Tag: entrepreneurship,%20evaluating%20ideas
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We’re startup junkies here at UpStart. We can’t imagine doing anything else. But if you haven’t started a company before, we have news for you: It’s not all sunshine and rainbows. As a founder, you will have some dark days. Days when you can’t help wondering if you should just pack it in and get a job. Here are a few classic founder days from hell, and what to do about them.
Left at the altar.
Problem: You’re eight meetings in with your dream partner / investor. You’ve agreed to terms. It’s back and forth with the lawyers now. Practically in the bag. And then, the unthinkable happens. Phone calls and emails go unreturned. Suddenly it hits you: They’re just not that into you anymore.
Solution: Always generate multiple options, and pursue them in parallel. That way, if one falls through, you won’t have to start from scratch. Also, you might find ways to work with multiple entities. And if you have a few deals in the works, you’ll gain better insight into the terms the market will bear, which could lead to better deals.
Painful pivot.
Problem. Most times, Plan A doesn’t work. Not completely, anyway. As a founder, you’ll have to decide what parts of your strategy to stick with, what parts to change as part of a strategic pivot – and when to make those changes. The decisions themselves can be gut wrenching. Are you being impatient? Maybe you should stick it out just a bit longer… Or maybe you’re ignoring the obvious, and you should have changed gears months ago. Oh, and by the way, you’re going to have to explain pivots to investors and employees in a way that doesn’t dampen their enthusiasm.
I just read Maureen Mackey’s interview with Bill Murphy Jr., author of The Intelligent Entrepreneur – Why a bad economy is good for entrepreneurs – and a few things jumped out at me.
A tough economy can work in an entrepreneur’s favor
I’ve learned this lesson first-hand. My friends told me I was crazy for starting a company in the midst of the dot com crash (2001). Maybe I was. But the crash and the resulting drought of investment dollars taught me some valuable lessons. First, only the most committed entrepreneurs were left doing what they were doing before internet tech startups became sexy – building successful businesses. It became very clear, very fast who was just there for the over-the-top dot-com parties, Kozmo deliveries and foosball. Second, you had to focus on creating value without resources because, well, you didn’t have any. There was no way to grow your business or to get anyone to invest unless you could prove your business model. Funnily enough, many of us learned how to do just that.
Are you cut out to be an entrepreneur? Entrepreneurs come in all shapes, colors, sizes, ages, etc. But in my experience, there are a few traits successful entrepreneurs tend to exhibit:
Tenacity. Many startups have limited resources and face constant streams of obstacles. The ones that succeed do more with less, and find ways around road blocks. You will most likely suffer many small failures along the road to success, and you’ll need to shake them off without being overcome by self-doubt. That also takes a lot of confidence.
Flexibility. Ok, this is the mind-bending part of entrepreneurship…. You have to walk a fine line between sticking to your guns, and knowing when to embrace change. When I look at the financial projections in a business plan, I only know one thing for certain: They are wrong. It’s tough enough to predict what will happen at a company with a twenty-year history. Predicting something like sales in the third year of an innovative venture that hasn’t even started to operate is next to impossible. So entrepreneurs need to be good at rolling with the punches.
Evaluating a new business idea? First, ask yourself the following questions:
1. Does the idea meet your personal criteria? Is it a fit with your goals, passions, and work environment preferences? Are you comfortable with the risks involved? Do you have the right skills and resources to make it successful?
2. Are market conditions favorable? Why is this the right time for your idea to work? How fast is the market growing? Is it big enough to support your revenue goals? For example, if the entire market only generates sales of $10 million, it’s probably unrealistic to think your company’s revenue will hit $5 million within five years.
The prospect of starting your first business can be pretty intimidating. Yes, you are a smart cookie, with passion and tenacity in spades, but this is a new challenge, and that’s always tricky. Here’s a basic roadmap to help you think about what to do, and when. UpStart can help at each point, with private coaching, and blog posts with tips and inspiration.
- Come up with an idea, and vet it. Make sure the idea is a good fit for your goals, interests, skills, and resources. Get preliminary feedback to make sure it solves an important problem for a specific group of customers, and that there’s a reasonable path to profitability.
- Get a partner, and structure a deal. Find out if partnering is right for you, learn how to identify the right partner, and iron out terms that ensure fairness and flexibility in good times and bad.
