A Founder’s Guide – When and how to startup?

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 ‘An idea doesn’t become a business without effort’.

Starting a new start up or a business requires lot of understanding related to different aspects of a business like financing, legal, sales and marketing, intellectual property protection, human resources, and more. The progression of business is described as business life cycle which can be described in different phases as:

  1. Business understanding
  2. Data acquisition and understanding
  3. Modeling
  4. Deployment
  5. Customer acceptance

Business understanding

The Business Understanding stage is the most important and crucial stage for starting a business which aims to seek answers to the questions for goal clarification. A better understanding of the problem through questions will determine the methodology acquired for attaining the answers in future (the approach acquired to address the question).

In nut shell, we need to ask lots and lots of questions like why, how, what, how much etc etc for each and every aspect of the problem which will give a clear insight to the business goal, objective and vision of the business.

Let us take a look on the tasks required for developing a clear Business understanding:

  • Identification of business goal and vision
  • Assessment of current situation
  • Preparing a business/project plan
  • Financial assessment and planning
  • Understanding your customer and competitors
  • Marketing strategy
  • Register with government and IRS
  • Building up your team

Let’s deep dive.

Identification of business goal and vision

The first and foremost task is to define your vision and goal which compelled you to think to start a business. The vision clarity is crucial which will be the deciding factor for future path to be followed.

Always start with the why.

Simon Sinek

It should be clear as to why you want to start a business, is it a personal why or a marketplace why. When the business is focussed on filling a gap in marketplace, you will have a larger scope and high probability of success. Also, the motive to start a business should be to make people’s lives easier as well as be able to communicate its value to the customers so that they are willing to pay for it.

The most undermine feature in setting up a business is “The Passion”. You should be passionate enough about your idea and have a keen interest and motivation to set it up in the market overcoming all the obstacles. If passion is missing then eventually your business will also be amiss.

There are numerous questions which you should be able to answer for your vision clarification:

  • What is the motivation to choose this particular business?
  • What is the difference in your idea and the current companies in the market?
  • Why will the customer be attracted to your product/service?
  • What additional advantage will the customer get?
  • How will you cope up with the increased costs and low demands?
  • How will you cope up with the competition from existing established companies?
  • What are the constraints and limitations linked to the business?
  • What is your plan for growth?
  • What is your primary competitive advantage?
  • Define what your company is trying to accomplish

Assessment of current situation

After the clarity of vision and goal for your start up, the next obvious key step is the in-depth analysis and assessment of the issues related to your business goals.

  • Inventory of resources: A comprehensive detailed list should be prepared for the available resources required for your start up. This will give you an idea of what is to be done next in terms of finances, man power, tools, data, hardware, and software as well as the requirement of knowledge experts for your business problems.
  • Risks and contingencies: Whenever you start any project, a backup plan/ contingency plan should always be in place to avoid any delays in the completion of the project. Identification of the potential causes which may lead to the requirement of contingency plan would be a very smart and intelligent move for your business. This will ensure customer satisfaction leading to success of your start up.
  • Costs and benefits: Cost and benefit analysis should be performed to find out that if the costs are exceeding benefits. Ultimate aim of starting a business is to earn money to make your business viable and feasible. If that condition is not being fulfilled then you need to reconsider this analysis and your project.

Preparing a business plan

  • Project Plan: This step requires the writing up and outlining of your project plan in a step-by-step action plan emphasizing on each and every specifics. The outline should include the completion schedule of each step and the result achieved/obtained for that step. The business plan should cover the answers to all the questions related to your business. All the aspects of a business should be considered without rushing into things, which is a very common mistake made by the newcomers.
  • Business name: Another important aspect is the selection of an amazing name for your business which will have a significant impact for the success of your business.
  • Market Research: Conducting extensive market research through surveys and public data will give you an idea about customer needs, preferences and behaviour – as well as your industry and competitors. This will allow you to have competitive advantage and offer unique value to the potential customers.
  • Exit Strategy: A business plan will give you an idea of the current status of your business, the ways to overcome the difficulties and steps to be taken for its sustainment. The eventual exit strategy will force you to look to future.

Too often, new entrepreneurs are so excited about their business and so sure everyone everywhere will be a customer that they give very little, if any, time to show the plan on leaving the business.

Josh Tolley CEO of both Tribal Holdings and Kavana

Financial assessment and planning

Financial planning is the backbone of any start-up. For starting your business you need to determine your financial assets, the sources of funding, finances to support yourself or the necessity to borrow the money. You should be able to answer the questions like how much will your start-up cost. How will you make money? What is your break-even point? How much profit potential does your business have?

