Starting any business involves dealing with a lot of challenges including legal, sales and marketing, financing, liability protection, intellectual property protection, human resource and many more. Despite all these challenges, there have been spectacular success stories from notable companies such as Uber, WhatsApp, Airbnb, and Facebook among others.
In this guide, we shall look at critical steps every entrepreneur needs to follow when starting a business or company, from the ideation stage to implementation and scaling.
Starting a business is a huge commitment and many entrepreneurs usually fail to appreciate the significance of limited resources they may have, be it time, energy, financing, among others. The key challenges every entrepreneur’s faces include; coming up with a great product or service, having a strong plan and vision for your business, having sufficient capital to fuel business at the stage it is not yet profitable, finding great employees who can implement your vision, and keeping your team motivated.
Getting a startup off the ground is always a tough task, and only the strongest survive. You will have to deal with a lot of setbacks, as things may go against your initial plans and expectations. Growing a successful startup takes time, needs solid business acumen and you have to get your right team.
Idea Creation: Solving Important Problems
Coming with a great business idea involves solving a problem that a market is facing, without the market necessarily knowing that they are facing a problem. Great ideas will mostly be based on a space you are familiar with as you aim to offer a unique solution and validation process.
Creative problem solving is not all about brainstorming, and that is where many people go wrong. Creative ideas do not suddenly appear in people’s minds for no apparent reason. Rather, they are as a result of trying to solve a specific problem or achieve a particular goal. Great solutions come as a result of huge amounts of mental problem solving, as you try to close a discrepancy between different issues in a society of subject.
To come up with a great idea, the first step you need is to clarify and identify a problem. Next, you need to research more about the problem. Work on formulating creative challenges that can help you better dissect the problem. Generate as many ideas as possible and work towards combining and evaluating your ideas. Draw up an action plan and settle on one idea that you will implement.
The best way to clarify any problem and understand the nitty-gritties is to ask yourself or better ask friends and colleagues a series of questions about the problem, in order to clarify the real issues that need attention. Ask yourself questions such as “What do I really wish to accomplish” “What is preventing me from solving this problem/achieving this goal”.
Because you will be faced with different options, you must set up criteria for judging potential solutions. For any question you have, and in order to come up with an actionable plan, you must set relevant timelines which motivate you to work against the deadline to come up with a solution.
Validating Your Solution
Once you have a come up with a solution that you deem perfect to handle a problem the market is facing, the next key step you need to undertake is to validate your solution, to ensure that its output delivers and meets requirements. Ideas are great, but they don’t make money, businesses do!
You need to test your solution to ensure that people will open their wallets for your product or service. Until you do that, you don’t have a business. Before you can commit all your resource – most importantly time and finances into a business, you need to test if the business will make money for you.
Even before you can build a full or partial product, it is very important to ensure you validate your assumptions.
Validating an idea can take different forms, but the ultimate metric for success is your decisions. To collect validation, you can make use of the following;
You can create a basic landing page to promote your idea or product by making use of top keywords for your product. Additionally, work on driving traffic to your landing page, so that as many people as possible see, and respond to your page.
In my day-to-day work, I use Instapage to create and test a wide number of ideas and potential new startups.
Surveys can be an excellent tool to gather a lot of vital data quickly, and most importantly, when done correctly, they help eliminate a lot of biases. The data you get from whatever method of data collection should be filtered, sorted, cleaned and well analyses to create visualizations and insights that can help you make better decisions towards the next step in your business.
After all, understand that nothing beats pounding the pavement. Talk to your potential customers by pitching your ideas, gaining feedback and try to sell whatever product you have.
Once you have determined that your customers are willing to pay for your product or service, then that’s the first step towards having a business. But that is not enough. You need to ask yourself the most important question – how many people are willing to pay?
Market size is among the most important aspects you need to critically evaluate when vetting a startup idea. As a matter of fact, it is one of the top criteria investors use to determine if to invest in a startup or not. You need to have a product or service that is highly scalable and can attract different markets.
