Step 1: The Idea
There’s a difference between an ordinary idea and a business idea. After all, it’s only when your investors and customers are willing to buy your idea does it become a business idea. What should you do?
Well, ask yourself these questions:
i) What are the needs of the industry and consumers relevant to my idea?
ii) Does my product/service already exist in the market?
iii) Who are my competitors and their market share?
iv) What is my break-even point and when?
Here is how you can obtain answers to those questions:
- Do a Market Survey: This will give you a better idea of potential customers’ needs.
- Carryout a Competitor Analysis: A simple SWOT Analysis [Strengths, Weaknesses, Opportunities and Threats] should help you gauge where you stand against your competitors.
- Develop Final Product: After you get the consumer feedback on your prototype, the next stage is to adjust to requirements and improve it. After this, you should have a better idea of expected sales volumes and thus, the Break-Even sales.
Step 2: Building a Team
Even if you pay personal attention to every job, there certainly will come a time when you cannot handle everything related to your business, i.e., accounting and finance, marketing, sales, fulfilment, etc. So, it is better to start identifying the areas where you are not so proficient and hire help.
What do you need to do?
• Determine the skill sets most important to execute your idea.
• Think about the people in your professional network. They could become a part of your team or even help find and introduce you to potential team members.
• How are you going to compensate your team?
When it comes to compensation, it is important to have an exact answer than many vague ideas.
Apart from paying people from out of your savings, here are a few compensation options available to startups:
1. Deferred Compensation: Basically, work today and get paid in the future.
2. Equity and Stock Options: Most startups may be unable to pay high salaries to attract employees, so they award stock options to employees to share in the company’s profits without any cash outflow. Basically, you get to buy shares in the company at an exercise price that’s lower than the market price.
3. In case of particularly experienced persons, a mutually exclusive title such as co-founder or adviser.
Apart from compensation, it is extremely important to hire people who believe in your idea as much as you do. When hiring, you should not aim to hire people who can satisfy the short term requirements of the business. Rather look for people who can provide what the business needs, in the short term and in the long term.
Step 3: Work Space
Where you work from is one of the many important decisions to be made at the initial stages. Apart from the option of working from home there are other options too.
1. You could rent a co-working space;
2. Share an office; or
3. Rent an office for yourself.
Your decision should be based on the following:
1) Do I rent a place?
Are you prepared to sign a long term lease agreement ranging from 5 to 7 years?
2) What are my growth prospects?
Depending on business growth your work space needs should align with not just your present needs but also the future needs of the business.
3) What do I need now?
Does your business require a tailored environment? Or does it need an open, collaborative environment? Are you confident committing to a long term lease? Or do you see sub-leasing as a more feasible option?
Step 4: Financing
There are a quite a few funding options available to startup entrepreneurs. An article exclusively dealing with financing will be posted shortly. For now, let’s give you an overview:
i) Venture Capitalist (VC): A VC is an investor who either provides capital to startup ventures or supports small companies who do not have access to equity markets to raise funds.
ii) Angel Investor: An affluent person who invests funds in startups for their capital in return for ownership equity or convertible debt.
iii) Small Business Financing: There are predominantly 2 types of small business financing options Debt Financing and Equity Financing.
iv) Business Credit Cards: Just like your personal credit card, there are business credit cards to help your business buy today, pay tomorrow.
v) Crowdfunding: It’s a relatively new practice of raising funds for your project from a large number of people usually through internet-mediated registries, eg: Kickstarter, Indiegogo.