- Create a business plan. Don’t go too crazy, though. Plan just enough to answer the questions why, what, who and how. Create a simple presentation that makes it easy to get feedback. Run some basic numbers to understand how much money and time you’ll need, how and when you’ll turn a profit, and whether the return is worth the risk. Continue reading this post
Tommy Hilfiger is the founder of Tommy Hilfiger Corporation. An entrepreneur from his earliest days, Tommy skipped college to run a string of retail stores in upstate New York. He later turned down highly sought-after fashion design job offers to start a company of his own. In 1995, Tommy was named Menswear Designer of the Year by the Council of Fashion Designers of America. Three years later Parsons School of Design named him Designer of the Year. By 2004 Tommy Hilfiger Corporation had over 5,000 employees and revenue of more than $1.8 billion. Private investment company Apax Partners acquired the business in 2006.
UpStart: “What does it take to be a great entrepreneur?”
Tommy Hilfiger: “I think skills and personality traits are more important than background. I never went to college or design school, but I had passion, drive, and resourcefulness in droves. When I launched Tommy Hilfiger Corporation, I wasn’t trained in the conventional rules of business, but that worked to my advantage. I experimented. I made bold moves. And I adapted as I learned. I credit much of my success to my drive to win and my fear of losing.”
By some accounts, over 30 percent of adult Americans have unrealized dreams of starting their own companies. What’s holding these wannabe entrepreneurs back? Among other things, many of them just can’t find compelling ideas. Here are a few tips for discovering ideas that will get you off the fence and into the action:
1. Consider yourself. Before you look outward for ideas, look inward to determine what kinds of startups are a fit for you. Got limited access to capital? Look for ideas that are bootstrap friendly. Have credible experience in a particular industry? Find ideas in that field, and you’ll have a better chance of executing well, networking your way to industry contacts and customers, and convincing partners, employees, and investors that you’ve got the right stuff. Got skills in a functional area like sales or web design? Look for business concepts where those skills are critical, and you’ll be able to accomplish more with less help from outside. And whenever possible, look for ideas that are in-line with your long-term passions.
Of all the things founders worry about when starting a business, losing money is often at the top of the list. Here are a few ways to limit financial risks for yourself, and for your investors:
1. Take a phased approach. Plan your business in time segments, like months or quarters (4 months). Set specific goals for each phase, with budgets, and ways to measure your performance. That way, you can stop every once in a while, take stock of how you are doing, and decide how to proceed—without any nasty financial surprises.
2. Track all expenses. If you don’t measure it, you can’t control it. A simple way to do this is to use a dedicated bank account and credit/debit card, so you’ll have all the numbers in one place.
What types of ideas are best suited to bootstrapping? (We’ll get to “how to bootstrap” in a separate post). Here are a few things to look for:
1. Low startup costs. Look for ideas you can launch without writing big checks. For example, it tends to cost less to start a company that sells services than one that sells products. Want to sell a line of baby food? You’ll need to create product formulations that meet FDA standards, and design packaging that stands out on store shelves. Also, you may have to produce more than you want at first, to meet supplier minimums and be prepared for customer reorders. Want to start a consulting firm? You can probably get started with a simple website and business cards.
2. Low marketing costs. If possible, find companies that reach customers without the need for large marketing budgets. For example, one of my clients has a $3 million revenue business and has never spent a penny on marketing. She sells hospitality services that cost over $100,000 per year. The universe of potential clients is fairly small, so she networks her way in the door, gives a sales pitch in person, and (sometimes) walks away with a big fat contract.
If I had hair, it would be on fire today. I’m only a few days into my startup, but there’s already so much to do, it’s nearly overwhelming (It’s also exhilarating, and I’m a closet stressmonger. Shhhh).
As an entrepreneur, with or without hair, you’ve got to wear a lot of hats. Today, I drafted the content for an online class, hired a graphic artist to design my book cover, pitched my business to a potential marketing partner, made some changes to my legal entity with my lawyer, and conducted a client coaching session.
But the toughest part about a day in the life as an entrepreneur is the tyranny of choice. There are 100+ things on my to-do list, and nobody to tell me what’s what. So, I’ve got to prioritize up the wazoo. That’s one of the untold secrets of entrepreneurial success: Figure out what to do now, and what NOT to do now (aka ever).
