Does it make sense to be an entrepreneur building anything less than an A+ business?

I've started 2 businesses and worked with hundreds of founders.

Sad reality: most of their startups will be dead inside 12 months.

This is partly because entrepreneurship is hard, but also because people have a bad habit of building bad businesses.

Me included.

My first business was a mobile ordering and payments SaaS for restaurants in Asia.

I CONVINCED myself it was a A+ business because:

• There were MANY successful precedents in other markets, and our market was early on the adoption curve

• The payments transaction fee model scaled beautifully, with built in margin expansion

• Our product solved a real problem and we saw it working

• The market was huge

• We had unique market access

In reality, it was a C business.

• We were in a prohibitive pricing environment, so we had to give it away for free

• As a result, we had no margin, generated no cash, so we ran out of money

• Adoption of our product required LOTS of customer education (bad!)

• Our product helped customers save money, not make more of it

• We were outsourcing technical development

• The market was small if you excluded customers who would never adopt our product (something we learned after deploying it)

• We were selling to low margin customers who lacked the ability to pay

You can tell you're in a C business when it feels like an excruciating uphill climb to get even an inch of progress.

A+ businesses do not feel like this.

I'm not saying building an A+ business is easy. Likelihood of failure is still high.

But I am saying that entrepreneurship is already so difficult as it is, that choosing anything less than an A+ business is consciously choosing to lower your odds of success.

There is no fixed definition of an A+ business.

There are obvious traits like high margin, big growing market, tons of recurring revenue (high LTV), non-capital intensive growth, blah blah blah.

All those things need to be true, but A+ businesses have some combination of the following as well:

• Super predictable way of accessing customers again and again

• Product or service is consumable (they need to keep buying it)

• High switching costs

• Customers need to stay with you for a long time

• Embedded repeated upsells with marginal cost to fulfill (built in revenue expansion, usage-based pricing)

• Powerful network effects

• High upfront cash collection with fast payback on CAC

• Short sales cycle

The list goes on, and there are PLENTY of businesses out there that classify as A+.

But somehow they're hard to find.

Here's what's starting to work for me: RAPID TESTING.

As soon as I have an idea that I THINK might be strong enough to build around, I systematically work to answer 3 questions:

1. How can I QUICKLY get hard data that there are unscalable economics in this business? (1-2 months)

2. How can I QUICKLY get hard data that the economics scale? (3-5 months)

3. How can I QUICKLY prove that the economics can scale using systemized processes (6-9 months)

Compelling results for each test should trigger the next test, or else kill the idea and move on.

As I've been working through these testing exercises, the smoke around whether or not I'm pursuing an A+ business starts to clear fast.

Product Hunt is an excellent place to start with #1. Paid ads are a great way to move from #1 to #2.