ASK STEVE - What advice do you have for professionals considering launching a startup?
Many of the challenges in the start-up process are very predictable. You need a good idea, a market that has at least marginal interest in that idea. You need good partners, lots of money, and the ability to smile in the morning and beat people silly in the afternoon. Start-ups are a way of life. It's not a job, it's not a career, it's a way of life. You start a business for the sense of accomplishment and the trouble becomes that real accomplishment takes a while to happen. Plus, the lack of accomplishment can steal confidence, breed fear, and cause a paralysis that founders cannot afford. These are some concerns to entertain - • Sales will not grow as quickly as founders project. • Miscalculations are usually made in what it costs to sell. • You chase too many kinds of customers or too large a geographic territory. • You introduce too many products with limited resources. • You need to get and keep experienced people fully involved - incent them. • Watch that operating costs and overhead do not increase without your notice. • Selling someone once doesn't make them loyal customers. Use experts to analyze your opportunity - the price you pay in time, energy, money and assessment is well worth your while. The alternative is a slow painful exercise in failure. Financiers are great analysts or consultants who have had experience in companies comparable to the start-ups they evaluate. They will help you get to the heart of the business you are thinking about starting. These people will not hesitate to say what to them is obvious. Competitors are not dumb. They have been where you are going. They also have what you do not and that is a real, operating business. The amount of energy and time you will need to create more money than it costs to create it is essential to know. Failure to know these things will make you bleed money. Finally you must know the responsibilities of being CEO. You will be expected to be chief technologist, strategist, salesperson, interior decorator, human-resource director, and office manager. It is essential to delegate and trust well or you will be buried by the time needed to do all of those responsibilities. There is a lot more advice that you will get from a true expert but this is a brief highlight and I also offer this list of questions to ask yourself before you take the leap. 1. What is the market potential for your company's product or service? What is the revenue potential for the industry, and what is its growth rate? 2. How did you calculate market potential? How do you determine industry sales and growth rate? 3. What makes your business different or unique? 4. Why would someone be "compelled" to purchase your product or service? What specific needs does it address? 5. How do you know that your business has high-growth potential? 6. What is it about your management team that makes them uniquely capable of executing on this business plan? 7. What are the primary risks facing this opportunity? 8. Who are your competitors? 9. What gives your company a competitive advantage? 10. Does the company have proprietary intellectual property in the form of patents, trademarks, copyrights, etc.? 11. When will your company break even in terms of profitability and cash flow? 12. How do you plan to acquire customers? 13. How do you plan to keep customers? 14. What drives customer satisfaction for this industry and for the product? And, how do you know? 15. Who is the end user of the product or service offering? 16. What alliances or partnerships have you entered (e.g. joint ventures, marketing alliances, licensing arrangements, selling/distribution agreements, channel partnerships, software agreements, etc.)? 17. What is the anticipated lifecycle of your product or service offering? What are your current and future plans for R&D investment? 18. How do you plan to expand your labor force? 19. What are the probable exit scenarios? God Bless & Good luck!