10 Things to Do Before You
Start Your Start-up
What
makes an entrepreneur is a complex question. It includes factors from the facts
whether your great idea is good enough? Can it grow in this slow economy? Can
it become profitable, and return on any investments it requires?
Well,
there's no way to know until you try, right? There are some ways to prepare
yourself, test your idea, and improve it before you actually found a company
around it. We've compiled the best examples from recent Inc. articles and
Inc.com guides of tips for the very early steps of building a start-up.
1. Scope out your industry
Or,
if you're just starting to think about entrepreneurship in general, find the
best industry to fit your style and talents. For example, this year's
burgeoning industries include interactive technology (from mobile app design to
tech-savvy translation), wellness (healthy beverages), and little luxuries,
such as baked goods. When you start honing in on a specialty area, seek out
counselors and talk to industry veterans. You can go to SCORE, the SBA, the
Women's Economic Development Agency, or scores more. The Internet, your local
library, the U.S. Census Bureau, business schools, industry associations, can
be invaluable sources of information and contacts. For instance, you might
approach business schools in your area to see if one of their marketing classes
will take on your business as a test project. You could potentially get some
valuable market research results at no cost.
2. Size-up the competition
Study
your competition by visiting stores or locations where their products are
offered. Say you want to open a new restaurant. For starters, create a list of
restaurants in the area. Look at the menus, pricing, and additional features
(e.g., valet parking or late night bar). Then check out the diners those
restaurants appeal to. Are they young college students, neighborhood employees,
or families? Then, become a customer of the competition. Go into stealth mode
by visiting its website and putting yourself on its e-mail list. Read articles
written on them. Sign up for e-mail alerts about search terms of your choice on
Google News, which tracks hundreds of news sources. After you study it,
deconstruct it using Fagan Finder, a bare-bones but very useful research site.
Plug the address into the search box. You will be able to quickly learn, for
example, the other sites that link to it, which can reveal alliances, networks,
suppliers, and customers. Business data aggregators such as Dun &
Bradstreet and Info USA provide detailed company information, including
financials, although the services are not cheap. Your aim is to understand what
your competition is doing so you can do it better.
3. Second-guess yourself.
"The
biggest mistake I see these days is thinking that a business idea will
automatically turn into a viable business model," says Terri Lonier,
president and founder of Working Solo, a New Paltz, New York-based business
strategy consultancy, and author of Working Solo: The Real Guide to Freedom and
Financial Success with Your Own Business. Then again, what if the idea really
is viable? "A lot of people start with a kitchen table idea," says
Marla Tabaka, a business coach who writes The Successful Soloist blog for
Inc.com. "It's a great idea you come up with your cousin at dinner. But
then the business booms, and your growth gets out of control. You need a
plan." Another important consideration is your personal financial
resources. Make sure you have a considerable amount of capital set aside,
especially because in a sole proprietorship you assume personal liability for
all activities of that business. If you borrow money and can't repay it, your
personal assets are at stake.
4. Think about funding- Think a lot.
Can
you bootstrap your company? Or are you going to need a small business loan?
Might an entrepreneur in the family be able to invest, or should you look for
venture capital or an angel investor? Money is a big topic for entrepreneurs,
and you'll want to know your options early on. In order to get investors to
open up their checkbooks, you'll need to convince them that your idea is worthy
and also be willing to subject yourself to increased scrutiny and give up a
percentage of your company. That's why it's a good idea to first ask yourself
whether you really need a professional investor at all, says David
Henkel-Wallace, a serial entrepreneur who has raised $60 million from VCs.
"If you're starting a web software or mobile software company, you might be
able to bootstrap it, which has the advantage that you get to keep all the
money you earn," says Henkel-Wallace. "You could also look into
borrowing from friends and family – or even take out a second mortgage – for
the same reason." If you decide your business can only get to the next
level with the aid of a professional investor, then you need to figure out what
a potential backer looks for in a budding company, says Martin Babinec, who
raised six rounds of funding through the business process outsourcing firm he
founded, TriNet, which now boasts annual revenues in excess of $200 million.
Start doing your research now, and don't talk to investors until you have a
strategy that involves foreseeable future liquidity.
5. Refine your concept.
Adrienne
Simpson initially intended to run a traditional moving company out of her home
in October 2002. The idea came to her after relocating her mother from Georgia
to Michigan. "I thought I'd put everything in a box, put it on a truck and
send her on her way. Oh, no! Mom started walking me through her home, pointing
at things saying, 'I'll take that, let's sell that, and I want to give that
away,'" she recalls. By the second year of operation, Simpson shifted
gears to make her Stone Mountain, Georgia-based company, Smooth Mooove,
specialize in transporting seniors—and their beloved pets—and providing such
value-add services as packaging, house cleaning, room reassembly, antique
appraisals, estate sales, and charity donations. Her crew does everything: put
clothes in the closets, hang drapes, make the bed, fill the refrigerator. But
even still business was stalling. "I knew how to run an existing company,
but I didn't know how to run a start-up," says Simpson, who worked 20
years for Blue Cross/Blue Shield and 10 years with Cigna Healthcare. Seeking
money and marketing advice, Simpson went to the U.S. Small Business
Administration (SBA) office in Atlanta and was connected to SCORE (Service
Corps of Retired Executives) counselor Jeff Mesquita. "When you position
your company you have to think outside of the box in terms of what makes you
different from the competition," says Mesquita. "Adrienne described
that what she does is move seniors from A to Z, so, when they arrive to their
new home it is like walking into a hotel room." The only thing her clients
have to bring is the clothes on their back (and maybe their pet under their
arm). That's when Mesquita suggested the business name change to Smooth Mooove
Senior Relocation Services. That same night, Simpson went to a networking
event. When people asked 'what do you do?' and her response was 'I have a
senior relocation service.' Right away people said 'Oh, you move seniors."
