Given my background, you would be forgiven for thinking that I was probably an ideal person for starting a business. Good university degrees in statistics, economics and an honours in marketing. An MBA with a strategy and finance focus. Real jobs in finance and accounting (6 years); in brand marketing with the multinational Kimberly Clark (3 years) and then over 25 years of consulting to major corporates around the world mostly as a partner at a top tier firm (Deloitte; Braxtons). Within that time I also launched two consulting businesses of my own and advised countless friends and family members on their own enterprises. And I even lecture at a top business school on strategy, decision making and M&A!
However, it was only when I started researching my latest venture over 3 years ago, did I find that I really did not know the best way of launching a business in the 21st century. You see my training and experience had mainly been around growing and developing existing businesses. That really entails optimising a known business model to best serve a known market. In the majority of new businesses, especially where founders have new ideas or are harnessing new technologies – launching a business is more a process of designing or discovering a business model; and only then optimising it.
Over the last few years, I have worked hard at taking my existing 30+ years of training and experience; and integrating it with the latest best practice in startup thinking to have developed a framework that can assist founders in successfully launching a new business. I do not claim for one moment that I have all the answers or that I am some amazing startup guru – and frankly acquiring these new “startup best practices” has included learning from our (my co-founder and myself) own failures, mistakes and diversions. But now I do have a much clearer perspective of the critical success factors and many of the potential pitfalls that must be addressed in developing a new business from conception to paying customers – and beyond.
The purpose of this article (and subsequent ones) is to share my thoughts with those people who are in the early stages of developing, or considering starting, a new business venture. It will include theory, practical cases, tools and links to important blogs, books and other startup resources. My wish is that it will give you a better than average chance of being successful, provide some useful support – and perhaps put the occasional smile on your lips too – because if you do not learn to enjoy the journey (or “camino”), it may be best if you do not start at all.
This introductory article will cover, at a high level, the overall process from conceiving an idea to scaling and growing the business. I will also touch on some of the hype (read BS) around the entrepreneurial environment and then some of the truisms that hold for established businesses and startups alike! I will finish off with some links to some useful resources.
I do not yet have the rest of the articles planned out in detail and to an extent I will be using your feedback to structure the themes, but they will almost certainly include:
- Business models, value propositions and lean thinking;
- Market segmentation, personas and the customer journey
- Design-thinking and product development;
- Funding and finance;
- The entrepreneurial mind-set with a commentary on depression and optimism.
They will NOT include:
- The 7 things that successful entrepreneurs eat for breakfast
- The 5 character traits that guarantee startup success
- The 10 reasons why venture capitalists have bad sex lives.
Lastly, I am not going to try and keep the articles to 500 words or whatever the behavioural psychologists believe our nano-concentration spans can handle. I am hoping that they will be valuable enough for anyone with a real interest in creating a successful business to want to read through in total – maybe even twice! On the other hand, if you do not – well, I will never know!
2. Stepping through idea to growing business
We can break down the development of a new business into phases. In a later article we will cover these in more detail, but for now they are:
Note several good authors have described the steps to build a business – probably the best being Steve Blank in his book “The Four Steps to the Epiphany”. The steps I describe above integrate well with his ideas, but Steve tends to use terms that may be a little cryptic unless you read his book (see recommended reading below) so I have tried to use more familiar terminology.
Google Garbage alert: if you google “x steps to build a business”, you will find a lot of useless, some downright dangerous, advice.
Probably the biggest learning point a corporate business person-turned-entrepreneur will have to get to grips with is that, up until there are paying customers (red blocks in the diagram above), their business idea is basically one big experiment.
The way this experiment is run has also been covered by a number of people, but the most popular must be Eric Ries in his book “The Lean Startup” (see recommended reading list). His underlying theme is that when you start your new business, your concept is at best a set of hypotheses that describe how you think your business will work in the future. Using “lean startup, the founders should build a set of experiments around these hypotheses and test them via learn-build-measure loops that test the underlying hypotheses of the business.
As an example, one of the major assumptions (hypotheses) that the AirBnB founders had was that people would rent their homes out to strangers. The only way to really test this was by testing this idea in the real world. In the process they got to understand under what circumstances this might (and might not) happen so they were able to build this into their product offering.
We will cover more of this in the next article. It is also the underlying methodology we use in our Mashauri programmes and so if you want to start using it right away, you could sign in to our Launch Programme if you liked.
3. Navigating the hype.
If the previous section guided you through the right steps, this section is to help you navigate through some of the rubbish that you can find on starting a business on the web.
