- To be successful building a business from nothing—it's not about inspiration—it's about process and timing.
- By validating demand first, building a simple model, and not overcommitting to lawyer/hiring/tooling decisions until after the marketplace confirms demand, these companies can usually move forward faster than others.
- The best guides for starting a company that currently rank in search engine results pages (SERPs) all point to the same basic premise: Success comes from execution (discipline) not from the 'quality' of the idea.
Starting with demand
A business should always start with a recognized problem that people would be willing to pay for a solution to.
While this may be common sense, many of the businesses that fail are those that start by developing a product and then trying to find customers.
The first question you should ask yourself is: Can your target buyer articulate in their own words the problem that needs to be solved?
Secondly, how often does that problem occur?
If it doesn't occur frequently enough, then your business concept is still 'just' an idea.
In this section, the author's focus is on using tools that can help reduce uncertainty about where to invest in a Market Research process before making investments of financial resources.
Tools listed here would include Market Research results, interviews with potential customers, Demands for search, and, when available, analysis of Competitor activities.
Validate problems early
The most authentic form of validation is evidence of intention and not popularity.
Evidence of intention could be provided by the following types of actions that an interested person would take: signing up for a waitlist, or setting up a Discovery call, requesting a Quote and a Preorder, or by someone continuing to ask similar questions from the same target audience over a period of time.
A good general guideline is to look for evidence of behaviour versus compliments.
Many people will tell you that your idea is fantastic, but significantly fewer people will take action that requires them to invest time and/or money.
Write lean business plans
Business plans do not have to be lengthy documents.
The contents of a Business Plan should seek to answer five of the most challenging questions: Who is the target customer? What are you selling / providing? How will you generate revenue? What does the cost structure look like?
How will a new company be able to survive long enough to learn how to operate.
The Most recent versions of Business Plans suggest using them as a Decision making tool, rather than formality, and it’s the appropriate way to develop and implement Business Plans.
The reason being is that the Business Plan must clarify Assumptions, Revenue Model, Pricing Structure, and Channels before any large expense is made.
Keep the business plan in operation
A weak Business Plan can state "We are going to do a lot of our Marketing activity on Social Media."
This statement is vague and non-specific.
Conversely, a strong Business Plan states: Who's going to post? What are they going to post? How frequently are we going to post? How are we going to measure whether the Posts are providing us with our desired results? What are we going to do if at the end of 30 days, our conversion from the Posts on Social Media does not continue to improve?
The above differences are significant and turn the Business Plan from a decoration to a "Working" document.
Determine your legal structure
When choosing a Legal Structure for your Business, the Legal Structure should be selected based on several factors including: Risk, taxes, growth Path, and Convenience.
The proper organizational structure for your business will vary based on multiple factors, including:
- The type of industry
- How vulnerable you are to lawsuits (organizational liability)
- If you have plans to seek outside financing (e.g., an angel or venture capitalist)
You’ll find that in many startup manuals this topic is addressed; however, most guides lack in-depth guidance.
Many of the better resources will tell you to consider other items that you will need to address earlier on, including necessary permits, trademarks, a contract between the founders, compliance with tax laws, and having a system for bookkeeping/accounting, in order to avoid more expensive clean-up actions later.
Don't overly complicate your administrative structure
Because many first-time founders either over-register their business or under-register their business, creating an unnecessary roadblock.
Over-registering when the business has yet to be validated, can lead to unnecessary cash wastage.
In the case of under-registering the business, the potential customers have already indicated they’re ready to purchase and delaying registration can create tax liability or tax issues unnecessarily.
Keep your first offer simple
The minimum viable product, also known as MVP, is one of the most recognizable concepts in startup lexicon.
The goal of the MVP is not to create a lesser version of your service or product for the sake of creating something for the market; rather, the goal of creating the MVP is to create the smallest functional offering of your service or product so that you can obtain evidence of demand for your offering in the marketplace.
For example, a services business may deliver their services to customers manually, prior to developing an online booking tool.
For a product business, the MVP may be a dummy prototype of your product or a limited quantity of your product.
For software companies, the MVP can simply be a demo version of one narrow workflow of an application, rather than developing and launching a fully functional application all at once.
Ship your MVP, rather than polishing it
The majority of the time that new founders waste is spent polishing their branding (logo, company website, features) for customers to purchase.
Customers usually place much more importance on reliability, clarity, price, and turnaround time than on visual design at the launch of an MVP.
Fund your business in a disciplined manner
The amount of funding you will require will depend on your business model and the industry you are in. Many lean services businesses will need minimal external funding sources.
For many product businesses, having the right products means making sure you have the products in stock as well as the ability to manufacture them.
For Software-based companies, however, this is not the case. In order to develop their software and acquire customers, companies may need money for development and customer acquisition.
Funding is currently being framed as an opportunity for planning rather than being framed as a trophy, which means that the entrepreneur must clearly identify what they want to use the funds for, how long they intend to use them, and what milestone of success the funds will enable.
Identify milestones to match the capital to the milestones
When a capital objective lacks clarity, it could indicate a problem.
When there is clarity as to how funds will be used, it indicates a stronger utilization of funds to accomplish specific objectives, such as validating a product, creating inventory, making first hires, running marketing before launching their product, or running operating costs.
Money is not a strategy; it is the fuel.
Don’t just develop the best product; develop a reliable channel
Developing a product without developing a means of reliably getting customers to purchase your product will not be a successful strategy.
Companies that do not have a clearly defined marketing strategy and that do not follow through with creating demand are more likely to experience difficulties with their companies.
In the early stages of many entrepreneurs' companies, the first channel may not be through paid advertising but rather through a channel that they can control, such as through building relationships and partnerships, through referrals, through content published in the various forms listed above, or through search-generated content.
