Sub-chapter from
Roadmap to Launching a Startup COMPANY

Planning a new venture is a difficult and confusing process. No single article or 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. We will show you how 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, which might greatly limit your time to learn and develop the business plan.  Using virtual teams of advisors that are 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 your 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 with this as a starting point is that this is really only about 2 percent to 5 percent of starting a company. The other 95 percent (or more) 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,  provided 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 conducting lots and lots of upfront 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 carrying out elaborate and expensive quantitative studies because it is WAY too early for that. Real-world data gathering and interviews that get people's reaction to your business proposal is needed.  This will allow some informal surveying of your mother-in-law and others 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.

What Steps Should You Take In Creating and Validating a Business Venture or Idea?

1.   Spend the first five to ten  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 cannot do it all and will need to hire or bring in partners to complement your own skills. However, the more well-rounded your skills, the better your chance of success will be due to a huge efficiency in the early days.

2.   Decide on a core idea, technology, or need as a starting point to iterate from, which solves a big problem today.  It must be three to ten 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  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 a "business plan," which at this stage should not be written in any detail until you have a complete management team and some market validation information.

5.   Develop some Competitive Landscape Maps for your 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 begin 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 be 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 at this point rather than a lawyer, to design your stock option allocation plan, but not to 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 to add details.  Much iteration will be required as these people come on board, and the only thing that is certain is the first plan will be wrong and will need many adjustments along the way.

11. Write a draft business plan consisting of 10 to 20 pages, plus an appendix that has plenty 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 a lot 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. This will allow you to 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 sometimes if there are ten 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. Start turning some lists of bullets into short paragraphs.

15. Raise your first level of outside financing. Today, this is pretty much personal funds or friends and family. Nowadays, few angels are investing prior to having a product and a few sales. 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.

16. Begin actual product development.  At this point, this could be from 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 the hiring process for marketing and selling efforts around three to six  months before the product will be ready, more for longer selling cycles. You need to have someone on board to begin setting up the selling process. They should be used to doing 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.  Find out who needs the product the most, and are therefore willing to take the risk of working with a new player to get some specific feature(s) you have that others do not offer.

18. Staff for operations and product/services delivery just-in-time, before product launch, and use this staff for quality control as they are trained. Usually only one or two weeks before the 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" or someone committed (as shown by low salary and high success compensation via equity and/or bonus) who has worked in this industry selling before and worked in this exact stage company for at least three years.

20. After signing no less than ten 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 and 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 you probably also need to add some more senior management talent in the finance, sales and marketing areas, either virtual staff or full-time.

22. Upon closing a larger financing, hold on for the ride of your life. 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 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 some 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 referrals, interviews, and other networking.

Obviously this is a simple and generic outline with many missing details that are specific to your situation. Timelines can vary from weeks to many years.  Seek small amounts of help from many experts along the way. Nothing can replace experience.

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