A 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 most 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 will limit you time to learn and develop the business plan. 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 (see article defining a vision) that is made up by that "core technology", problem or idea. The problem is that this is really only about 2% of starting a company, the other 98% 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 (see article on Competitive Market Landscape Maps) and then creating a 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 article 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 sometime 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.
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:
- 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.
- 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.
- 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?
- 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.
- Develop a Competitive Landscape Map
- Do a risk assessment landscape map of your market entry or launch strategy
- Complete a business plan and vision to develop a financing strategy that plans all needed financings to reach well beyond breakeven to $25MM or more in revenue (as appropriate). 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 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 a limit 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 a plan)
- Begin Recruiting a management team with the key skill sets needed to validate the concept and plan (many iterations will be required as these people come on board as the only thing that is certain is the first plan will be wrong and need many adjustments along the way.
- Write a draft business plan of 10 to 20 pages plus an appendix that has lots of supporting market research. At this point us as many lists and bullets of ideas that are easy to change, do not write lots of pretty prose that will such effort but is guaranteed to change radically as you learn more.
- 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
- 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 sometime 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)
- Iterate your business plan to version #2 based on the customer and market experience trials. Starting turning some list of bullets into short paragraphs.
- Raise first level of outside financing (today this is pretty much personal funds or friends and family. Few angels are invest prior to having a product and a few sales today.)
- Being actual product development
- Start hiring for marketing and selling efforts around 3-6 month before the product will be ready, more for long selling cycles
- Staff for operations and product/services delivery just-in-time before product launch using this staff for quality control as they are trained
- 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.
- 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).
- 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
- 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) know how to do and what you do not know well enough to accomplish without outside help. Errors in judgment here are often fatal for the 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 and probably hire people to help with. C-Level will interview and rate candidates for a $200 flat fee.
There are lots of factors that make a successful business but these factors must work to have any chance of success.