Lao Zi, a Chinese philosopher, once said, “A journey of a thousand miles begins with a single step.” However, when it comes to starting a business, many people become so consumed with planning that they overlook the first and most important step. It’s important to know how to pitch for funding and survive if you don’t receive it, as well as how to position your company for success and build a powerful brand.
The ultimate goal of entrepreneurship should be to make meaning, not money. Starting a company with the sole purpose of getting rich quick is a wrong approach. Instead, creating a product or service that contributes to making the world a better place is a better way of thinking. Making meaning is not only beneficial for the world but also for your company’s success. It’s challenging to become a top entrepreneur without making meaning as it is the key motivator for you and your employees. To create meaning, entrepreneurs should formulate a short but powerful mantra that reminds employees why the company exists. A mantra is a simple, memorable, and frequently repeated statement. It is different from a mission statement because it is shorter, more direct, and easily retained. For example, Coca-Cola’s mission statement is lengthy, while a hypothetical mantra such as “Refresh the world” is shorter, catchier, and easier to remember.
Using the MAT Framework for Start-Up Success
For many start-ups, chaos seems to reign: it’s unclear where the company is headed, how much progress is being made, and what needs to be done next. This is why it’s important to use the MAT framework:
- Assumptions, and
First, identify your milestones, which should be the most important events on your road to success. By mapping out the key events in advance, you can keep track of how you’re progressing towards them. For example, if you’re starting a tailoring shop, your milestones might be getting a “proof of concept” for your products or services, completing a functioning prototype, and raising funding for your first batch of products.
However, it’s not enough to simply define milestones. You also need to be realistic about the assumptions you’re making about your business. Create a list of assumptions that could affect whether or not you reach your milestones, and track them regularly to see if they still hold. For example, if you assume that your textiles will cost $1,000 a month but your suppliers raise their prices to $2,000 a month, you’ll need to find new suppliers or adjust your prices.
Finally, list the tasks that will help you achieve your milestones. These tasks could be peripheral but crucial, such as renting office space or paying employee insurance policies. By setting specific tasks, you can ensure that everything is taken care of and that you’re making steady progress towards your goals. With the MAT framework, you can stay focused and organized, making it more likely that your start-up will succeed.
Many start-ups also struggle with positioning, which refers to how customers perceive the company. However, positioning need not be complicated. The key is to clearly answer the question “What do you do?” and communicate that answer to the market. This will give customers a reason to buy your product.
To achieve great positioning, start by making sure your mission is understood and believed by customers. Your core business should connect to their core needs, showing that your company exists to fulfill those needs. Additionally, your positioning should speak specifically to your target group of customers. For example, if you sell security software for banks, your positioning should focus on reducing the risk of online-transaction fraud for commercial banks, rather than simply increasing website security.
Another important factor in successful positioning is that it should feel personally relevant to the individual customer. Instead of stating how your product can reduce global cancer rates, for example, focus on how it can prevent the customer from getting melanoma. This makes it immediately clear to the customer why they need your product. By following these steps, you can create effective positioning that resonates with customers and drives sales.
Communicating Your Idea Effectively & Preparing a Business Plan
Pitching is a crucial skill for any entrepreneur looking to attract investors or partners to their business idea. The key to a successful pitch is to clearly and succinctly explain what your company does and why it is important. It’s important to keep in mind that your audience may not have the same background or expertise as you, so it’s necessary to clarify the significance of what you’re saying.
Start your pitch by introducing what your company does, and keep it short and concise. For example, “We sell software,” or “We teach underprivileged kids.” Next, clarify why your idea is important. Always ask yourself “So what?” after each point you make and provide a few vivid examples to answer that question. For instance, if you’re pitching a hearing aid that uses digital signal processing, your response to “So what?” might be, “Because our hearing aids make sounds clearer.” Then, you can provide an example: “So if you’re at a party with a lot of ambient noise, you’ll still be able to hear your conversation partner perfectly.”
By using this approach, you can make sure that your pitch is engaging and resonates with your audience. Remember, the goal is to get others excited about your idea and convince them to invest or partner with your business. A clear and compelling pitch can make all the difference in achieving that goal.
Preparing a business plan is a critical step for any startup, as failing to plan is, essentially, planning to fail. Even though a business plan may seem like a formal and pointless document, it has several advantages that should not be overlooked.
First, stakeholders will require a business plan, so entrepreneurs seeking investment or support from others should not consider starting without one. Furthermore, preparing a business plan can benefit a startup in a number of ways, such as enabling the team to work together to identify potential issues and highlight gaps that need to be addressed. Additionally, focusing on the executive summary, which is a brief and concise summary of the plan, can be a key factor in attracting the attention of potential investors or partners. A strong executive summary should effectively communicate what problem the startup is solving, how it plans to address it, and what makes its product or service unique.
Entrepreneurs should perform a simple test on their executive summary by printing and reading it themselves. If it sparks their interest and makes them want to read on, it’s likely that it will do the same for others. Overall, the business plan is a critical tool for startups, helping them to plan for success and avoid failure.
The Importance of Cash Flow
While many startups receive funding from investors in the early stages, bootstrapping is another way to build a business without any external investment. To successfully bootstrap, generating cash flow should be the primary focus. Cash flow is essential to pay bills, rent, salaries, and other expenses. This means prioritizing sales and projects based on the speed of payment. For instance, declining or demanding part of the payment upfront for a six-month website design project when the company will be bankrupt in eight weeks.
