It’s been said that entrepreneurs are the ones who really change the world. Goods and services like instant coffee or instant communication were once non-existent, but thanks to daring entrepreneurs we now have the luxury to take these products for granted.
Without entrepreneurs, innovation would wither along with productivity and growth.
Most of us think we can’t be an entrepreneur until we come up with a big idea. We unnecessarily criticise ourselves for not being creative enough or get disheartened when people don’t understand what we’re trying to do. This obsession with having to be the inspired visionary leader is what holds too many people back from beginning their startup journey. Take a step back, and see if the startup journey is right for you by walking through these 5 steps.
1. Finding Ideas for Your Business
Rather than trying to think up the next big world-changing idea, just take time to notice what’s happening in your life and the lives of those around you. Be mindful of the world, talk to people and notice the things you and they are struggling with. In other words, look for problems rather than solutions. Get curious – ideas can come from anywhere.
Your personal passions
What do you love doing or feel strongly about? Is there a hobby you do regularly that you’d like to do turn into a living? Do you currently work with or help out a charity, school or social enterprise? What has got in your way when trying to pursue these activities?
Paul Sinton-Hewitt started Parkrun because he was looking for a way to pursue his love of running and also be part of the local community. It’s now gone international with over half a million runners taking part in their weekly runs.
Your personal experiences
We all experience things that we are just waiting for someone to solve.
Min Kyu-choi, founder of the Mu folding travel plug, loved his Apple devices but saw that accompanying plugs were too bulky to travel with.
Your professional experiences
The majority of us spend at least a third of our waking hours working. Because of this we have unique insights that others may not have (even if they seem obvious to us). These experiences are often a rich source of problems worth solving.
2. Pitching Your Idea
The use of phrases such as ‘business pitch’, ‘elevator pitch’ and ‘video pitch’ have grown in popularity in recent years. But what are these terms and what do they mean for entrepreneurs?
A pitch or Business Pitch is basically delivering a business plan verbally and it typically takes the form of an entrepreneur or group of entrepreneurs presenting or describing their ideas to prospective investors.
An Elevator Pitch is simply a very short pitch that distils the idea into a short summary that takes only as long as a short elevator ride.
A Video Pitch is a pitch done via a short video rather than in person.
Regardless of the means chosen to pitch, the aim is typically the same; describing a business opportunity with the intention of securing funding to develop the idea further.
3. Getting Funded
A few people get together and come up with an innovative solution to a common problem. They test out their new solution, iterate a little, and find something that works and that a sizable group of people actually want to use.
Inspired, this band of innovative thinkers decide to turn that early idea into a company. But to fulfill that dream, they’ll need advice from seasoned entrepreneurs who have built successful companies before. And money.
So, who can you take money from?
Friends & Family
Even if your family and friends are not as rich as an investor, you can still accept their cash. That is what you decide to do, since your co-founder has a rich relative. You give him 5% of the company in exchange for $15,000 cash. Now you can afford room and ramen for another 6 months while building your prototype.
A bank loan works in much the same way as other business investments. Banks require the entrepreneur to describe his business and present a business plan, and then decides whether it is interested in providing funding in the form of a loan.
People who either have $1 Million in the bank or make $200,000 annually. They are the “sophisticated investors” – that is people who the government thinks are smart enough to decide whether to invest in an ultra-risky company, like yours. What if you don’t know anyone with $1 Million? You are in luck, because there is an exception – friends and family.
This is arranged via websites that bring investors and small business owners together. Entrepreneurs create a profile and post a business plan on a peer-to-peer lending website, and lenders bid on investing the business. The owner and the lender, which is commonly a private individual, negotiate an interest rate for the investment and the lender then supplies the funds to the entrepreneur.
4. Building Your Team
As a business startup, it’s difficult to decide when to make your first hire. There is no “one-size-fits-all” answer to when you should recruit a new employee, and who you should hire. Each company has different needs.
Remember that filling these needs and setting up the necessary payroll will add a new level of complexity to your accounting process. Because each new startup usually includes a team of founders, each with their own different set of skills and experiences, it is important to understand where your gaps lie. Making the wrong hiring decisions can be very costly to a startup. Creating an employee hiring roadmap can help you pinpoint when and where additional expertise is needed.
Whatever you decide in your hiring process, you’ll need to budget for the resources you need and when you need them. Full-time permanent employees expect a certain level of long-term commitment.
Early-stage startups can sometimes struggle to attract candidates because of the perceived risk. If you know you only have the money to engage someone for six months, it may make sense to start with a six-month contract, and only extend it to full-time permanent when your startup is secure enough to make a longer-term commitment. This can help position your company for greater success without a sizable upfront investment in full-time employment
5. To grow…or not to grow
While entrepreneurship begins with an opportunity, sustainable success comes from creating an organisation that can execute on that opportunity. But as organisations start to gain more sales and customers, managing growth becomes a critical challenge that, if not handled appropriately, can lead to venture failure.
Why do entrepreneurs fail to manage growth? Often, they have limited time and resources to spend on organisation building. They’re constantly fighting fires in the business’s day-today operations; or they’re chasing too many opportunities, leaving little time for planning.
Entrepreneurs without organisational or business skills may retreat into something they do know and are more comfortable doing, like product development. They may hire salespeople or engineers to handle sales and technical support before bringing in someone with organisational and business skills. But eventually growth overwhelms the operation.
In order to survive and continue to grow, entrepreneurs need to pay attention to the requirements of a firm in its growth phase. They cannot neglect the planning and preparation required for long-term success.
Yet the organisation will need to retain its entrepreneurial spirit as it grows. It can’t function over the long term by simply managing what it has previously created. Customer needs inevitably change. Competitors eventually offer superior products or services. Economic conditions, politics, technology, and a variety of other external shifts will create a constantly changing opportunity set that leads to new possibilities while rendering old opportunities obsolete.
What distinguishes those firms that not only survive but also thrive? Entrepreneurs and leaders who build an efficient operating organisation, while maintaining the organisation’s entrepreneurial ability.
If you want to be a successful entrepreneur, don’t start out wanting to be one. Start out with a customer problem and a product that solves it. Someday you’ll wake up and realise what you’ve become: a person who took a risk, started a business, and made it ‘happen’ – An entrepreneur.
Sometimes the difference between the entrepreneur who “makes it” and the one who does not is simply not giving up.
What are your experiences with starting your own business, and which of the above steps proves the most challenging? Let us know your thoughts in the comments.