater chance of achieving profitability, and freedom from the pressure and demands of outside investors, a niche startup is likely a good fit. Also, if your unfair advantages are rather weak, you should consider opting for a niche startup.
(Shortform note: Other business leaders concur with the authors that there are benefits to not having investors in your startup: the freedom to make decisions independently, the ability to focus on customers’ needs rather than investors’ demands, and the ability to quickly adapt to change. However, even if Ali and Kubba are right that niche startups have a better schedule and are more profitable than rapid-scale startups, they're not necessarily much better in this regard. One survey found that a quarter of small business owners have fallen ill due to stress and overwork. According to another study, only 40% of small businesses are profitable, and 30% lose money on a continual basis.)
However, if you’re a risk taker and you love the “grind,” a rapid-scale startup might be an option—but only if your unfair advantages are incredibly strong. You need access to valuable assets, sophisticated technical knowledge, a desirable location, excellent interpersonal skills, and high prestige so you’re able to fund your efforts, develop an innovative product, attract customers, woo investors, and sustain their trust.
(Shortform note: The need for founders to have strong unfair advantages to succeed in a rapid-scale startup likely contributes to the disproportionate number of white males leading venture-backed startups across the US, which Ali and Kubba acknowledge. Data tracked for a four-year period starting in 2013 showed that 90% of rapid-scale startup founders were male, 72% were white, and 14% were Ivy League-educated. Although there are now more women and entrepreneurs of color getting traction among investors, white, upper-class males still have a notable edge, which highlights the privileges afforded this demographic.)
Is Entrepreneurship Right for You?
If you’re still not sure entrepreneurship is for you, you may find it helpful to evaluate whether you fit these more surprising personality traits common among entrepreneurs:
You’re a rule breaker. If you frequently challenge conventions and take unexpected routes to typically mundane tasks, your rebellious streak can be a huge advantage, given the need to constantly innovate as an entrepreneur.
You’re restless. Entrepreneurship requires tackling one challenge after another, so if your first thought after achieving one milestone is always “What’s next?” applying that zeal to a startup venture could be a fantastic career move.
You don’t fit in with the crowd. If you see and do things differently than most people, your unique perspective could generate insights that drive breakthrough innovations and move society forward.
While there’s no surefire litmus test to determine which career path is right for you, Ali and Kubba arguably give a fair and balanced view of critical factors to consider. Use their advice as a jumping-off place for your decision.
Once you’ve chosen the type of startup you want to launch, you should carefully consider which business idea to pursue. Ali and Kubba say your idea doesn’t need to be revolutionary; you just need to execute it well and use your unfair advantages to get an edge. You can build a successful business simply by improving upon an existing product or service. And remember, sometimes success comes down to getting the timing right. As we discussed earlier, capitalizing on a growing trend often facilitates success even when your business idea isn’t notably original.
How to Tell If You’ve Got a Great Business Idea
Most business leaders agree with Ali and Kubba that your business idea doesn’t need to be completely original. But if it’s not original and revolutionary, how do you know whether your idea is good? Here are some indicators that experts suggest you check:
You can sell at a reasonable price and make a good profit. Your business idea has to make sense for your customer and your profit margin.
It’s hard to copy. Explore protective legal steps, such as patents, to make it harder for others to copy your product or idea.
You believe in the difference it’ll make. No matter how profitable an idea promises to be, if it goes against your values, it’s not worth it. You need to be passionate about your business to stick with it for the long haul.
People you trust—and people you don't know—say it's a good idea. Pay the closest attention to people’s immediate gut reactions, which generally reveal the most about their authentic feelings.
It’s easy to understand. If you can easily explain your idea and why it’s important, you’re more likely to succeed with prospective customers and investors.
To come up with a good business idea, Ali and Kubba recommend thinking creatively about how you can solve a problem in a unique way that somehow adds value to people’s lives. For example, you could create tires that last twice as long as competitors’ tires or build a transcription app that’s more accurate and sensitive to regional accents than other apps on the market. To generate ideas, Ali and Kubba suggest talking to people about things they find frustrating or products they wish they had. Also, reflect on problems you encounter routinely. Your life experiences are an excellent source of insight.
(Shortform note: Ali and Kubba recommend generating ideas by paying closer attention to your problems and the problems of others. Some business experts claim that the most effective way to stay tuned into these kinds of opportunities is by practicing meditation. Meditation can help calm your thoughts and make you more present and attentive to the people and circumstances around you. When you’re more present, you’re more likely to tap into the inspiration required for creative thinking. Also, consider how to improve the customer experience for a segment of the market. For example, you could explore offering travel advice to LGBTQA+ customers who have concerns about safety that other businesses don’t take into account.)
Once you have a business idea, Ali and Kubba say you must ensure that it fits two essential criteria: 1) enough people want and will pay for your proposed service or product, and 2) your unfair advantages match up well with your idea. For example, if you want to design the longest-lasting tires on the market, but you don’t have any technical or engineering expertise related to tire tread and wear, you probably want to consider another business idea (unless you have an extraordinary business partner to fill that role, which we’ll discuss in the next section).
