If you have an entrepreneurial spirit then you’re likely thinking about starting a business or you’re already putting your plans into effect to get your business startup off the ground. All startup businesses require a great deal of planning, from idea to market, to profitability.

From idea to market

Very few startups actually end up at market with the original idea they started with, whether that might be a totally revolutionary new product or service, or possibly a replication of a business that already exists, but possibly to service a different market segment. The idea is only the first part, either way you will need to cultivate your original idea and build a blueprint for your new business.

One aspect will be a certainty, if you’ve read Tim Ferriss’ 4 Hour Work Week like I have and you bought into the idea that you’ll start a business so you only have to work for 4hrs a week, then you better brace yourself for the reality. It will likely take you twice the time of a normal working Monday to Friday job to start a new business. That’s right, twice the time and be prepared to be working one, two or maybe even three jobs while you plan your future dream business.

If you’re passionate about it you’ll last through the tough times

One thing is certain with every startup business I’ve worked with or in, you need a great passion for the industry or industries you choose to focus work and the problems you’re looking to solve. Startup businesses are usually under capitalised, most are being subsidized from an another job. When the tough times show up, and they will, if you don't deeply care about the cause you’ll give up. You’ll also be more likely to come up with the creative ideas needed to attract the right type of paying customers, if you have a passion for the industry.

Where to start

Before you incorporate a company, register domains, try the pub test. Can you explain your product or service to your mates at the pub and convince them to buy? Generally your family members are the wrong audience to test any new business idea on, they want you to succeed, they won’t be near as tough on you as your future customers will. At least your mates will pan the idea (if it’s a bad one) while buying you a beer or two to drown your sorrows. If your product or service is over your mates heads, try this analytical challenge:

Score each of these areas honestly out of 10

1. Does the idea revolutionise an industry
2. Does your product or service fix a major problem for a business
3. Are there strict compliance and regulations surrounding your services - 1 yes 10 no
4. How do you rank the level of competition in the market - 1 is high 10 is low
5. Does your service appeal to a only few or a lot of businesses
6. Can you get to market in less than 12 months
7. Will a company need a lot of time to consider your proposals
8. Can you sell other services to the same client
9. How much training and or certifications are required to expand the service
10. Will you be able to sell this business in 3 years without you running it

• If you scored 60 or less you possibly have a good idea but that’s all it is an idea
• If you scored 70 or more you possibly have a good idea and it might make enough money to keep the doors open
• If you scored 85 or more you possibly have a good idea that will make money and become profitable, but you’ve got a truck load of work to do to make it successful

This is only a general guide, there are always exceptions to every rule. Just an FYI our business model scores an 82 on this chart, we make up the rest with a passion for these industries!

Build a financial model

Once you’ve decided that your new services or products pass the first tests and you have what at this stage appears to be a viable idea, you’ll need to create a base financial model to go from idea, to prototype, to a full serviceable model. One thing most entrepreneurs (including myself) have done and will continue to do is over estimate the purchaser's initial responses to an offering. To many times I've heard “Ill build this and people will simply like it and start buying more”. If only that were true. It takes a lot of tinkering to get your products or services set up to sell like a production line.

Be ultra conservative, when you first determine how many people will buy a service or product daily, weekly, monthly or yearly, then cut those numbers in half and then cut them in half again. Now calculate your TMR or Trade Monthly Revenue, which is a way to measure the number of customers you have to close each and every month to keep the doors open. Then review the total numbers of sales you will need to meet your TMR. If they match with your initial projections and you feel highly comfortable that they are achievable then you’re ready to move on.

Break Even Analysis or Trade Monthly Revenue (TMR)

Just about every start up business is either under capitalized or without a clear plan to navigate through the initial stages of building the business. A TMR helps you stay on track, and the sooner you can make it to this number the better. Understanding your TMR figures helps you plot and plan your sales and growth strategies. Always include a contingency fund in your TMRs so that you can course correct or go in a different direction if something isn’t working or if you have to retool or redesign.

What to risk

This is probably the hardest question you’ll have to answer. If it’s going to be your time and the money you’ve already saved then that might be ok if everything doesn’t go to plan. If it’s your home or your life savings on the line, then those are risks only you personally can answer. A word of advice if you’ve never sold anything and you’re an ideas person (the brains), then you best find a partner that might match your investment, so the business will have the much needed skills and experience to actually sell the products or services. Otherwise you best be looking to contract with someone to close the initial sales.

