Five essential points for first-year startups
Sean Neville, MBA ’02, is the Johnson School’s Entrepreneur-in-Residence for the 2009-2010 academic year. Most recently the CEO and co-founder of Simply Audiobooks, Neville led the company from inception to becoming the world’s largest audio book rental company. Last summer, he negotiated the successful sale of Simply Audiobooks to another Canadian media company.
Entrepreneurship is not rocket science; in fact, it’s more art than science. Those adventurous souls who dare to embark on this journey should make some advance plans to ensure success. Having made the journey myself, I’d like to share the five points I believe will help entrepreneurs head in the right direction.
1Start with a big idea that excites you. Whether your idea involves solving a problem or doing something better than anyone else, you’ll need passion to drive it. A driven entrepreneur is a force to be reckoned with. Chances are you’ll achieve only a fraction of what you dream, so dream big! And validate the big dream with data to prove to yourself and to others that you are on to something.
2Create a roadmap. If you were asked today to drive a car from New York to Los Angeles, could you do it? Absolutely. But what if you had to do it without a map or GPS? You’d likely get there, but it would take more miles, more hours, and more frustration to complete the trip. And if you happened to be in a race, chances are you’d lose.
So how is it that people think they can start a business without a complete business plan?
Your business plan is the roadmap to your business execution. It gives you an optimal route before setting off on the trip. In midcourse, you may decide to change your route; that’s your prerogative. But set off with a plan — in fact, two plans: a brief executive summary (two to three pages) and a comprehensive business plan (15+ pages). The summary is for potential investors, who need to understand quickly what your business is about. If they want to dig deeper, they’ll ask for the details. Your comprehensive plan should provide your operating team with the information they need to run the business, including strategy, analysis, and numbers.
3Bring the right people on board. No plan gets executed without people. Since you are starting from scratch, pick fun, smart people who are prepared for the startup world, where a day’s work might involve speaking with customers, designing a new marketing brochure, and taking out the trash. If they are excited about the ride, they’ll be good company on the exhilarating, but often frustrating, journey of building a company from the ground up. And when the going gets tough, they’ll dig deeper with you. Whoever you bring on board, make sure you have them sign a well-articulated employment agreement. It helps on two fronts: It sets clear expectations at the outset and makes a potential future break clean.
4Sell, sell, sell. Entrepreneurs should identify clear paths to selling their product or service, for if no one buys, there is no business. This strategy should always include an Internet marketing component: Internet marketing is the most targetable, cost-scalable, and trackable medium out there. Spend a thousand dollars and know how many visitors came to your site, where they came from, and what they did on your site. A feast for the data-driven marketer!
5Start with enough money to make it happen. Just as a car runs on fuel, a company runs on money. An entrepreneur should try to fill up the tank (or at least half of it), before heading off on the journey. It starts with money out of the founder’s wallet, often followed by a check from a family member or friend. From there, approach outside investors in an attempt to raise enough capital to allow you to focus on building the business for at least six months. And when you start taking other people’s money, use a formal, written agreement. A handshake or a simply crafted document might suffice with family and friends, but not outside investors. Starting a new business is always a challenging activity. Starting with a big idea, a comprehensive plan, great people, a selling strategy, and adequate financing will increase an entrepreneur’s odds of making it to the second year — and, possibly, a huge success.