By Kenneth Burke
It’s easier than ever to start a business! Which is great, except too many people jump into entrepreneurship without any preparation. There’s a learning curve no matter what you do, but I’d much rather see your business start off on the right foot than struggle unnecessarily.
Roughly half of all businesses close shop within five years, which is a crazy statistic, because it’s been so consistent for decades! It’s crazier still when you realize that only one in 10 tech start-ups make it to the five-year mark.
Yet after helping Text Request go from $0 to a succeeding software company, and working with dozens of other brands from freelancers to start-ups to billion-dollar enterprises, I’m convinced that no business should fail.
The solution? Planning.
Starting a business takes a lot of preparation, and you have to do the work. So many entrepreneurs have great ideas, yet what they need is an actionable plan for getting to the next level. That’s what these questions are for. Answering these 11 questions will help your business start off on the right foot and give you a jumpstart on the business planning or Lean Planning process. They’ll force you to turn your ideas into actionable next steps while avoiding common mistakes. Let’s dive in!
1. Why do you want to start a business?
Entrepreneurship is incredibly enticing because all we hear are the success stories. We read about a 22-year-old who created a million-dollar gummy bear brand, or about a few college guys taking the eyewear industry by storm, and we want in on the action! It makes sense; money and success certainly know how to inspire. But hype isn’t a reason to start a business. Any entrepreneur, investor, or even editor will tell you the best businesses solve a problem.
Be honest with yourself and with your team. Why do you want to start a business? Is it because you want to make a lot of money, or do you see a real need that you have the skills (or the determination) to address? As Simon Sinek would handily agree, fleshing out why your business exists and why you’re doing what you’re doing is the bedrock of a successful business plan.
2. Is your business idea new, or can you follow someone else’s blueprint?
To help your business start off on the right foot, learn your space. You’ll spend all day every day in your market, and the better you understand it going in, the better off you’ll be. Take a look around. What businesses in your market can you learn from? There’s always someone else who’s already done a lot of trial and error. Take what they’ve learned and save yourself the trouble!
Here’s an example from Text Request. We launched with a consumer-centric model. Our founders thought, “Why is it so hard to actually get ahold of someone at a business? Why can’t we just text them?” So Text Request started as a solution to this consumer-facing problem, without any market research or learning from the few competitors in our space. Had we paid attention to those other brands, we could have learned a few things—like the fact that businesses don’t want to change their habits. Oh, and more importantly, businesses only care about new technology if it directly brings them more money. So several months and a lot of mistakes later, we pivoted to helping small businesses get and keep more customers. The thing is, at least two other brands in our space learned the exact same lessons before we did! Thankfully, they pivoted in other directions, but we could have easily looked at what they were doing and saved ourselves months of pain. You have an idea, but do you know what else is going on in that industry? What are other brands doing? Now take all the lessons they’ve learned, and apply them to your own business plan.
3. Is there actually a market for your business?
There are plenty of reasons why new businesses fail—poor leadership, not enough money, and so on. But the main reason why only one in 10 businesses survives the first few years is “lack of market need.” It’s the polite way of saying “no one wanted our product,” and it accounts for more than four in 10 failed ventures!
Entrepreneurs often base their decisions on an assumption, and they aren’t always right. Fortunately, it’s an easy problem to fix. Do some market research before finalizing your business plan, and answer questions like:
Our company did an interview with Alex Lavidge, an entrepreneur, investor, and consultant who specializes in business planning and market research. I’ll never forget this little nugget he shared (paraphrased): If it were my business, I’d much rather spend a couple thousand dollars to see if we’re onto something instead of hundreds of thousands and several years trying to make it work. He also recommended AYTM and Survey System as good places to start your research. You can also use Google Analytics Surveys.
4. How will you support yourself while starting this business?
At some point, you’ll need to commit yourself to your new business full-time, and you won’t instantly start making money. What will keep you, your family, and your business afloat while you ramp up? Many entrepreneurs find creative ways to fund their ventures, and it’s beautiful to watch! It’s a great testament to “where there’s a will, there’s a way.” People will take out loans against their home, break into their retirement savings, move in with friends and penny pinch, or spend hundreds of hours pitching investors. There’s no one right path, but you will need to plan wisely for this period. How long will it take you to start drawing an income from this business? Now, as Reid Hoffman suggests in his podcast Masters of Scale, double that figure, because you never know what’s going to happen that you didn’t account for! To help your business start off on the right foot, work realistic expectations (and some leeway) into the financial section of your business plan.
5. Who do you know that can help you?
Mark Cuban has famously said, “Sweat equity is the best startup capital.” I tend to agree with self-made billionaires, but there’s also no point trying to figure everything out on your own. Nearly everyone wants to help and add value where they can. So ask! Look to your contacts (and their contacts) and reach out to people who you think can offer some candid advice. Every time you talk to someone who’s already been there and done that, you create an opportunity to minimize mistakes. So look for advisors you can grab coffee with and pick their brains—even offer a few bucks for their troubles!