The correct choices depend upon the products or services being sold, the customers' purchasing behaviors, and the complexity of the products or services being sold.
Be specific with your channels outside of your marketing channels
Telling people to "do marketing" is not a plan for action.
Providing people with a written marketing plan setting out the specific activities to be completed at a minimum weekly basis for a particular source of customers will provide a clearer understanding of what is required to achieve the desired sales goals and, if the leaders of the company follow through with these four steps, this activity will create accountability.
Create operating systems beginning at the start
The definition of a business is that it is a method of repeating an activity.
As a business grows and matures into an operational business, the systems created for capturing leads, tracking customer communications, invoicing customers, fulfilling orders, managing cash flow, and supporting customers, must all be created to avoid or manage the chaos that grows with an expanding company.
One of the most overlooked elements of startup advice is that while it may seem as though everything is completed once your launch occurs, this is actually when the majority of work begins since you need to determine what aspects of the startup are working correctly, what are not working correctly and what areas need improvement.
Simplicity of the technology stack
While there are many ways to put together an elaborate and complex technology stack, the best earliest stacks are generally simple and easy to understand.
For example, you will usually find that a simple combination of a spreadsheet, a calendar or scheduling tool, an invoicing tool, one CRM, and one analytics layer will generate more revenue and produce better results than a complex technology stack where the majority of those tools are not being used.
A simple technology stack is also a feature of your startup.
Launch with feedback loops
A launch is not a final destination for starting a business; rather, it is a first proof point in your business model.
The first structured test of your business model is a launch and you should create the goal of your launch to test out a small number of specific things: who the customer is who is converting, the objections being mentioned by customers when they are deciding whether to convert, what was delivered incorrectly or today, the financial margin between the sale price and the cost of the product you're selling.
An effective launch strategy is narrow in scope and has one target audience, promise, and offer with one primary channel through which to convert.
The narrow scope of a launch will help you develop effective feedback.
Measure what matters when measuring your success
Your early metrics as a startup should be based on your survival and on your learning, not on your vanity metrics.
The early metrics that you should focus on are usually, number of leads generated, conversion rate, number of repeat purchases, average time for response, their churn rate, and how much cash they have in their bank account.
Vanity metrics can always wait until later on in the process to measure.
If metrics do not tell you something useful about your customer's behavior, these will not be useful, but rather just there for decoration.
Optimize your business by iterating to correct
The last stage of your launch is not to scale; rather, it is directly follow-up with correcting the things that do not work correctly.
Startups that are well-run adapt quickly to market feedback, eliminate underperforming concepts, and focus their efforts on the things that create revenue for them.
Many of the existing guides are written too optimistically and too shallowly; they encourage the reader to continue working toward improvement but do not discuss what that will look like.
True iterative processes will remove barrier to entry, simplify product offerings, clarify marketing messages, and only adjust pricing based on market evidence.
Building around signal means letting customer behavior dictate what is changed.
For example, if multiple customers ask the same questions, then that indicates the message is not coming across.
If many customers start but very few finish, then that means that the offer is weak.
If customers only purchase once and then vanish, then that means that the delivery method or value proposition need improvement.
The vast majority of results available today highlight the basics of a business but rarely do they take a deep enough look into the actual "execution friction" of a business.
Additionally, most results do not discuss the specific differences between a business idea that is good on paper and a business idea that can sustain a week of day-to-day operations.
The largest void within the current startup literature lies in the area of specificity.
Specifically, the literature contains minimal coverage of trade-offs, income limitations, time restrictions, and differences between types of business models.
A much more robust page demonstrating the differences between the same 10 steps for a sole consultant versus a product seller versus a software creator would demonstrate more effectively how to launch and run a successful business.
As for the real-world pressures associated with startup development, there are three major areas:
- Cash;
- Market saturation;
- Complexity.
When cash is short, a bootstrapped founder will develop a sequence that allows the business to avoid excessive spending until the time comes to validate the business model.
The focus is on validation of demand rather than the "perfect" business.
Black market businesses will often struggle to differentiate themselves in a crowded marketplace and thus must hone their niche positioning, clarify their message, and/or create unique delivery models.
Complex offers have a tendency to create significant friction during the sales process, and thus the first offer should be as simple as possible for the customer to understand and learn about.
Because the majority of side-hustle entrepreneurs have less than six months of time to devote to their business, they tend to be more productive when they solely focus on one customer acquisition channel, development of one offer, and creation of one target market, with a weekly review process for all three.
In conclusion, the successful start-to-finish development of a new business occurs by reducing uncertainty in the proper sequence.
The order of priority for helping to decide whether to scale the business is: Demand, Structure, Execution, and Scale when the business has proven track record of repeatable business model.
This same pattern is the underlying principle for current successful startup literature; the best way to beat out the generic startup guides is to provide clear direction on how to think, what to do, and what to do when the first plan fails.
Frequently Asked Questions (FAQs)
What will be the amount of money to get started?
This depends on the model or type of business you choose; for example, service-based businesses can typically be established with minimal money, while product and inventory-based models require higher initial working capital investment.
Should the business plan be lengthy?
No, it should be useful; for example, an entrepreneur's best business plan is one short enough to answer all the questions that need to be asked, rather than a lengthy plan to read that may not be useful at all.
What are the three most critical elements that must be developed within the first 90 days of starting a company?
The three most important elements that need validation before scaling any company will be the existence of validated demand; Development of a simple business offering; and Creation of a repeatable method for acquiring customers.
If you don't have these three elements, your business's growth is likely to be accidental at best.
Is legal formation the first step?
No, not necessarily; in the majority of cases, start-up entrepreneurs will validate the potential business concepts before establishing a legal business structure.
Once completed, the establishment of a company structure will also depend on the risk tolerance and the readiness to serve customers.
