Are you an entrepreneur at heart, tired of the daily grind at a meaningless job and looking for a life of adventure and riches? If so, this blog post isn’t for you. I wrote this for serious entrepreneurs that have a history of execution over strategy, action over dreaming, and realistic expectations of the outcomes.
To date, I’ve started three businesses, invested in several others, and successfully completed 6 M&A transactions for a combined enterprise value of $216 million. I’ve mentored startups at HTR’s LaunchPad Accelerator and Startfast Venture Accelerator, judged business plan competitions, and spoken at a few conferences about startups and entrepreneurship. And throughout all of this, I’ve decided that starting a business is one of the hardest, and simplest, things an entrepreneur can do. Like playing an instrument, the motions themselves aren’t complicated, but it takes practice and patience and a great deal of dedication to get it right. It's because of this practice that I can write the following sheet music for how to start a business in 10 steps and 500 words:
Find a worthy market problem. Every business solves some sort of problem, and your startup must too. Talk to people about the problem, and make sure it’s big enough and important enough to solve, and test it by asking friends and strangers about it.
Define the persona of your target customer. If you’re not sure what a persona is, go learn from Pragmatic Marketing or HubSpot Academy. Then get the key persona for your product right. Knowing your persona is a prerequisite to knowing how to engage that audience.
Describe your solution to the problem for that persona. When you are ready to write this down, distill it to a short paragraph, which usually starts with “The solution to this problem is …”.
Describe your product. The solution to a problem is different from what your product is, so you need a separate description of your product or service. Think of your product description as the first paragraph of a landing page that entices visitors to become leads.
Describe your product features as bullet points. Some folks call this marketecture – these are the top 3 to 7 features of your product that would resonate with your target audience.
Know how you’re going to acquire customers. Direct sales force or channel sales? Marketing-driven leads or referrals? Paid ads or Inbound Marketing? Are there key partnerships that need to be formed? This forms the basis of your go-to-market strategy.
Figure out how the economics work. This is an important step that most entrepreneurs miss. You’ll need to describe how much someone will pay for your product, and how much it will cost you to produce (cost of goods sold, or COGS.) Divide the two to get gross margin, and make sure it’s reasonable for your industry. Next, describe your costs to acquire customers (at scale), and make sure that the whole thing is profitable at some point.
Write it all down. Take everything in steps 1-7 and write a 1 (or 2) page business plan, or put it into a PowerPoint deck so you can explain your business to outsiders.
Create a strategy map. I’ve been teaching startups about Strategy Maps for a few years now, and the concept is simple, described here. The goal of a Strategy Map is to end up with an action-oriented bullet point list of steps to take to start your business. This is how you’ll actually run the business and get stuff done.
Ask for advice. If you’re starting a business and you don’t talk to others about it, you’re an idiot. There are TONS of folks that are willing to help for zero dollars if you find them and ask them. Join an accelerator, hire a co-founder, or form an advisory board – just get outside your own head and start testing your ideas in the real world. Soon after, talk to real potential customers, ask for their input, and iteratively refine your plan over time.
There you go – hopefully at least a start, from one chronic entrepreneur to all you future entrepreneurs, to give it a go. Now stop reading blogs and go execute.
P.S. - Now, for some of you, much of what I wrote won’t be clear without an example, so I’ve assembled an example business plan using the format above for Cheerios, with apologies to General Mills for my oversimplifications, assumptions, and hyperbole. I made up most of this content, and borrowed the rest, for the purpose of creating an example.
Market Problem – Kids need to eat to grow, and parents want better choices for their kids so they are healthier, smarter, and better behaved than “other” kids.
Persona – Mary the Mom (yes, I know about the gender bias here, but buyer personas need to make some assumptions to be specific enough to be useful) is 35, has 2 kids, one is still in diapers and the other likes to pull his little sister’s hair. Mary took 6 months off work to stay at home, which has turned into 12 months, and she begrudgingly drives a minivan instead of that cool convertible she’s always wanted so there’s room for her stick figure family sticker that her mother-in-law (bless her heart) gave her. Mary does all the shopping, and reads most labels, buys organic when there’s not too large a price delta, and brings her kids with her when she’s at the store. Mary needs a vacation, but she loves her life now more than at any point in her past.
Solution – The solution to Mary’s problem is a healthy choice breakfast food that can be purchased where Mary normally shops that’s healthy and can double-duty as a snack item. Both her kids will eat it, and both will eat it at more times than just breakfast.Product
Description – Cheerios is a family-favorite breakfast cereal. It’s wholesome goodness is healthy for kids and their parents. It includes only what matters.
Gluten free - We believe that Cheerios should be enjoyed by everyone. By simply removing stray wheat, rye and barley grains from the Cheerios’ oat supply, Cheerios will still have the same great taste, but will be gluten-free.
Oats - We put oats within everyone’s reach by transforming the simple oat into a crunchy, toasted cereal. The versatility of Cheerios means anyone, anywhere, can enjoy the power of oats. And every step of the process-- from harvest, to mill, to shelf— is carefully vetted to incorporate only what matters.
Real farmers - Without farmers, we’d have no oats. We’re committed to helping farmers with their cultivation of oats, one of the most sustainable crops in the world. Our partnerships with farmers matters. Watch the video to learn more about one farmer growing oats for Cheerios.
Good for your heart - Your heart matters to us. That’s why Cheerios are made with the best oats possible, to provide the best nutrition for your heart. Learn more about how beta-glucan can help lower cholesterol. Eat well to live well.
Families matter - We believe in the power of family and the moments you spend together. No matter how much time you have, we want to help you and your family make the most of it.
Ageless – from infants through grandparents, Cheerios is for everyone.
Go To Market/How to Acquire Customers – Direct marketing using traditional and digital media techniques. Traditional techniques include paid television ads during prime persona-time consumption hours, product placement in relevant properties, and store-level promotions including coupons, end caps, and tastings. Digital media techniques include social engagement, a community built from our customer advocates’ online conversations, online sponsorships, and paid advertisements with retargeting.
Unit Economics – An average size box of Cheerios sells for $3.00 at point of sale. COGS is low at approximately $0.50 for product plus $0.15 for packaging, but net margins are under pressure from relatively high costs of sales. On a unit basis, it costs $1.50 or retail and distribution, $0.15 for traditional customer acquisition programs, and $0.15 for digital media customer acquisition programs. After G&A and at scale, net margins are expected to be approximately 10%.