6. Should you have a partner or outside investors?
This must be a great question because I’ve never heard the same answer twice! I’ll summarize the arguments:
If you alone are starting, funding, and growing your business, then you have 100 percent ownership and authority. You get to call the shots, and you get to reap the reward. These are great perks! But a business partner can bring an (often necessary) skill set and perspective to the business. This could make the difference between you failing alone or succeeding as a group. I dare say most of us would rather take 50 percent of a successful company than 100 percent of a failed one! Outside investors throw another wrench into the machine, because it’s now their company, too, and they probably won’t be working on it day-to-day. You’ll have less control over everything, but that additional capital could be the catalyst that catapults you to glory! Are you the only person who could possibly make this business work? Do you need additional funds? Do you have a great idea, but need another skill set to help you execute? It’s impossible to give a blanket recommendation, but this decision will affect literally every move your business will ever make. Make sure you give this question the consideration it deserves!
7. How will you market and sell your products and services?
“If you build it, they will come” is not an acceptable marketing strategy. It doesn’t matter how great your idea is if no one knows about it, and it doesn’t even matter whether people know about it unless you also tell them why it’s valuable! Too many entrepreneurs assume that people will see their product, automatically get the value, and buy it. That just doesn’t happen. Here’s an example of this mindset:
One day I showed up to meet a pre-launch startup team and hear their idea. It was a great idea, with lots of potential. But the team’s mindset on marketing and sales was: we’ll talk to everyone about it, and if they don’t get it instantly, they aren’t worth our time. Woah, now! That’s not a strategy, that’s a product pitch when you haven’t even proven your product is what people want! But this happens all the time. Whenever you introduce a new product or service to consumers, you’re asking them to change their habits. The problem is, people don’t want to change their habits unless there’s a clear benefit, and even then it’s a hard sell.
To create your marketing and sales strategy, you need to answer this question:
How can we best explain our value to potential customers?
The answer might be through conversations at trade shows, sales videos, search engine or social media marketing, creating content, word of mouth, or any number of options! To help your business start off on the right foot, determine how you can best explain your value to potential customers, and how you will use that explanation to grow your business.
8. Where will you find your first customers?
You need actual customers to tell you what’s good about your business, and what needs to change. Particularly for tech-based companies, these beta customers will be the lifeblood of your growth and innovation! Find people who are willing to work closely with you, use your product daily, and tell you all the little things that will make it more valuable and/or easier to use. After you’ve got several customers actively giving you feedback, you’ll be surprised by what you didn’t think of! But where will you find these people? Start with your current connections, and with all the people they know. It’s important that you find beta customers in your target industry, though. If these aren’t the kind of people you’d target in an ideal situation, then they won’t bring as much value to the process.
9. How will you brand your business?
Branding is the single most overlooked feature of any new business! Branding is much more than just your fonts and colors. It’s the messaging of your company that permeates everything from your name and logo to executive decisions to your content and customer service. When people see your name, logo, or website, they need to get a clear idea of what you do. For instance, Shopify is a platform for creating ecommerce stores. Their name makes a lot of sense! It helps explain the company’s value—as does their logo, which features a shopping bag. On the other hand, Kalo is a site for recruiting, managing, and paying freelancers. Can anyone tell me what “Kalo” has to do with project management? Because I have no idea, and the founder’s reason for the name is “it sounds like us.”
Do you see the disconnect? Clarity will beat creativity every time, so aim to represent the value you bring through your name, logo, and website. Shopify also does a great job incorporating their values into every aspect of the company. They want to make it simple for you to run a successful online store, and you can feel this through their content, advertising, and website design.
To help your business start off on the right foot, put some effort into your branding. You might even want to hire a professional! Seek to answer questions like:
10. How patient are you?
One of the biggest challenges you’ll face while starting and growing your business is patience. It’s been a challenge for me, for every entrepreneur I’ve worked with, and for millions more! Usually, you’ll be so excited to conquer the world and grow faster that you’ll get bummed out when things inevitably take longer than expected. There are two big business planning lessons in this, though. First, if you’re not mentally prepared before you start, the fight with patience could zap all your motivation. Nobody wants that! So be sure you can handle it if things take two or three times longer than you originally thought. Second, you’re going to need enough capital to keep your head above water! If it takes you twice as long to reach your goals, it will probably take (close to) twice as much money, too. Does your plan account for that?
11. How do you feel about failure?
Entrepreneurs who worry about being perfect go bankrupt. Seriously! Entrepreneurship is all about taking calculated risks and learning from the thousands of mistakes you’ll make as you grow your idea. You could have the best business plan, the most talented people, and unlimited resources, and you’ll still have to adjust along the way. You’ll still make mistakes and have to rethink your approach to problems and solutions. Here’s an example. I was working with a tech and design company who’d already created a good product but was having trouble getting enough people to their site. They’d been blogging regularly, but still weren’t drawing crowds. So they took the hit and tried another approach—sponsored content—which worked very well for them. They made a mistake that cost them a lot of time and money, but they brushed it off, learned from it, and adapted. That’s what you’ll need to do, too! You will have to make a lot of decisions constantly, and you’re going to make more mistakes than you can count! Can you handle it? You’ll help your business start off on the right foot by preparing yourself and your team to adapt as you go.
Taking time to thoroughly answer these questions and prepare yourself will help your business start off on the right foot. However, no amount of preparation is a substitute for doing the work and taking the leap to launch. To start on the right foot, you have to actually start! So, I have one more question for you.
What’s stopping you?