Perhaps you have an idea that meets a market need. Or maybe you have always been a self-starter and want to
focus on your own gig. Whatever your path to entrepreneurship, here are a few concepts to consider.
1. Don’t Leave Home Without It
Cash flow issues have killed many a start-up. When budgeting, remember that a task will take longer and cost more
than you expect. Early money is always the most expensive.
The earlier the stage a company is in, the lower its negotiating power and valuation. Thus, any early investment funds
will bring a greater percentage of ownership to the investor
because the investment has a higher risk and lower valuation than it might later (For more information about how
this works, please see: https://www.groovehq.com/blog/you-probably-dont-need-funding) It is important to be clever, to
be cautious, and to bootstrap your way to each milestone. If
possible, delay leaving your day job, consider parallel revenue
possibilities and nondilutive funding sources (financing that
does not require selling shares of your stock), or do some
combination of these. If there are further monetary needs,
consider dilutable sources of money such as those available
from your FFF circle (affectionately known among financiers
as friends, family, and fools), angel investors, and venture
capitalists. Investors can also add value—such as business advice, key contacts in the industry, or both—that can be more
critical than the funds.
2. Fail to Plan—Plan to Fail
The simple act of writing a business plan will require you to
take a straightforward, unemotional look at your project. The
plan is a tool and is meant to evolve. Amongst additional benefits, a business plan will:
• Provide a roadmap;
• Aid in planning or allocating resources, or both;
• Provide an organizational tool; and,
• Reduce the risk of misperceptions among team members as
to current or future plans.
Similarly, the process of creating a plan requires you to:
• Consider alternative future scenarios and set specific objec-
tives and goals in furtherance of these scenarios,
• Confirm the realities of the math projections, and,
• Truly understand the relevant market.
Also, a financial plan will be required by any potential
investors because it provides the preliminary information they
need for deciding whether to back you.
3. Do Your Homework
So, we have now established that a business plan is essential.
However, the path to a strong and useful business plan begins
with homework. You will need to consider the following:
• Market size (the estimated sales volume possible for your
product and all of its competitors combined) and plausible
penetration (the amount or percentage of the total market
that you can reasonably expect for your product);
• Competitive forces (internal and external factors affecting
your company’s ability to compete with others in the market) and distinguishing elements (aspects of your company
or product that make it more desirable than its competitors);
• Comparables at various stages (comparable costs calculated
during the start-up phase to see how they might affect the
overall competitiveness of the final product);
• Who your customers are and who will pay for your products
• Factors contributing to your buyers’ purchase decisions, as
well as the price range they will be likely to consider;
• Fully loaded costs (the overall cost of producing your product, including salaries, overhead, all fixed expenses, and
variables to do with fluctuations in the cost of materials, etc.
or changing sales volume);
• Regulatory hurdles (required governmental or other official
approval, licensing, or regulations that may affect your abil-
ity to bring your product to the market); and
• Time to market (the amount of time it will take you to bring
your finished product to the marketplace.
Then you can create a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Armed with these considerations, you are poised to craft your business plan.
4. Surround Yourself with True Brilliance
What are your strengths? What are your weaknesses? Resist
the temptation to surround yourself with like-minded indi-
TOP 10 STEPS TO
STARTING A BUSINESS…
AND MISSTEPS TO AVOID
Equity Partner, Saul Ewing LLP