By Paul Morin
Even though I often deal these days with entrepreneurs and senior-level managers who are much further along in their entrepreneurial careers, I still frequently get asked how to start a business.
Amazingly, it’s often these further-along and usually successful entrepreneurs or larger corporations who are asking me how to start a business correctly! How can this be?! Didn’t I just get done saying that they’re experienced and usually quite successful already?
As it turns out, many folks who have been in entrepreneurship their whole lives and have attained some significant success have never really thought through how to start a business. Instead, they have subscribed to the “just do it” mentality. In my experience, while this approach can frequently lead to success, it a can much more often lead to failure. Granted, in any large group of people, just “throwing it against the wall and seeing if it sticks” will lead to some successes, some of them notable. That said, just because there’s some success with that approach doesn’t mean it’s the best way to go.
In my experience and observation, the best answer to “how to start a business” is carefully and deliberately, but with a great deal of confidence and belief. Just because you take a meticulous, well-thought-out approach does not mean that you’re not an entrepreneur! In fact, the best entrepreneurs do just that. They take a measured, deliberate approach to assessing and starting up each business they get into. They are willing to take risks, but they greatly prefer to take calculated risks and they are willing to constantly update their approach based on the ongoing feedback they receive from their target market(s).
These days, when I’m asked how to start a business, I provide the following steps. While this isn’t intended to be an exhaustive list of what needs to be done, and the order of the steps may change slightly depending on the particular situation, I have used and seen this approach used successfully many times. As one of my mentors told me early in my career, “You want to have a powerful plan that can change.” You must be willing to adapt to changing circumstances and feedback. You must not be rigid in your behavior. You must believe that you can succeed, but you must be flexible.
Here are the “how to start a business” steps. Posts elsewhere on this blog go into greater detail on most, if not all of these steps.
- Understand profitability and break-even analysis — too many people go into business not understanding these basic concepts.
- Understand upside goals and potential — what kind of business are you trying to create? Does the business you are starting right now match your objectives?
- Screen and sort your ideas and opportunities, using criteria that make sense.
- Understand the psychology of markets and niches.
- Develop products and/or services that meet a true market need.
- Understand and select appropriate marketing strategies.
- Deploy appropriate marketing tactics.
- Create a full, formal business plan.
- Strive for operational excellence.
- Replace yourself/sell your “baby.”
It should also be noted that you may choose to raise capital at any point along this process. However, I would suggest that you should not seek to raise capital from angel investors or venture capitalists until you’ve reached at least the fifth of the steps listed above, where you are developing products or services based on a true market need. Depending on how well you know the angel investors and/or venture capitalists, and depending on how much capital you’re looking to raise, you’ll also likely need to have a formal business plan completed before it makes sense to approach them. As discussed elsewhere, angel investment and venture capital don’t make sense for a large percentage of start-ups, so before investing a great deal of time in approaching them, be sure you have a business with characteristics that make sense for that type of equity investor.
Paul Morin founded CompanyFounder.com. Morin has worked with various entrepreneurial companies in senior management roles and has led the development, review and selective implementation of several hundred start-up and corporate venture business plans, financial models, and feasibility analyses. You can e-mail Morin at email@example.com.
Originally published: Sep 19, 2011