To improve the cash flow situation, try to postpone outflows by negotiating payment terms with suppliers. Waiting to perfect the product before selling it can lead to bankruptcy as it is essential to generate cash flow through sales. The product can be improved by receiving feedback from real customers, instead of waiting to fix all the glitches before shipping. Selling the product in a small, isolated geographical area or market can help contain any damage to the company’s image due to suboptimal product quality. However, safety issues should be taken care of before even the first sale as it can cause irreparable damage to the company’s reputation.
Bootstrapping is a great way to build a company if external funding is not possible, but it requires a focus on generating cash flow. Prioritizing sales and projects based on payment speed, postponing outflows by negotiating payment terms with suppliers, and selling the product in small isolated markets can help improve the cash flow situation. It is also essential to prioritize safety issues as they can cause irreparable damage to the company’s reputation. By focusing on generating cash flow and addressing safety issues, bootstrapping can be a successful strategy for building a company without external investment.
Creating an Exceptional Team: Hiring the Best and Firing the Worst
To run a successful company, having a great team is essential. But building such a team is not an easy task. There are two key strategies that can help achieve this goal: hiring people who are better than you and firing those who don’t perform well.
It is crucial not to be afraid of hiring someone who is more capable than you. Hiring less able people will only fill the team with poor performers. Therefore, having the humility to admit that there are people who can perform better than you and having the self-confidence to hire them is essential for success.
The second strategy is identifying low-performing team members and removing them. While it may seem harsh, keeping low-performing employees is costly and counterproductive. To identify low-performers, setting personal milestones and defining a review period during which their performance is assessed is important. This can help both the employee and the company decide whether or not to continue the employment.
To maintain a high-performing team, it is necessary to hire those who can push the team forward and remove those who can’t. While it may seem difficult, these strategies can help build an exceptional team.
Partnerships can also be an effective strategy for startups to grow their business, but it’s important to make sure that the partnership produces a tangible financial benefit. When considering a partnership, the focus should be on the potential to reduce costs, accelerate product development, or enter a new market. For instance, when Apple partnered with Aldus Corporation, it enabled Apple to find a “killer application” for its computers, while Aldus got a channel to sell its software. The partnership helped both companies to flourish.
However, forming a partnership is not an easy task. Finding a champion within the company who can be solely responsible for making the partnership work is essential. This person should have full authority to get all departments in the company to deliver what is needed and should truly believe in the potential of the partnership. This way, the partnership has a better chance of succeeding.
In addition, it’s crucial to have a plan for getting out of the partnership if necessary. Even though partnerships are intended to be mutually beneficial, circumstances change, and it’s essential to be clear about how the collaboration will end if it becomes necessary. Acknowledging this from the start can help both parties to be more at ease over the course of the partnership.
Successful partnerships require a careful selection process, a champion who is committed to making it work, and an exit plan. If done correctly, partnerships can provide a valuable boost to a startup’s growth trajectory.
Key Elements for Building a Recognizable Brand
As a founder, you want your startup to become a household name, but how do you create a brand that people will recognize and talk about? The key is to create products that are contagious and that people are eager to try out. To make this happen, you need to focus on a few key elements that contagious products tend to share.
First, your product needs to be cool. For example, the iPod was successful because it was the first cool MP3 player. Second, your product needs to be effective, or excellent at what it does. For example, TiVo became an iconic digital video recorder because it made recording TV shows so effortless. If it had been difficult to use, it would not have succeeded.
Third, your product needs to be distinctive, or noticeably different from the competition. Consider the Hummer, for example – it stands out and is not easily confused with any other car. These elements will help make your product contagious, but it won’t be enough to build a brand.
To create a recognizable brand, you also need to build a community of users around your products. Communities provide support to users and make the experience of using your product or service more satisfying. For example, Coca-Cola’s loyal fans started a Facebook fan page that gained over one million followers.
If you don’t have a community forming organically, you can expedite the process by finding your most enthusiastic customers and asking them to build the community for you. They will probably be happy to help, especially if you give them a budget for promotion and community events and assign someone from your company to be your representative. By creating contagious products and building communities around them, you can turn your startup into a recognizable brand.
The Unexpected Opportunities
The story of Univac and IBM teaches us an important lesson: always keep your eyes open for unexpected opportunities. Univac made the mistake of thinking their computers were only for scientific use and did not consider the possibility of catering to a wider audience. Meanwhile, IBM identified the potential of computing in businesses and built machines to target this new consumer market. As a result, IBM eventually overtook Univac as the leader in the computing market.
To avoid making the same mistake as Univac, it is crucial to keep an open mind and look for non-obvious customers and uses for your products. When your product is used in ways you didn’t expect or by customers you didn’t anticipate, don’t panic. Instead, take advantage of the opportunity to grow your business.
It is also important to be willing to shift your focus if your “obvious” target customers are hard to reach. Start-ups often aim to sell to prestigious, established companies, but these companies tend to only buy from other established companies. In such cases, it’s better to focus on customers who are willing to try your product and provide feedback.
In conclusion, keeping an open mind and being willing to shift focus are important assets in identifying and capitalizing on unexpected opportunities.
The idea behind starting a company should be to create something of value and significance, not just to make money. By focusing on generating cash flow and pursuing unexpected market opportunities, businesses can thrive without external funding.
To put this into action, it is essential to make the introduction of any document or presentation attention-grabbing. While the executive summary is the most important part of a business plan, the same holds true for any presentation or sales pitch. To capture and maintain the audience’s attention, it is crucial to use the most striking facts and compelling stories at the beginning of the presentation. Otherwise, people will lose interest, and the rest of the information will go unheard. In short, businesses must begin with a bang and use shocking information to capture the audience’s attention.
Inspired by a book “The Art of the Start”; Guy Kawasaki