Too many entrepreneurs tackle starting a business as a random walk into a business minefield, and they count on their street smarts, thick skin and pure determination to get them to their destinations alive. That does work once in a while, usually with some serious collateral damage, but a less painful approach is to prepare and plan for each step along the way.
One preparation example is the value of building a business plan before you start. A popular startup myth claims you don’t need one, since investors never read them. The reality is that if you are only doing a business plan for investors, you are already in trouble. You need the business plan for yourself, to force you to draw a detailed roadmap through the obstacles ahead, and be able to measure your progress along the way.
In my perspective as an advisor and mentor to many entrepreneurs, there are a set of basic strategies that can be applied to every startup to dramatically improve the odds of success, no matter what the business domain. These include the following:
- Take inventory of your resources before you start. Funding is only one of the critical resources you need to start a business. Maybe more important, you need domain knowledge, relationships and lots of potential customers. Some entrepreneurs run with passion into the minefield, only to find it’s harder to recover than to plan ahead.
- Define success as it relates to this startup. For some entrepreneurs, the end goal is a social one, such as saving the environment or feeding the hungry. For others, it’s all about making money. The path to each of these destinations is quite different. If you and your team don’t know where you are going, the obstacles will loom large and endless.
- Prepare a startup vignette to highlight value. Every startup needs a simple elevator pitch, quantifying the value of its journey, that can be communicated in less than a minute to new team members, potential investors and customers. As an investor, I’ve heard people talk for many minutes, and I still had no idea where they were going or why.
- Calculate and manage your financials. Even non-profits require money to operate, so every startup needs a business model with plans to bring in income. Manage expenses and measure success by profitability, as well as social value delivered. Pace yourself to avoid financial dead ends that can kill your startup.
- Scaling the business requires repeatable processes. Plan ahead to add more structure, people and financial resources to convert initial success into long-term growth. This means delegating tasks and not micro-managing, as well as more time spent working on the business, rather than in the business.
- Define metrics to keep on track for the journey. Common financial metrics include burn rate, gross margin, revenue growth and net profit. You also need a sales pipeline, customer acquisition costs and marketing costs as a percent of revenue. These measurements should be driven by your values and your company culture.
- Continually motivate and reward your team. Team loyalty and positive motivation is a powerful force for overcoming unforeseen obstacles. Reward systems should focus on progress and results, rather than time worked or entitlement. Celebrate every small milestone and success to keep the momentum growing.
- Maintain your own strength and drive. You won’t survive the journey if you try to run the business 24 hours a day. Be sure to schedule time away from work for physical and mental rejuvenation, including for hobbies and family. Mentors, advisors and business peer support groups are also key to a better perspective on the road ahead.
The best entrepreneurs I know use these strategies to prepare themselves before the assault and to prevent being surprised by the obstacles they will likely encounter. Prepared entrepreneurs are ready and able to dodge and pivot quickly, and not burn themselves out before they reach the finish line. The alternative is to endure a hard road and a painful beating along the way that I wouldn’t wish on anyone.
Image credit: CC by NATO Training Mission-Afghanistan