How to Start and Grow Your Own Business—What New Entrepreneurs Need to Know

Starting a new company represents a huge opportunity for people, but it also represents an opportunity to learn something new about yourself and what it is to be an owner of a business. It will also represent a large commitment of time, energy and money. So, starting a new venture is no small task. However, you will gain insight about starting a new business on this journey to find and create a successful business.

For your business to be successful you should not only have a great idea, but you should also have the following elements of success: (1) the ability to be strategic in the pursuit of success, (2) the ability to be resilient when facing set-back, (3) a deep understanding of your market place and (4) a willingness to be open to the evolution of your innovation as you gain experience.

Current business dynamics develop tremendously fast with new technological changes occurring all around us and changing demands of customers due to ongoing developments. Those entrepreneurs who will do best in these circumstances are those entrepreneurs who continue to cultivate their curiosity as much as possible, conduct experiments at early and frequent intervals within the business, and create businesses that can adapt to changing conditions and continue to provide exceptional customer service.

This guide contains all critical elements of launching and sustaining a thriving business while moving from the theoretical into the pragmatic. This guide is filled with actionable and applicable tools you can begin to use immediately, along with a wide variety of real-world examples of how the industries known as “small business” and “large business” utilize a variety of successful entrepreneurship models and tactics. Thus, whether you are currently working on validating your very first idea or are ready to implement scaling efforts, this guide will assist your transition successfully from idea formulation to implementation of those ideas.

An entrepreneur should focus on a specific challenge instead of simply coming up with an idea.

Validate your opportunity by finding out if you have a real potential customer in mind. All successful businesses address significant customer needs. To start, summarize the customer’s biggest issue in one short sentence. Afterwards, perform some basic research to validate your opportunity:

Conduct interviews or talk to 20 potential customers. You can do this through face-to-face, telephone or web-based communication.

Create a simple quick survey or a landing page with a “join our waitlist” option.

Create a quick simple prototype of your offering or prototype it as a minimum viable product (MVP) to get feedback from a few potential customers and gauge demand for your product offering.

Reasons why it is important to perform validation:

1) An entrepreneur performing validation prior to significant investment in an offering can avoid developing a product that has no customer demand.

Validation checklist — What do you need to complete validation?

1. One-sentence definition of customer’s problem
2. Conversation with (or survey results of) 20 customers.
3. A web site or other mechanism to gauge initial demand, such as pre-orders with real customer signups.

Develop a workable, simple business plan that is confined to one or two pages and not written as if it were an academic paper with a 60-page thesis.

The plan should contain answers that address key business issues, i.e :

What do you sell (products/services/price)?

Who buys from you (target customer – age, gender, location, and pain points that defeat them)?

How are you going to sell to your customers (sales channels – online, brick-and-mortar, or through partnerships)?

What are your expected expenses related to obtaining and maintaining new customers (CAC/LTV)?

When can you expect to break even and what is your cash-on-hand over a certain time period?

Use basic financial information for your plan, such as: an approximate 12-month cash flow statement (projected) as well as a three-year (projected) high-level profit and loss statement, in addition to milestone KPIs (e.g. obtain “X” new customers for your business, achieve “$Y” in new revenue). The U.S. Small Business Administration has developed a step-by-step business plan method that outlines all of these items.

It’s important to align the type of funding with your specific stage:

•Friend/ Family/ Founder Funding: Provides quick cash for the fastest way to an MVP.

•Small Business Administration (SBA) Loans: Used for working capital and purchasing equipment; SBA lending has increased dramatically over the last few years thereby increasing access to these loans, especially for smaller dollar amounts.

•Angel Investors and Seed VCs: Positioned for those wanting to move quickly on product development and recruiting talent.

•Revenue/Bootstrapping: Takes longer for growth to occur but helps entrepreneurs maintain control of their company.

Take Immediate Action: put together a 12-month budget on how you plan to use the money you are raising. This will show lenders/investors how you plan to turn their investment into revenue/milestones.

Legal Structure, Registration and Basics

Select your Legal Structure (either Sole Proprietorship, Limited Liability Company, Subchapter S Corporation, or Subchapter C Corporation) based on taxes, liability, and the desire to get funded. Once you select your business name, register with the appropriate regulatory authority, get any required licenses (if applicable), and get a separate banking account, start easy bookkeeping (i.e., software like QuickBooks, Xero, or just a simple spreadsheet).

Quickly creating a minimal viable product (MVP) allows developers to be the first to market and quickly learn from customers what needs improvement. When this is done Developers should be monitoring their metrics early on in order to see how successfully they are acquiring users, activating their users (i.e., helping users to reach the “light bulb” or “AHA” moment), and whether or not customers are coming back after they have used the product (this is also known as retention) and what revenue is generated per user.

Developers should modify their product or service based on measurable feedback using customer interviews and usage or engagement data to help them prioritize feature development going forward.

