By Brian McKay
Starting a new business is a big step. It all starts with a thought and often cascades from there. It isn’t easy and you know that. Nothing ever is.
Sometimes the euphoria of a great idea can get in the way of rational thought. Zenruption is all about start-ups and disruption. Maybe you’ve thought about how to start a senior home care business or something else that you feel is a good fit for you. The goal is to help you do it right the first time. To that end, the next four questions are a starting point to get you off on the right foot.
Is your idea totally new and disruptive or is it a modification (innovation) of existing practices that will be competing in a crowded space?
This is an important place to start that will beg additional questions on down the line. If you feel that what you have is truly disruptive it probably involves development and testing to see if it will be adopted. At an early stage in the process it is important to remember that consumers might not even know they want something disruptive. This makes things even more convoluted.
Disruptive products and services typically monetize the customers that big organizations have neglected and then slowly work their way up into the main customer space the giants occupy. Your disruptive idea needs to be something that targets the forgotten and can’t be easily replicated (or they wouldn’t want to) by the corporate bureaucracy. True disruption takes true commitment. Be prepared to have fits and starts in attracting a customer base.
If the new venture is a modification of existing practices, it is easily assumed that you are a planning on an big improvement over other competitors. Marketing is key in this situation. You have to show the difference between you and them effectively and immediately. The goal is to get it out there before they catch on or can replicate it. If your competitors can’t easily replicate it, then bonus! You have more time to get marketing and adoption up to speed. When Uber first figured out that they had innovated and a fractured taxi industry wouldn’t be able to respond at all, that must have been a happy moment for them.
Are you prepared to spend double what your startup cost estimate is?
In a perfect world business plans would always be spot on. They never are. Certainly some businesses are started for less than envisioned, but more often than not, costs are higher. Variability is brutal and there is no way a business plan can account for every factor along the way. Another thing about variability is that it is costly more often than not. Unplanned tools, software, build-out, regulatory costs, etc., can all be things missed in the business plan that cost money.
Another huge factor is that growth is expensive. Having to build now to bring in revenue later can kill your cash flow. Does your business plan anticipate your product being a hit and the upfront costs that come with booking more orders than you can fulfill? If not, start planning now. Have a plan in place that accounts for unexpected growth.
If you spend what was budgeted, or even less, hats off to you. Continue to watch those costs like a hawk. The more saved on start up the more available for marketing when you get going.
Who is being included in this venture and why?
Now you might think that is a funny top four question. Why not contemplate how the business entity will be formed or what type of accounting software to use? Well this is a massive first question to ask as it impacts the whole future of your company and your personal life.
It’s no wonder that most startups include multiple founders. People love to share great ideas and workload. The reason it is so important to ask this is to determine if those included really have the skills you need and if you are ready to watch your personal relationship become far more contentious. Sure your cousin Betty Sue could really use a job and you are a nice person, but what does she bring to the table? Are you prepared to butt heads when she isn’t contributing? How appealing is it that Thanksgiving dinner might suck even more than it currently does?
Very few rock bands survive intact, except the Stones. Many former startup partners end up hating each other. Plan on this in advance. You aren’t bringing people in to impress them, but because they have the contributing skills. If you estimate those skills wrongly, instability will follow. Find those that clearly bring something to the table and hopefully aren’t related to you. Once that is done, establish a power structure to minimize the free for all that can be competing incentives. It’s your idea, you dictate the path it takes.
Are you and the others involved open to stumbling forward?
Few things cause the premature death of a business more than certainty. It is a luxury you can’t afford. Just as in planning your initial budget, things don’t always work out as planned. Flexibility is a must, but it is in learning from small missteps that will make you successful. Stumbling forward means you will do things right and you will do things wrong but in the end of the day you stumble towards more right than wrong. Being profitable doesn’t mean always being right, it means learning to be right most of the time.
Another aspect of stumbling forward means probing new ideas. Put out small feelers here and there to see which works. Stay on the initial track of the business plan but don’t hesitate to probe a new idea or product in a way that produces learning without threatening the existence of the company.
To stumble forward you have to check your ego at the door. Be prepared to say you were wrong and continue stumbling. If you can’t coat check your ego, don’t start a business as your chance of failure just went way, way up. Hubris and an inability to admit fault kills more organizations than Sharknado did humans.
Now that those four questions have been contemplated and answered, you are ready to get down to the real business at hand. Things like business entity formation, accounting, build out, and marketing lay ahead. Be prepared to learn. A lot. With the basic questions answered now, moving forward will be much easier.
Cheers to your future success.
Feature photo courtesy of Flickr, available under a Creative Commons Attribution-Noncommercial license
Brian McKay has his MBA from Boise State University and is a co-founder of zenruption. He absolutely loves small business. Brian has a complete and total fear of shopping malls that borders on paranoia.