A Simple Road Map To Starting a Significant Company
By Bob Norton
Planning a new venture is a difficult and confusing process. No single article or even book can address all the things that need to be done, as so many will be specific to that venture and the order can vary greatly depending on many factors. However, here we are trying to outline some of the key steps to help you formulate a business plan and vision, so you can outline a timeline that might work by revealing many of the key steps that are not well thought through by many new entrepreneurs. The time frame for the first ten steps can be a few months or even a full year, but as much should be done as possible before a large burn rate is incurred that might greatly limit your time to learn and develop the business plan. Using virtual teams of advisors, not on the payroll, but available for consultation is often a great way to keep expenses down, while not compromising on quality or experience needed to develop you plan.
Typically an entrepreneur will start with a product idea and that portion of the vision that is made up by that "core technology", problem or idea. The problem is that this is really only about 2% to 5% of starting a company, the other 95+% is much harder and will require many diverse skills. Most people start with this core idea or market need and that is not a bad place to start, as it indicates the POSSIBILITY of a market if everyone, or at least lots of people think like you, and are willing to pay enough for your solution compared to alternatives.
First I recommend lots and lots of up front market research and then creating a draft brochure of what the company might look like to a consumer of the product or service. This does not mean elaborate and expense quantitative studies, it is WAY too early for that, but real world data gathering and interviews that get people's reaction to your business proposal. This will allow some surveying of your mother-in-law and others informally to sharpen and focus your idea on a market and improve your presentation before showing it to anyone "professional". Smoothing out some kinks and identifying the key questions and objections is critical. Then, after some validation by real buyers, at a particular price point, you can begin to pull together a real development and business plan for launching your company.
A good starting point is to read the short chapter on The Marketing and Communications Pyramid". You can start at the top and work down. Obviously there are many ways to go about this task and I know several that can be combined in the process to validate the value of a business concept and begin to get a handle on the risks, costs and opportunity. One very experienced person can sometimes do this, but typically you will need to draw on the experience of several people with backgrounds in marketing, sales, finance, product development and operations.
There are basically only two ways that virtually everyone on the fortune 400 list of richest people got there.
One is real estate, which is slow, low risk and relatively easy to do, but does not create any jobs.
Two is by starting and owning an entire company, or a large portion thereof.
What Steps Should You Take In Creating And Validating a Business Venture or Idea? Here is a ordered list of articles available on this site that will walk you through many of the required processes:
1. Spend the first 5-10 years of your career learning on someone else's nickel. Get good experience managing people in small companies and some in larger ones. You need market knowledge and experience, project management experience, people and management experience and ideally some sales and marketing experience too. You can not do it all and will need to hire or bring in partners to complement your own skills but the more well rounded your skills the better you chance of success.
2. Decide on a core idea, technology or need as a starting point to iterate from that solves a big problem today. It must be 3 to 10 times better or cheaper than alternative solutions if you need to attract capital investment early on.
3. Develop Market Research (probably using a consultant if you are not experienced at this) which answers the questions: How big is the potential market? Who specifically will buy the product in great detail which includes the exact person (decision maker), company type or list, vertical market(s) etc. Who is solving this problem a today and find everything you can about how they do it?
4. Develop a Marketing And Messaging Communications Pyramid and the documents it specifies in the top down order until you get to "business plan" which at this stage should not be written n any detail until you have a complete management team and some market validation information.
5. Develop a Competitive Landscape Map for you space with a visual representation of your competitors and your position in the marketplace.
6. Do a risk assessment landscape map of your market entry or launch strategy.
7. Complete a draft business presentation slide show and/or rough executive summary to show people informally and flush out your ideas better.
8. Using a spreadsheet develop a financing strategy that plans all needed financings to reach well beyond breakeven to $25MM or more in revenue (as appropriate). You will likely need some consulting help here from an experienced entrepreneur who has successfully raised either angel financing, venture capital for any institutional source or both.
