This is, after all, the American dream and something all businesspeople are trying to one day achieve. Whether you are an executive with a Fortune 500 company or a stay-at-home mom, here are four things that you should consider when competing in the start-up world:
- A solid business plan is essential - but get to the point quickly. When writing a business plan, you will never have all the answers to every question. But to gain the interest of potential investors, you need to have a plan that identifies a problem, describes why it is a problem, and how your idea will solve it. A successful start-up company can convey this in a single page which is simple to understand and easy to grasp. Your business plan should be linked to achieving measureable milestones, in a specified time period with a specific amount of funding. Companies that prepare 60 or more pages of detail and present their ideas for over an hour are almost always doomed to failure. Your presentation needs to be sharp and concise. Once you gain the interest of your target audience, then you can go through a deep-dive of information and supporting detail at subsequent meetings.
- Create a strong management team - people matter. As good as an idea may be, without the right team behind it to provide the proper level of support, the odds of success for a start-up company are slim to none. Successful start-up companies have people in place that are qualified and knowledgeable in their areas. As investors evaluate companies, they look very carefully at the make-up of the management team. It is important to know that this does not mean having "yes-men" on the team. It should be made up of individuals with diverse backgrounds that can implement the strategy outlined in the business plan on time and within budget.
- Listen to all feedback you receive - the good, the bad and the ugly. Most entrepreneurs have a strong personality and a drive that makes them who they are. This personality can be extremely beneficial when presenting ideas and motivating people to invest in a company or encouraging your team to put in those extra hours of work to get a job done on time. But it can be detrimental as well. We all think we have the best ideas, and if people would just listen and invest everything will work out. That's not the case.
When you decide to work in a start-up business you need to be prepared to present to 50 or more people and hope for ten percent to listen. As you go through your presentations, you are going to meet people who support your ideas and others that say you're crazy. As much as we tend to ignore the criticism, a successful start-up company incorporates all feedback and uses it to support future endeavors. Sometimes, when adjusting and changing your original assumptions based on feedback, people are more willing to listen and support your ideas going forward.
- Initial investments - importance of sweat equity. To be a competitive start-up company means understanding the concept of "sweat equity." I have run into too many people that expect to be reimbursed from future investors for money originally invested in a company. This is just not the case. A competitive start-up company has a management team that is willing to work for almost nothing and know that the payoff is down the road after raising money and successfully achieving their milestones. This not to say that you should not expect compensation for your efforts at some point. But the initial funds to get a company off the ground should be aimed at development and marketing efforts, not compensation.
There is no secret recipe or special sauce that makes all companies successful. Understanding these four concepts, though, should help you be more competitive in the world of start-up companies.
Jim Schulz is a managing director at Milestone Advisors, offering CFO-level services on a part-time basis.