The financial projections should be prepared which will be able to indicate the working capital required for your start up and how to compensate the cash “gaps” in between. These projections can be based on these key areas:

  1. Start up Investment
  2. Assumptions
  3. Running Monthly Overhead
  4. Streamlined Sales Forecast
  5. Cumulative Cash
  6. Break-even analysis

Break-even analysis

Break even analysis aids in determining when their company, product or service will be profitable.  This is a very helpful tool for an entrepreneur because it gives the information about the minimum performance your business must achieve to avoid losing money as well as the exact source of profits can be recognized. Thus, break even analysis is an essential part of financial planning as it determines profitability, price a product or service and analyses the data.   

Minimizing your expenses

A lot of startups tend to spend money on unnecessary things.

Jean Paldan, founder and CEO of Rare Form New Media.

The expenses should be minimal when starting a business and spend only on the essential things which will help your business to grow and achieve success. Overspending on fancy new equipments, or lease office or office furniture which will not contribute to reach your business goals should be avoided. Luxuries can come when you’re established.

In case of financial assistance requirement, the most effective financial sources are:

  • Personal funds
  • Credit cards
  • Friends and family
  • Angel investors
  • Equity crowdfunding
  • Bank loans/SBA financings/online lenders
  • Venture capitalists
  • Investor
  • Equipment loan financing

Understanding your customer and competitors

Customers: Due to the diversity in human nature and their requirements, it is impossible to meet the expectations of every individual. This emphasizes on the need to choose your target customer very wisely and carefully which will have a direct impact on the performance of your business. Try to identify the needs of the customer which is not being met by the current market products, why are the customers unsatisfied, what are they looking for. How can your product and business fulfil their requirements? How can you solve their problems and complaints through your business? If you ponder over these points, and are able to get the appropriate affirmative answers through your business, you will be very pleased with the future outcome! Also never ignore the positive and negative perception of the customers towards you and your business, they can help you to improve.

Competition & competitors: Always look out for your competitors and their products to keep you one step ahead of them in new developments and announcements. You can even setup a Google alert for the notification. Keep asking questions that who are the company’s principal competitors? How can you improve upon the competition’s approach? What are the competitor’s weaknesses and strengths? What gives your company the competitive advantage?

Marketing Strategy

To succeed in business, it is very important to continually attract, build, and even educate your target market. The key points/steps which should be included in your marketing strategy are:

  • Identification of all target markets
  • Qualification of best target markets
  • Identification of tools, strategies and methods
  • Testing the marketing strategy and tools
  • Learning the fundamentals of SEO (search engine optimization)
  • Use of social media for your product and business promotion
  • Content marketing engagement by writing different articles
  • Issue press releases for any significant events
  • Continuous networking

Register with government and IRS

It is important and must to get your company registered with the government to become an officially recognized business entity. The business name should be registered as well as take essential steps to trademark your business name for extra legal protection. After the business registration, you may need to get an Employer Identification Number (EIN) from the IRS for getting tax ID.  EIN is similar to a Social Security number for businesses. EIN can be obtained online through the IRS website.

Licenses and permits: Depending on the type of your business, you should assess which Permits, Licenses, or Registrations will be required for your business:

  • Permits need for regulated businesses (aviation, agriculture, alcohol, etc.)
  • Sales tax license or permit
  • Home-based business permits
  • City and county business permits or licenses
  • Zoning permit
  • Seller’s permit
  • Health department permits (such as for a restaurant)

Building up your team

For making a business successful, teamwork plays a crucial role. Therefore, selecting your employees and hiring a great team for getting your company off the ground is the key requirement.

Entrepreneurs need to give the “people” element of their businesses the same attention they give their products. “Your product is built by people,” “Identifying your founding team, understanding what gaps exist, and how and when you will address them should be top priority. Figuring out how the team will work together is equally important. Defining roles and responsibility, division of labor, how to give feedback or how to work together when not everyone is in the same room will save you a lot of headaches down the line.

 Joe Zawadzki, CEO and founder of MediaMath

A comprehensive and thorough reference check should be performed while interviewing the prospective employee for your business. The reference check will give an idea about the employees’ honesty, truthfulness, work ethics as well as his suitability in your company’s work environment.

Conclusion

The work of an entrepreneur commences from the day one when the idea of starting a business struck to his mind. The launch of the start-up is just a beginning to a long journey of being an entrepreneur. The success and growth of your business will take time and efforts.

The above points have covered the goals, tasks, and deliverables associated with the business which can be utilised to structure your projects. These tips will help you to grow your business but you should be always prepared to adapt to the varying environments as there’s never a perfect plan!

Be prepared to adjust, there’s a saying in the military that ‘no plan survives the first contact,’ meaning that you can have the best plan in the world, but as soon as it’s in action, things change, and you have to be ready and willing to adapt and problem-solve quickly.

Stephanie Murray, CEO and founder of Fiddlestix Candy Co.

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