Perhaps the best way to do this is by busting some of the “myths” you might read:
- Myth: Everyone should try and get a venture capitalist or business angel (see jargon buster) to fund their business.
- The chances of getting funded are really slim. Far less than 1% of new ventures get funded (see our blog on “Holy Grails, unicorns, VC funding and other fabled creatures” for more facts). In addition, if you are one of the few that might obtain funding, not everyone likes the loss of control that goes with it – see later article on funding.
- Myth: Social media is the answer to all your marketing prayers
- Social media may be a useful channel for many new businesses and can certainly be an inexpensive way to reach customers. But, as in most startup spaces, it requires clear objectives and strategies. Far too many founders launch Twitter accounts, Facebook pages, LinkedIn company pages, etc and then spend mega-hours on trying to get likes and followers with no real idea why or how. One hundred people who willingly register on your website is worth thousands of FB likes or Twitter followers!
- Myth: You have to offer things for free, especially if you are selling web-based services.
- Someone using your services for free is a user, not a customer. Once again, there may be a sensible strategy as to why you might have a free version of your product, mainly as a way of allowing them to experience your product before buying a paid-for version. If you cannot persuade someone to part with money for your service, then you probably have not got an appropriate value proposition.
- Myth: You should attend all the startup events you can find so as to “network” with investors and the like.
- There are a ton of events on the go, frequently based around pitching competitions, motivational talks and startup “experts” sharing their wisdom. They can be fun, motivational and occasionally useful contacts can be made – but don’t confuse them with work. Generally, founders attending these events, even if they pay, are the “products” on offer to the vendors. (I suspect I may pick up some flak for this comment and, to be fair, there are some great events like South Summit, but you should pick your events carefully and attend with clear objectives in mind.
4. Some truisms
Although I started the article explaining how starting a business is not the same as running a going-concern, especially in the early stages – there are plenty of business laws that still apply. Many people holding themselves out as entrepreneurial gurus seem to want to ignore these. Frankly in this day of sky-high valuations on young businesses that are yet to turn a profit; and the rock-star status of some of the founders, it is easy to think that the business version of the laws of gravity can be defied.
My list of truisms that may seem to be getting trampled to death by unicorns (jargon buster) are:
- Cash is king – positive cash flows derived from customer revenue will always remain the lifeblood of a business (to mix my metaphors). Even if you can convince an investor to temporarily allow their cash to be that flow, they expect your business to get there – and get there quickly.
- A startup is a temporary organisation seeking to become a permanent business through finding a workable business model. A business is an enterprise with paying customers.
- Business strategy is still important. The teachings of gurus such as Michael Porter and Clayton Christensen are as relevant for new ventures as they are for large corporates, even if there are different interpretations.
- Following the above point, it is essential that you are able to articulate your basis of competitive advantage if you wish to survive. By the way, being first is not a long-term competitive advantage.
- Not all ventures must have plans to become massive, change-the-world institutions. Lifestyle businesses that simply provide a living or even bolster a salary are just as important – in fact most economies depend upon them.
- You and/or your co-founders need to be an expert in the business sector in which you are competing and in the underlying technology or process that makes you different. For instance, if you are going to provide a highly customised tourism experience based on big data analysis of customer behaviour, your team must have deep tourism knowledge and excellent big data expertise.
- Providing true perceived value inside an excellent customer experience in a way that is different to your competitors, will always be at the heart of any long-term business venture.
5. Some recommended reading
There is more new business venture reading material out there then you will ever have the time to read. Frankly for most of my readers, you just need enough knowledge of the new venture process to successfully launch and your business, not become startup specialists. I would therefore recommend the following books:
- Business Model Generation: Alex Osterwalder
- Disciplined Entrepreneurship: Bill Aulet
Note – not one of the most famous books, but one of the best!
- A few blogs that are worth subscribing to (practical, entertaining, short (not lie mine!)
Great to have reference books:
6. Conclusions and questions
If you find this article to have been of value, please let me know either via the comments section or direct to my email at firstname.lastname@example.org In addition, if you have any suggestions as to how the style may be improved (eg shorter, more examples, etc), please use the same media.
Our objective is to help you to be more successful in launching and growing your business. The Mashauri process, mentors, training and community are part of that; but should you decide not to use our programmes we hope that at least these articles will be of some value. If you do want to fast track your business to success, then I suggest the LAUNCH programme which is mentor-backed and about to commence.
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