Marketing and building an audience will be about getting scrappy in the beginning.

To do this, you will want to focus first on low-cost/high-learning channels.

How to start would be to implement:

Use of Content Marketing & SEO strategies to grow visibility through searches.

Using Google or Facebook ads (or any paid advertisement gateway) to validate hypotheses on what works and to identify target customers.

Partnerships or local outreach efforts (e.g., reaching out to other B2B companies in your area) for B2B or local businesses.

Make sure to have a referral program in place to utilize word of mouth as an avenue of growth.

Example: A bootstrapping course provider could grow early on with just a newsletter and free webinars (both high learning/low cost) and progressively add to their scale with paid advertisements.

Startups typically fail due to inadequate capital (cash). It is important to monitor “runway” (number of months you can continue operating) weekly by determining the remaining amount of cash (total cash available) divided by the average monthly expenses (business burn). Limit and restrict fixed costs early in the business; provide for significant reductions in fixed costs as the business grows; and adapt as necessary throughout the life of the business. In addition, it has been shown that survival rates vary with both geographical and industry type (as indicated by Bureau of Labor Statistics). It is therefore critical to plan for the worst case cash scenario, in order to survive as a company.

Evidence supports the validity of Actionable Cash rule: that is, you should maintain sufficient runway until you achieve your next measurable objective (for example, a product market fit or break-even), and an additional contingency amount as well.

After establishing a repeatable business model, the next guidepost should be the development of systems to improve efficiency and therefore increase sales.

Start with standardizing processes (including sales scripts and onboarding procedures) that cannot be changed over time.

Identify the largest gaps in your team (and add a generalist to help fill those gaps quickly, versus waiting for specialists), this will save you time and money.

Create Dashboards to track your most important metrics (Core KPI) through the use of Dashboards.

Create Customer Support to help decrease churn rates of customers.

Start by answering two fundamental questions regarding your strategy with the help of the business schools: “Who is your ideal customer?” and “What makes your business different from others?” Then, figure out what will be your strategies for growth in the future; they can include Market Penetration, Product Expansion, New Markets, and Partnerships.

The foundation of any company’s culture is laid by the founder through their actions.

The company should clearly articulate its core values, the manner in which decisions are made, and how frequently the company communicates. The cost of hiring someone who does not fit into the culture of the company can be very high. By establishing defined roles and utilizing probationary periods, the company can alleviate some of this risk.

In this case study of Warby Parker and their simple idea executed well, you will see how Warby Parker found their way to success through solving a very real pain point for customers: high priced eyewear due to the way the optical industry was marketing their products.

Warby Parker became a direct-to-consumer company with an affordable yet fashionable eyewear option for consumers. They offered consumers the ability to try their products at home and also worked towards the goal of helping underprivileged communities by donating glasses to those in need (“for each pair bought, they’ll donate another pair”). The model used by Warby Parker has provided lessons about being a successful entrepreneurial venture.

Warby Parker filled a specific need for customers.

Warby Parker had a unique approach to their distribution (both while they were in business and after).

Warby Parker was developing their brand and user experience.

Warby Parker had a plan to develop their business over time, taking into consideration margins while growing. Please see the multiple case studies and strategic breakdowns provided for additional details about these lessons.

Frequent causes of product failure – and steps to prevent it.

1. Market Validation: Test the product prior to going to market.
2. Lack of Cash: Create a spending plan and a method of raising funds that is realistic.
3. Rapid Growth: Only grow the company’s footprint in proportion to sales growth.
4. Failure to Listen to Customers: Maintain a strong feedback loop.
5. Poor hiring match: Hire purposefully and define job functions.
6. Make Wise Decisions Based on validated data: Most of the fortune 500 companies get their data from a 10-year span; and more control over the success of a startup is realised through proper strategic planning, access to capital and disciplined action.

Quick-start Action Plan (First 90 Days)

Days 1–30

• Create one-sentence problem statement and three customer segments
• Conduct 20 interviews and create a landing page to gather signups
• Create a one-page business plan and 12-month cash projection

Days 31–60

• Build Minimum Viable Product (MVP) or pilot service
• Test small methods of customer acquisition (advertisements, partnerships, and search engine optimization)
• Establish accounting and legal registration

Days 61–90

• Calculate customer acquisition cost (CAC), retention, and first-year revenue
• Make decision regarding funding strategy (grow bootstrapped or seek funding)
• Hire first contractor or individual’s expertise who fills a critical vacancy that cannot be filled by an existing employee.

In conclusion, the final call to action

For entrepreneurs, starting and scaling a business is work that can be measured in terms of progress. Entrepreneurs create systems to validate market demand, raise funds, build simple systems, and leverage speed to learn faster than competitors.

Builders use the Playbook described above as a living checklist, testing concepts at the earliest possible moment and spending intentionally and developing scaled systems before adding staff.