Coming Up with a Business Plan
If you can find yourself at the business plan stage, you have every reason to be happy. Every business needs to have a written business plan. A business plan serves many uses, including providing business direction, attracting investors, projecting the future of business, among others.
A business plan is a written description of your business’s future and it’s pretty much a document that tells what you plan and how you plan to do it. A good business plan is inherently strategic. It specifies where to start with few resources you have and where you aim to get with resources you will need to add.
In this section, we will not delve much on how to write a business plan and the components which each business plan should be, but rather look at what are the key guidelines in coming up with a great plan.
One of the key things you need to get right is your market strategy. Coming up with a great market strategy is usually as a result of meticulous market analysis. Conducting a good market analysis will make the entrepreneur become familiar with all aspects of the market, as this shapes a business.
You also need to come up with strong competitive analysis. The purpose of a competitive analysis is to determine the strengths and weaknesses of your competitors within the market and come up with strategies that will give you a slight edge over them. Not until you have conducted a thorough market analysis and extensive completive analysis will you be able to come up with a strong business plan.
A better business plan can lead to new customers. You need to take a step back from your daily routine and reconsider your strategy. While you are busy building your business, your market may have changed. Even slightly, your customers may have changed. You need to identify changes if any by being in close relationship with your customers.
Funding Your Startup
Now that you have got the idea, the drive and the know-how, how do you perform when it comes to capital? Funding is a very important step for any business, and without the required capital, you will not be able to get your startup off the ground. You need to note that every funding decision is a complex mix between short-term and long terms costs, as well as the overall ownership and control.
You might have come across articles and other informative content that talk about more than 7 ways to fund a startup. However, I would like to simplify things for you. When it comes to funding a startup, it all comes down to three main categories; Bootstrapping, Debt and Equity.
It is always a noble idea for startup founders to begin their venture with a lump sum of investor capital. However, for most startups, it is not always possible. This is where bootstrapping comes in.
Bootstrapping involves using personal savings, credit cards and sweat equity, or even borrowing from friends and family to get your company off the ground. Key to note is that borrowing from friends and family can be a bit of a challenge because most of these people you are related to you might not believe in your abilities or idea.
This is the reason many entrepreneurs turn to crowdfund on sites and overlook getting funds from family members. Startup funding generated form bootstrapping will normally cover essential aspects of running a business for at least 18 months.
In simple terms, debt is capital you have to pay back. In most cases, debt is easier to come in when it comes to funding your startup. Lenders are more willing to funding small businesses at their initial stages in the form of debt financing.
Loans are usually useful and accessible when there is a clear means of servicing the debt. When you are getting into debt to finance your business, it can be a great idea, especially if whatever you are investing in has the potential to generate revenue after some time, usually a short term.
Equity is the third common option for funding a startup. Equity refers to capital a startup founder receives in exchange for stocks in the company. In most cases, equity options are far less rare as compared to bootstrapping or debt options.
However, entrepreneurs always like equity option because it is not based on personal credit or collateral. Equity investments will be most valuable if a business has a high risk and normally a longer period for return on investments.
Pitching to Investors
As an investor who has been in the game and they will tell you that for every 100 investments they make, only 10 goes big. Due to this statistic, you need to create a compelling, outstanding and irresistible pitch that investors would not forget or turn down.
First, take only 10 minutes as time is very critical. A brilliant idea would mean nothing unless you can dissect it in a few minutes. Secondly, you need to turn your pitch into a story. Story-telling is a scientifically proven way of capturing the listener’s attention and holding on to it.
Investors are definitely bored with spreadsheets, valuations and numbers. Spice things up and be creative. You also need to be laser-focused. This is because one of the most valuable tools investors have in the pocket is time, and you should not toss around with it.
YOU MAY FIND USEFUL: 10 Most Important Slides To Have in Your Pitch
Be vivid in your explanations. You also need to be careful not to over-explain your product as doing that can be boring. Explain exactly what is unique about your product or service, and be specific on the market you are going to serve. Additionally, explain precisely how you are going to acquire your customers and your revenue model you will use.
