I talk to a lot of people that have a great idea that they think they can turn into a business. This page is a reference page for everyone in that situation. Next week, I’ll look at what to do if you have a great idea for the business for which you currently work.
Here are some of the questions to consider:
What Value am I Creating?
As Simon Sinek says – start with why? I often run into people who are obsesses with the features of the widget that they want to build. This is a mistake – start by thinking about the value that you are creating for people. A great tool to start with is the Value Proposition Canvas by Alex Osterwalder.
The great thing about the VPC is that it leads straight into the next important question:
What is my Business Model?
Now that you’ve sketched out the value that you hope to create, it’s time to figure out how to deliver that value. For this, you need a business model. By far the best tool I’ve seen for this is Steve Blank’s Lean Launch Pad. You can sign up for a free version of this course at Udacity.
Do the course, and take the time to actually do the work that is assigned throughout. The key point here is that when you are starting out, you don’t actually know what business model will work. You can only figure this out by talking to potential customers to gain an understanding of what they need.
You need to do this step before all of the others because it is important that you take action and start working on the idea. You can think about it forever, but you can’t figure out if the idea is any good until you start testing it.
How Do I Get Data?
First off, you need to figure out what to measure. Lean Analytics by Alistair Croll and Ben Yoskovitz does a great job of figuring out which key metrics to track.
Lean Launch Pad is based on gathering real data from potential customers. This can be a challenging task. The best method for doing this is outlined by Ash Maurya in his book Running Lean. He includes very detailed sets of questions to ask customers at every point in the customer development process. If you’re a bit of an introvert, like me, it is really useful to have a clear idea of what you are going to ask before you start doing research. Running Lean gives you an excellent blueprint.
I Need More Resources!
As you’re starting out, you’ll need more resources. This can be people, or it can be money. First off, figure out if you are a potential high growth firm. If so, you will almost certainly need Venture Capital funding. If not, you can try to grow organically. If you need VC support, you’re much better off if you have already gone through the business model generation process. Having a business model validated with customer data will increase your chances of getting funded.
What about if you’re just thinking about hiring another programmer, or a marketer? Paul Graham (again) gives you the equation that you need to consider:
An investor wants to give you money for a certain percentage of your startup. Should you take it? You’re about to hire your first employee. How much stock should you give him?
These are some of the hardest questions founders face. And yet both have the same answer:
1/(1 – n)
Whenever you’re trading stock in your company for anything, whether it’s money or an employee or a deal with another company, the test for whether to do it is the same. You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 – n)% you have left is worth more than the whole company was before.
Of course, if you need money, then:
I Need to Pitch
Whether you’re talking to potential funders, or trying to get into an accelerator, you need to pitch. I like using Guy Kawasaki’s 10 Slide framework. Quintin Adams has turned this into a sample deck:
How Should We Work?
If you’re aiming to be a highly innovative firm, then you’ll need great people. We’re now at a point where we can hire great people from everywhere – distributed workforces are becoming increasingly common.
Here is a great set of tools that can help you set up a system for working when everyone is in a different place.
If you follow all of these steps, then you’re making it more likely that you will continue to be innovative as you grow.
I Have Questions About the Mechanics of Running a Startup
There are many other questions that come up when you’re trying to turn your great idea into a business, like:
- What should I do about intellectual property?
- Should I join an accelerator? Which one?
- What software can help?
- How can I do customer surveys?
And many, many more.
There are some unbelievable collections of tools for entrepreneurs. To learn more, these are my favourites:
- Chuck Eesley’s tools for his entrepreneurship course at Stanford.
- Steve Blank’s Startup Tools (you could spend days exploring the stuff here).
- Harvard Startup Tribe – organised around Tom Eisenmann’s work.
- Y Combinator Startup Library and Hacker News.
That should be enough to get you going. The big lesson is to start taking action as soon as you can. Don’t over-think your idea. If you use these tools and do everything right, it still doesn’t guarantee success. But it will sure help your odds.
(the cartoon is from Hugh MacLeod’s Daily Newsletter – subscribing to it is worthwhile.)