If you really want to go this on your own you need 5 things:

• The ability to sell and negotiate on the value of your offerings not price based selling
• Know how to identify your customers and know where to find them
• A creative side to be able to differentiate yourself and attract interest from new clients
• Enough working capital to reach TMRs and sustain any changes or iteration cycles that might be needed
• A lot of self belief, a great attitude and the ability to adapt to change

Market test

Before you actually risk the farm you’ll need to create a market test or in most cases a series of tests. Which could mean building a prototype or MEVO (Minimum Economic Viable Offer) or MBO (Minimum Buyable Offer). Some businesses require more upfront capital then others to market test. You have to be willing to create an environment for testing new products and services, something you can stick with. Have you ever been to a new ice cream tasting? If you have you’ll know what I mean.

With online social networks offering countless communities and forums, you can easily create surveys using SurveyMonkey and sample test potential prospects. Keep those surveys really simple and easy to fill out, and include your value proposition inside them, such as - How much would you pay for this service? Using A, B, C, D multiple choice answers is the easiest way to receive responses, leaving a comments sections where responders can elaborate further can help with additional insights. If you’re looking at building an online eCommerce business then you should be able to easily screen capture your products, add pricing to the survey areas, and if you’re really onto something you might even get a request for an order.

Creating a brand

Brand development is a matter of opinion, good design is important and understanding how your brand appearance is being received by customers and prospects is another. You don’t necessarily need a branding expert to create a memorable brand image (initially). As long as you understand how and where you’re placing your brand, you can find reasonably priced designers to work with and there’s even online really low cost logo creation services that actually aren’t to bad, try 99designs.com. Once you establish the colours, themes and overall tone or feel for how you want your brand to look, then set your brand guidelines to help you maintain consistent marketing when you’re just get going.

Shoestring marketing

Guess which budget most startups don’t have? If you guessed marketing you’d be wrong, most startups don’t have staff training, development and client acquisition budgets. Most new businesses will have to intelligently determine where their first marketing dollars should be spent and that’s not always easy either. Planning the coming out party so to speak can take some really deep research and soul searching. There isn’t room in this already lengthy read to cover stunts, tactics, marketing options or how you can stretch the marketing budget, however with any marketing efforts creating a starting point is what’s needed, make it count by understanding where your customers most likely hangout, then find a way to build a marketing strategy around those efforts.

Customer acquisition

Probably one of the most overlooked areas in building a financial model is the cost to acquire a new customer. Customer acquisition costs are determined by understanding the total time, effort, money and all overheads it takes to sign one new account. What is the average sales cycle to close that big account you’re sweating on. What environments do you need to create to build customer relationships, do you need to attend a trade show (please don't do that, ask anyone about ROI on a trade show if you’re startup - it’s almost non existent). Advertising, events, trade shows, samples, prototypes and then time and money in delivering your key messages, are all part of the cost of acquiring a new client. Calculate this component as accurately as you can and then readjust your TMRs.

Outsourcing

The key for most startups is keeping your costs down and to this you need to outsource, you simply can not do everything yourself (and why would you), anything and I say everything that you can afford to do in house outsource it. Our business is built on outsourcing, and it creates so many more possibilities to expand an early stage startup that you simply wouldn’t be able to do if you’re staring down large payroll and other technically priced contract or in-house labour. One area that we overlooked internally ourselves when we first started was the content marketing requirements. Creating, building, and managing your stories or content in all their digital forms. Consider your customers journey through the buying cycle and you’ll soon figure out you need a content marketing team to be working on integrating your content marketing and social media marketing strategies.

Insider tips

How you allocate your time in a startup is really going to determine if you’ll be able to service your new customers and grow your business at the same time. This is one area where our business had the largest challenges. The insider tip is > create a multi level sales funnel to ensure you have prospects moving through the sales processes or levels of the funnel, ultimately arriving at a formal offer and then becoming a new account. Without enough prospects at the top end of funnel, losing a client could risk the startups early days.

Here’s the top 5 insider tips that can help your startup:

• Don’t waste time on detail, build services that you can adapt and change with the needs of the market and the early customer feedback
• Go to market early and don’t wait for the product or service to be 100% perfect, it never will be
• If you can’t make your TMR within 12 months, assess everything and be highly critical
• Follow the customer journey to buying and shorten every step possible
• Take a sales course and make sure you understand the sales cycles, funnels and buying habits of your customers before you start

I wish your startup every success and may your journey be filled with much joy and excitement. Running your own business can offer you the lifestyle you’ve always been looking for. Be prepared, plan well and be totally honest with yourself before you start.

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About the Author

 

About Adam Mole

Adam is the proprietor of start up BPO company Transeo and has been working with offshore and outsourcing services for more than 20 years. Adam is passionate about small business. He likes to write about his experiences in sales and startup business ventures. In his spare time you'll find him on one of Sydney's south coast beaches surfing and smiling. Email Adam at adam.mole@transeo.com.au and follow Adam on Twitter @adam_transeo.