Understanding Funding Series
Before any round of funding, analysts undertake research to determine the valuation of the company to be funded. Valuations are derived from different factors including proven track record, management, market size, and risk among others. These factors have a big effect on determining the type of investors likely to get involved in your company. Here are the funding rounds;
This is the earliest stage of funding to any new company. It occurs during a period when company funders are getting their operations off the ground. Depending on the nature of the business, this type of funding can happen pretty quickly or may take a longer time. In most cases, investors at the pre-seed stage are founders themselves.
The seed fund is considered the first official equity funding stage. Basically it represents that first official money that a company raises. This series of funding is very important for scaling a business, as it is already off the ground. Seed funding is used to enhance activities such as market research and product development.
Series A Funding
Once a business has developed a track record, an established user base and consistent revenue, the company may opt to seek for series A funding. Funding at this series is used to further optimize user base and product offerings. Series A funding is for investors looking to put their money on companies that already have great ideas.
Series B Funding
Series B round of funding is used to take the business to the next level, way past the development stage. Investors will help businesses get to this level by expanding on their market research. Companies that have already gone past seed and series A funding have already developed a massive user base and substantial revenue streams.
Series C Funding
Series C funding is purely for scaling purposes. Businesses that have made it to series C are quite successful and are looking for additional funding to develop new products and expand to new markets. They might be even looking for this type of funding to acquire other business. Incase series C is not sufficient enough, a business may opt to the next series, which is series D.
Critical Factors that Determine Startup Success
Research has shown that launching and running a successful startup comes down to five critical factors. More precisely, in his research, Bill Gross points out the following 5 critical factors that determine the success of failure of a startup.
You should know that it is very important to be in the right place at the right moment. Take for example technology. As new technology becomes part of an innovative landscape, its success depends on how quick the broad audience and adapt and use the technology. You need to plan early enough and understand your burn rate to avoid going into the business too early.
Getting your Team Right
The execution of your startup comes down to those you have placed at key positions to oversee the implementation of your idea. If you assemble a team that has no idea of what is happening in the market, has no prior leadership and management experience and is full of doubts in implementing their strategies, be sure you are headed on failure. You need to have a team that is full of experience, is highly motivated and can adapt quickly to different market demands.
I know you are wondering why this point didn’t come as the most important factor in determining startup success. However, according to research, it is usually the third most important factor. Only when a concept is proven so do turn an idea to be a perfect business model.
The fourth most important factor in determining the success or failure of a startup is the business model. Initially, a startup can go without a business model. However, with time and based on the demands of the market, it can develop one or modify an existing one. Startups that are mostly focused on technology have shown to get off the ground without a strong business model, only to adopt one soon or later.
Funding is an important factor for any startup. We have already covered the main rounds of funding that a startup goes through, from pre-seed to series D funding. If you inject too much money to a startup at the very initial stages, you risk making your venture grow artificially. The most important aspect is to ensure that you balance the other factors; timing, right team, idea and business model, and have adequate funds that can run a startup for at least 18 months.
We have covered extensively on critical milestones that are required to ensure a problem in the market is identified, converted into a solution, the solution enhanced to become an idea, the ideal validated to become a product or service and the service validated to become a business. Nothing comes easy and to get yourself ahead of the pack, you must be willing to pay the ultimate price by sacrificing your time, resources, social life and comfort levels to roll your sleeves and get your venture started.
You need to work on an idea that is genuinely scalable. You do not need to be a master of all, all you need is to have a basic idea of different areas of a business and have the right team supporting and advising you in every decision you have to make. Of importance is having a prudent use of limited resources at your disposal and having a religious discipline of your finances. A journey of a thousand miles starts by making a single step.
As the Chinese put it; the best time to plant a tree was 20 years ago, the next best time is now – that means time is ripe for you to get out of your fears and comfort zone and build something the world can remember. You have to note that the path less travelled once taken may make all the difference.
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