Starting a business for the first time is one of the most rewarding, challenging, exhilarating and scary journeys an entrepreneur will face over the course of his or her lifetime. The first and one of the most critical steps in building a successful business is developing plan of action.
Below is a toolkit of things you need to successfully ideate, research, develop and grow a startup business. Hopefully, you have addressed all of the below in your business.
A Good Idea You Are Passionate About
You can’t start a business without a good idea. Your idea needs to build a real-world solution to a real-world problem, preferably in a sizable market. And, in all cases, do what you love, as it is important you have a passion about your startup to get through the good times and the bad.
Realistic Exit Expectations
You need to decide if you are building this business as a lifestyle business for yourself, as the sole owner, or if you are trying to attract outside capital. The things you would do for yourself may be different than the things you would do for outside capital. Outside investors will most likely require much faster growth and a clear roadmap to exit for their investment after around five years. Personally, you may be fine building a small revenue business that covers your desired lifestyle without the hassle of outside investors. Consider consulting a venture capitalist firm to help decide whether or not you want the involvement of outside investors.
Before you get started, you need to do some preliminary market research for your startup. How large is your market? How competitive is your industry? How well-funded are your competitors? Is it a market that will appeal to venture capitalists? You want to make sure you know what you are getting yourself into before you start. You are practically trying to kill your startup before you start, and if you can’t find a good reason to kill it, you are off to the races.
Once you have finished your market research, you need to build a business plan, determine your revenue model, create a sales and marketing plan, and develop a budget for your business. Where you can, bias businesses with a recurring revenue model to better leverage your upfront sales and marketing investment. In addition to budgeting for the development of your product or service, make sure you leave enough to test your sales and marketing efforts, and achieve a profitable customer acquisition cost and proof of concept that will appeal to future investors. In all cases, set reasonable milestones to shoot for along the way.
Once you are sure you have a well-researched idea and solid business and financial model, you should be in a position to get your business started. This includes addressing a mix of frequent legal questions for startups (e.g., determining corporate structure, intellectual property protection, state of formation). It also includes the basics of setting up your bank accounts, accounting policies and process, employee handbook policies, and insurance protection. You need to decide where best to locate your startup and how best to set up your board of directors and advisors. A good startup lawyer will be critical here.
Now it’s time to build the actual product or service you plan on taking to market. That always starts with a good product and pricing strategy. Where you can, ‘productize’ your business for maximum efficiency and scalability. In building your product or service, you will need to decide if it’s better to build your startup with in-house employees or third-party contractors. In all cases, you will want to build a minimum viable product with which to test and to optimize over time—don’t build a Rolls Royce if a Toyota can do the job to start.
Customers are not magically going to show up and start buying your product or services. You need a solid sales and marketing plan to get your story out there. Most B2B businesses are sales driven and most B2C businesses are marketing driven. In both cases, they can benefit from strong search engine optimization, social media marketing, and public relations techniques to get started. Focus on proven high-ROI driving tactics to start in order to stretch your thin capital resources. It is this part of a startup launch that most entrepreneurs forget and why I co-founded Ensemble as a one-stop ‘digital services suite’ to assist with scaling up your audience.
Next you need to build your startup team and determine your team’s roles and responsibilities. Once you know what roles you need to fill, you need to recruit employees for your startup, determine employee compensation, determine employee benefits, and potentially give equity to key employees. In all cases, make sure you hire people that are well suited to fast-moving, nimble, startup environments, preferably with a proven track record at prior startups.
The last piece of the puzzle, which is required for any startup, is capital. For very early-stage businesses, if not your own money, this most likely means finding Angel investors for your startup and other bootstrapping financing techniques. In all cases, you will need to build a reasonable bridge to a 10x return for your investors and structure the financing in a way that works for all parties.
For more details on any of the above topics, please reference the Red Rocket blog and our ‘101 Startup Lessons–An Entrepreneur’s Handbook.’ Good luck!!
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George Deeb is the Managing Partner at Chicago-based Red Rocket Ventures, a startup consulting and financial advisory firm based in Chicago. Red Rocket is also a founding member of Ensemble, an all-star powered ‘Digital Services Suite’ for entrepreneurs desiring high ROI ‘Do It For Me’ solutions at 20-to-40 percent savings.