(Shortform note: As Ali and Kubba assert, it’s crucial to ensure that there’s sufficient demand for your business idea. According to research, 42% of businesses fail because there’s no market need. How can you estimate demand? One way is to distribute surveys to potential customers or conduct focus groups. You can also access publicly available market data on distinct industries. For example, Pew Research Center shares data from public opinion polls, demographic research, and other social science research. A simple strategy that Chris Guillebeau suggests in The $100 Startup is to research keywords on popular search engines to see how many people are interested in a given product.)
When You Don’t Have the Right Unfair Advantages
Although Ali and Kubba say it’s important to make sure your business idea matches your unfair advantages, some highly successful entrepreneurs have achieved success without clear alignment between their initial unfair advantages and their business ventures. For example, Peter Kelly owns four successful restaurants and a catering business with combined annual sales or roughly $10 million. He never went to culinary school or even graduated from college, and he grew up in public housing as one of 12 siblings. He attributes his success to a strong work ethic and high self-confidence. So, you shouldn’t necessarily limit yourself to business ideas that intuitively align with your obvious advantages.
Finally, after you know which idea you’re going to pursue, Ali and Kubba say it’s important to recruit business partners who can contribute valuable skills and insights to your startup. While it’s possible to succeed on your own, the authors advise against it. Why? The demands of launching a startup are intense, and business partners can ease the emotional burden and share the workload. Also, business partners can provide unfair advantages that you lack, making your road to success much smoother. For example, maybe you have a brilliant idea for a new restaurant and you’re exceptional at marketing, but you’re a terrible cook. In that case, you’ll likely need to find a partner with cooking expertise.
(Shortform note: Not everyone agrees with Ali and Kubba that business partners are a good idea. Instead, some entrepreneurs recommend that you hire people who have the skills and resources you lack, offering them an hourly wage, a salary, and/or profit sharing, thereby protecting your position as the sole decision maker. Why? They say bad partnerships are common and can be disastrous—and ultimately aren’t worth the risk. One frequent source of conflict is resentment that surfaces when one partner puts in more work than others. Also, partners sometimes double-cross each other to get ahead. For example, two partners might team up to vote out the third, leaving the ousted partner with nothing.)
How many partners do you need? According to Ali and Kubba, two or three is usually ideal. They say you need to fill three roles: an innovator, a promoter, and a specialist, and one person can fill more than a single role. First, the innovator casts a lofty vision and reinforces a worthy purpose for the business venture. Second, the promoter functions as the face of the business, interacting with customers and potential investors to “pitch” the business, get feedback, and secure support. Third, the specialist provides the knowledge and skills needed to build a reliable product.
(Shortform note: If you decide to pursue business partners as Ali and Kubba suggest, most experts who endorse this approach also recommend two or three partners at most. They say investors seldom fund single-founder startups because they consider multiple co-founder ventures to be more credible and robust. This may be because they know that it’s unlikely that any founder will be an effective innovator, promoter, and specialist. Additionally, three co-founders may be better than two because you’ll always have a tiebreaker vote if you end up deadlocked on a particular issue. However, more than three partners slows down your decision-making process, which can hamper business growth.)
When you’re ready to recruit business partners, choose with extreme care, as this is one of the most critical decisions you’ll make. As Ali and Kubba caution, conflict between business partners is one of the primary sources of startup failure. Therefore, trust is essential, and it doesn’t happen overnight. If you already know and trust your prospective partners, it’ll make your working relationship easier from the start.
How to Handle (and Prevent) Conflicts Among Co-Founders
Ali and Kubba accurately state that conflict between business partners is a common cause of startup failures. According to research, 65% of high-potential startups fail due to conflict among co-founders. These conflicts emerge when co-founders clash around their values, ideals, visions, and strategies. No matter how connected and aligned you may initially feel with your co-founders, business leaders say you can’t realistically sustain alignment across all the critical aspects of the business, as you each bring unique perspectives and experiences to the startup.
However, you can take steps to identify and resolve potential conflict before it escalates. Business leaders recommend these steps:
Have a conversation about values and motivation. Discuss what’s inspiring each of you to take on this business opportunity, and share values that are important to you. For example, is being bold and taking risks more important to you than making a positive difference for others? Talking openly about these factors will increase empathy and promote stronger bonds.
Play the “what if” game. Talk through scenarios that you might encounter as your startup grows. For example, have each person answer questions such as “What if an investor offers us $10 million? Should we accept it, and if so, what should we do with it?” Talking through hypothetical scenarios will help you get clear about how people think and problem solve.
Exchange feedback regularly. At least weekly, meet to share your respective thoughts about what’s working and what could be improved. Focus on delivering fact-based, empathetic input rather than attacking or being passive-aggressive, as fact-based feedback will facilitate more productive conversations.
Identify what really matters and be flexible on the rest. For big strategic issues, make sure you’re clear about how you’ll navigate disagreements. If you reach an impasse, revisit your shared vision and aim for win-win outcomes. Alternatively, seek counsel from an independent advisor who can provide an objective perspective.
Ali and Kubba say a good business idea solves a problem that you’re passionate about and matches your unfair advantages.
Briefly describe one business idea you’ve been considering. What problem does it solve? Who’s your target audience?
What clues have you gotten that there’s sufficient demand for your idea? For example, maybe you’ve observed people struggling with a routine task, or you’ve been frustrated by a subpar product or service.
Which unfair advantages do you have that will help you achieve success with this idea? Write down two or three ways you can leverage each unfair advantage to advance your idea.
What competition exists for your idea? How can you stand out from the competition?