The business took off from there.
6. Seek advise from friends, mentors … or anyone, really
A
mentor can be a boon to an entrepreneur in a broad range of scenarios, whether
he or she provides pointers on business strategy, helps you bolster your
networking efforts, or act as confidantes when your work-life balance gets out
of whack. But the first thing you need to know when seeking out a mentor is
what you're looking for from the arrangement. What can your mentor do for you?
Determining what type of resource you need is a crucial first step in the
mentor hunt. Lois Zachary, the president of Leadership Development Services, a
Phoenix, Arizona-based business coaching firm, and author of The Mentee's
Guide: Making Mentoring Work for You, recommends starting with a list. You may
want someone who's a good listener, someone well connected, someone with
expertise in, say, marketing, someone accessible. Ideally you could find a
mentor with all of these qualities, but the reality is you may have to make
some compromises. After you enumerate the qualities you're looking for in a
mentor, divide that list into wants and needs. Who's best as a mentor? Look
within your family, friends, business community, academic community, and even at
your competitors – well, not your direct competition, but you get the idea.
7. Pick a name
Naming
your business can be a stressful process. You want to choose a name that will
last and, if possible, will embody both your values and your company's
distinguishing characteristics. But screening long lists of names with a focus
group composed of friends and family can return mixed results. Alternatively, a
naming firm will ask questions to learn more about your culture and what's
unique about you - things you'll want to communicate to consumers. One thing
that Phillip Davis, the founder of Tungsten Branding, a Brevard, North
Carolina-based naming firm, asks entrepreneurs is "do you want to fit in
or stand out?" It seems straightforward. Who wouldn't want to stand out?
But Davis explains that some businesses are so concerned about gaining credibility
in their field, often those in financial services or consulting, that they will
sacrifice an edgy or attention-getting name. "However, in the majority of
cases, clients want to stand out and that's a better approach when looking at
your long-term goals. Even the companies that say 'I just want to get my foot
in the door' will usually begin wishing that they stood out more once they pass
that first hurdle." Read more.
8. Get a grasp on marketing strategies
You
don't need to be a marketing whiz, but if you're trying to build an idea from
the ground-up, you'll likely need to build an accompanying marketing strategy
from the ground up. In doing so, you need to be clear on who your customers
are, because you don't have any time to waste on marketing to those who aren't.
"That's really the biggest challenge, determining who exactly your
customers are," Lonier says. "Many times [business owners] think they
understand who they are, but you need to be willing to interview and test
potential customers, particularly in the early days of a company, in order to
be able to build those relationships." One way to make marketing easier is
through joint-venture marketing, Tabaka says. When she owned a coffeehouse in
Naperville, Illinois, she realized that her company and a major drugstore in
the same shopping center could work together and support each other's marketing
goals. Another important and relatively easy way to get your name out into the
market is building your web presence through social media like Twitter and Facebook.
Be sure you familiarize yourself with and utilize Search Engine Optimization
(SEO) to make it easier for people to find your website.
9. Do a little test-run
"The
best way to test your idea is if you're employed full-time and can sell your
product or service in the marketplace on weekends," says Sapp. If the
business is already your day job, then you have to move quickly to test,
verify, and tweak your model," he adds. Try surveys, polls, and focus
groups to gain insight into attitudes about your business idea. Solicit
feedback on the cheap by using online survey tools available through such
services as Zoomerang.com, Surveymonkey.com, and Constantcontact.com. The goal
is to get to know your customers intimately. What turns them on? What causes
them to tune out? Are they impulse buyers or do they like to deliberate over
their buying decisions? There are a lot of products that people like but don't
buy, says Sapp. The price might not be right, for example. "Use social
media to hone in on certain groups that can become your focus group," says
Susan Friedmann, a nichepreneur coach, in Lake Placid, New York and author of
Riches in Niches: How to make it Big in a Small Market. "Check out chat
rooms, communities on social networks like Ning or Face book, industry groups
within LinkedIn," she says. "What are people discussing? Letters to
the editor or articles in trade publications are resources for finding out
about challenges in that particular industry. What are people writing about?
What do people want to know about?" Knowing the answers to these types of
questions may help you refine your idea.
10. Start searching for future talent
This
might sound premature, but don't forget that your business is supposed to grow
someday. Keep your eyes peeled all the time for people who might fit into your
organization – even if you can't afford to pay them yet. No matter how small
the internet has made the world, experts still recommend in-person networking
as the No. 1 way to recruit talent. "I've done a lot of placing people
into positions, and I have never used a job board as a way to do that,"
says Rich Sloan, co-founder of Startup Nation. 'Personal [interaction] is so
much more powerful and important to me." So, if you meet someone
interesting or knowledgeable at a networking event, or even if you get
particularly impressive service somewhere, be it a museum gift shop or
helpline, ask that person a bit about themselves, what kind of business they
see themselves in five years – and the best people around will stick in your
mind for when you need them.
(Courtesy- http://www.inc.com)
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