The author, in this Part – IV of his Entrepreneurship Series, gives a broad but detailed outline on how to get started with a business by way of finance, testing business models, team formation and management and general attitude.
So you want to be an entrepreneur?
Got a plan? Have a product? No idea, what’s next?
No matter, if you’re a first-gen entrepreneur, running a small business, or even trying to do something on the side, let’s start with some basics. Where’s the money?
Figure out how you're going to finance the company.
To start a business, you need money for licenses, equipment, software, legal fees, operating expenses and much more. Running a food truck to selling a mobile application, there’s a ton of costs involved in establishing a set-up. Unless you’re a consultant or advisor, selling “gyan” or specific knowledge, most traditional or non-traditional businesses require financial investment. This is called “working capital” and typical fund-raising can happen from bank loans, angel investors, venture capitalists (small & large), government funding (rare for initiations unless you’re selected for incubation), and even friends and family. New ideas on fund-raising involve crowd-funding or kick-starter campaigns (online) but this can require a bit of technology knowledge (which is surprisingly easy to learn). However, all of this means that you will have to sacrifice some stake or part of your business for the original investment and this can be in various forms and manners – essentially, you lose control over the decision-making process to some extent.
If you have saved funds and/or stockpiled some cash (however, wherever), you can also consider “bootstrapping” your company - another word for self-funding and not giving up ownership too fast. If you really believe in your product or service, bootstrapping is the best plan which gives your product or service time to gain traction, catch attention and drives up the value of your business. Eventually, this means you can demonstrate to investors your early successes and how capital influx can grow the business when it’s time to shift gears.
Consider technology – do your research as much as possible.
Who’s with you?
Have a good team – this cannot be stressed enough. Jack Ma famously insists on hiring people smarter than him. Steve Jobs would hire the best and refuse to manage them, claiming that his job was only to hire them and show them where he wanted to go. For smaller start-ups, the quality of people makes or breaks your product/service. In such situations, hiring costs play a very important role and most businesses work from the premise of what they “think” they can afford. This practice has negative after-effects. Define the role first, minutely, and then review market rate for the skills required – only then, should you consider cost to company for resource-building. If you can afford it, get the best your money buys.
If you’re bootstrapping, then it’s a policy of beg, borrow or steal - whatever it takes to get the work done. Build a scope of the work required and see if you can outsource to friends and family. Network extensively – in short, ASK for HELP, often loudly and to as many people as possible. You’ll be surprised by the goodness of people, in these hard times of competition and personal gain.
There’s an old Gujarati saying – “Dhandamein Naak Mat La” – leave your nose (ego, pride) at home, don’t bring it to the market.
What are you selling?
We are all selling, something or the other, all the time. Understanding the need for your product/service is crucial. Find your niche and exploit it by utilizing all aspects involved. If you’re selling communication services, consider all streams like ghost-writing, editing, coaching freelancers, brand pitches – understand the market. If you’re considering the food industry, understand what sells and consider what is actually required. Business viability is not necessarily what you’re good at – many more might be better at it than you. Understanding market dynamics and requirements defines your success and growth.
For a bootstrapper, timelines are very important – how long can your funds sustain you till you find your niche? Try to structure small PoC’s (Proof of Concepts). A proof of concept is an easy exercise to set up dry or test runs for your product/service in any given market. An example is a young and very skilled baker of my acquaintance, who has started cloud selling and setting up a home-based outlet before engaging directly into the market with substantial investments. She’s building up her brand and creating a client list which will help in the long run. For any business, creating impact and value with a strong client list is essential.
Have a plan – stick to it, till it doesn’t work. Then adapt and plan again.
Who’s doing your books?
Hire a cheap lawyer, get cheap results – this is an old saying. The same applies for any given business model. If you have to hire a professional, get the best you can afford. Your “books” are your accounts and money/fund management.
Don't settle for a cheap accountant – you will need local-specific knowledge and detailed expertise with your local rules, regulations and taxes. Find a person who deals extensively for your industry specifically and pay for advice during the planning stage itself. Money saved is money earned – having a structure in place is imperative before taking a single step on investment of time, effort or money. This is one area where technology doesn’t help. So beware of online services which seem to be cheaper.
What’s your outreach plan?
Figure out your marketing strategy. People need to know that you’re selling or providing a goods/service before you can generate sales. A business owner never stops selling or marketing their products/services. Spend at least 40% of your planning in building a pitch and then once your product/service is on the ground, ensure 40-50% of your time is kept for pitching. Sell online/offline, network extensively, build relationships even if you don’t sell, constantly build your prospecting pipeline. Creating leads and converting them to long-term paying customers is an exhausting process and takes weeks or even years.
Keeping all of the above in mind, it’s also necessary to remember this – “Be Flexible.”
In a shifting technical and political landscape, the rate of change in the past 2 decades has been exponential. What works yesterday might be irrelevant today and so on. To grow with the market, original planning must envisage and keep space for change and re-structuring as per market requirements. The best way to achieve this is to keep plans open-ended and run a wide coverage on the early documentation process, so that change is not inhibited by original plans and models.
No one can plan for the challenges your company might face five or even two years ahead of time. Instead of spending a year working on business models or developing an idea, just go and start – test your idea in small segments, run focus groups with friends and family and close networks or even the people around you. Ensure your documentation is in place, however.
Most importantly - Don't Quit.
Business is war and while battles are won or lost, the war is never over till you say it’s over.