Last month, our own Q Manning wrote a post called “The Start-Up Survival Guide.” Consider this a continuation of that post!
I have an idea for a new business. What should be the very first thing I do before anything else?
The first step would be to have a plan. Of course, there are many levels to this. Start by working out what income you expect to come in and how big your market is. Once you’ve done your research and taken educated guesses on that, you can start to planning to build a team and an infrastructure that can support and bring in that expected income and cater to your market. It’s important to know your market — even if you’re working in a new field and have no idea what your expectations should be, it’s important to set a goal that you can attempt to hit.
Dwight D. Eisenhower had a phrase that he used often: “Plans are useless, but planning is indispensable.” It’s important to have a plan so you have something to strive toward, but it’s equally important to have a plan so you can better understand what went wrong if you initially fail. Don’t look at early failures as a bad thing. Let them guide you in your future endeavors and let them help you set better future expectations and plans for yourself and your company. Not to mention, no one is going to give you a loan or assist you in funding if they don’t think you’ve thought ahead and have a plan. Most investors understand that your business will probably not resemble your business plan, but trust me: they’ll appreciate the fact that you’re not going in blind.
How do you build a great team? What do you look for?
It depends on what market you’re in. A college education is good for certain things and you’ll always need your specialists and experts, but the old saying is true: the real education is the workplace. An MBA is impressive, but sometimes, it’s more valuable if you get it after you’ve been working in the business world for a while. An MBA may be impressive, but is that person truly hirable if they have no experience? You’ve got to weigh every option. College educated folks also cost more, but they also tend to be better prepared for their field than other newcomers. Like I said, it’s all about finding that perfect balance. However, if you’re a brand new business and you’re bootstrapping, you may not have the luxury of every choice. You have to pick what works best for you with the resources you have available.
What speed bumps should every small business expect to hit in the first year? How can they overcome them?
One of the things I learned early on is that in the current economy the more traditional institutions like banks and lenders don’t want to give you a loan until you’ve been at it for one or two years. Their “start-up funds” won’t be available for most start-ups! (Unless you want to remortgage your house). That’s why it’s vital to identify and cultivate good relationships with capital. Good investor relationships are invaluable! You need to be more responsible with investor’s money than you would be with your own. To give some examples of irresponsible behaviors, I’ve seen a lot of companies that, upon securing funding, go after the fanciest offices in the biggest building they can find. I’ve also seen companies hire an absurd number of support and management staff rather than try to find ways to accomplish things more efficiently (these people tend to hire someone new every time they see a problem rather than find a solution or system to put in place). These kinds of decisions will sink a business right out of the gate. There is a time and place for large impressive facilities and rapid growth, but an investor wants to see that the growth is measured and the funds are being invested first in key areas like marketing and production before expensive overhead.