9. At this point you may want to being recruiting a virtual team that is not on a full-time salary, but passionate about your venture and willing to invest a little time to help validate the plan and also willing to join if and when financing comes together and risk is down some. You will also likely need to pay some consultants who make their living doing this, and can't eat stock options, in small amounts. Paying through stock options here is a good way to limit salary for potential full-time employees, but this is complex and needs advice specific to the exact circumstances. Seek a consulting executive, not a lawyer yet, to design your stock option allocation plan, not implement a plan. At this point you are just modeling the financials and you do not yet need the paperwork and specifics you just need an outline for contingent offer letters, discussion and the like.
10. Begin Recruiting a management team with the key skill sets needed to validate the concept and business plan much further and add details. Many iterations will be required as these people come on board, and the only thing that is certain is the first plan will be wrong and need many adjustments along the way.
11. Write a draft business plan of 10 to 20 pages, plus an appendix that has lots of supporting market research. At this point use as many lists and bullets of ideas that are easy to change, do not write lots of pretty prose, as that will take lots more effort and is guaranteed to change radically as you learn more.
12. Go out and try to "sell" the product to customers to get their feedback. This should be done as soon as possible and may be possible much earlier with a mockup or product prototype. After validating the concept by getting real money from customers somehow, probably for services with a commitment to a product shown in a prototype form, you can rewrite the business plan to reflect all changes based on your learning experience and do a risk assessment with some real market feedback
13. At this point you may want to look at possible intellectual property protection (everyone so far has been under non-disclosures to protect your rights here). A patent can be helpful, but it can also be worthless if there are 10 other ways to do the same thing balancing this with the potential cost will require experienced advice from someone without a conflict of interest (i.e. NOT your lawyer)
14. Iterate your business plan to version #2 based on the customer and market experience trials. Starting turning some list of bullets into short paragraphs.
15. Raise first level of outside financing (today this is pretty much personal funds or friends and family. Few angels are investing prior to having a product and a few sales today.) This is a topic for another book all by itself, so obviously you should learn much more about this and get help from experienced entrepreneurs and consultants. There are many, many ways to raise money but all are usually time consuming and difficult too.
16. Being actual product development – At this point this could be on your own funds or using unpaid co-founders. You could also sell services that might help you develop the product you need on someone else’s nickel.
17. Start hiring for marketing and selling efforts around 3-6 month before the product will be ready, more for long selling cycles you need to have someone on board to begin setting up the selling process. They should be used to do more market validation and soften the beach by building a customer database and validating the target (best) customer. They should identify the lowest fruit for early sales who need the product most and are willing to take the risk of a new player to get some feature you have others do not offer.
18. Staff for operations and product/services delivery just-in-time, before product launch, using this staff for quality control as they are trained. Usually only one or two weeks before product launch is OK for this function, but obviously it depends on the complexity of the product and support. Add a couple of weeks minimum to whatever the training time is expected to be.
19. Begin selling real product and booking revenue - You need a real "sales partner" someone committed (as shown by low salary and high success compensation) who has worked in this industry selling before and worked in this stage company doing that for at least 3 years.
20. After signing no less than 10 customers you may want to look at beginning to raise expansion funds from serious angel groups, super-angels or institutions that still do real Series B type financings (make them prove it by showing you recent investments they did and speaking with that management as many will say they do to leave the door open even though they don't).
21. At this point you will need to hire an experienced CEO, at least part-time, but full-time if you expect to raise more than $2 million in financing. This person MUST have grown startup companies successfully before and probably add some more senior management talent in the finance, sales and marketing areas
22. Upon closing a larger financing hold on for the ride of your life, as if you have a good product and the money to grow you should be able to expand, or "roll out" your the product or service very rapidly.
Each of these steps requires experience and has a varying levels of associated risk. Each task must be attacked with a clear understanding of what you and your team (virtual or otherwise) already know how to do, and what you do not know well enough to accomplish without outside help. Errors in judgment here can be fatal for a company. Finding experts in the particular areas, to leverage their experience without using much of their time is a critical talent you will need to develop. You can barter services, charm a little volunteer effort or buy it – but you must enlist others willing to help you with referral, interviews and other networking.
Obviously this is a simple and generic outline with many details, specific to your situation missing. Timelines can vary from week to many years.