The prospect of launching a business is thrilling but also stressful. The stress comes in part from entering the unknown. That would be the case no matter what new endeavor you’re taking on: trying a sport you’ve only ever watched, moving across the country, raising your first child.
Of course, there are ways to temper fraught nerves, chief among them accepting that certain things will never be in your control, and that if you prepare for those that are, you’ll be better equipped to fend off at least a few problems.
We consulted with experts on the key things to do when starting a business, and then narrowed the list to six. To be sure, subsets of tips fall under all of these tips, but it helps to begin with a solid base. Here’s to building something new, without losing your sanity.
THE EXPERTS
Ted Alling - cofounder of Access America, sold to Coyote Logistics, which UPS purchased; partner at venture incubator Lamp Post Group
Mike Bradshaw - executive director of Chattanooga’s business accelerator The Company Lab (Co.Lab)
Charlie Brock - president and CEO of Launch Tennessee, Tennessee’s statewide business accelerator
Lynn Chesnutt - managing director of Tennessee Small Business Development Center
Alex Lavidge - entrepreneur (Variable Inc., among others), early-stage investor and former director of Co.Lab’s GigTank business accelerator program
1. Have relentless passion for the business you plan to launch.
You’ll spend double the energy needed – and perhaps waste much of it – if you’re not committed to the path you’re about to tread.
“You have to have the mindset that nothing on earth can stop your company from being successful,” Alling says. “My high school football coach used to say, ‘The team that wants it the most, wins.’ This is true in business, too. You need to check yourself and be willing to go all in.”
Your passion is the unique component that will get you through rough patches. It’s also what permeates whatever you do to build your business.
“It’s necessary to convince potential investors, employees, vendors and customers that they should be part of what you are building,” Brock says.
Recommended reading: “Founders at Work: Stories of Startups’ Early Days” by Jessica Livingston
2. Make sure your spouse or partner is on board and you’re both emotionally prepared for what’s to come.
Once you have your own commitment under locks, if you have a partner or spouse, make sure you’ve got it from them, too.
“The support that you need from your significant other is extremely underrated,” Alling says. “Starting a business is not a 40-hour-workweek position. It is a grind, and you will have to have extraordinary support from your partner.”
This isn’t just a question of time; it’s also a question of money, so make sure you’re on the same page financially. This may seem obvious, but many entrepreneurs ignore it: If you’re in financial distress, you must seek out ways to generate additional income in the short-term future.
“Whether that be a job, a part-time contract or a proven sales opportunity, sometimes the first priority is to generate cash flow however possible without compromising the pursuit of a dream,” Lavidge says. “With this, it’s easier to help a new business grow on a path where later they can reinvest back into the business, until it can provide a comfortable livelihood.”
All these factors combined affect a person’s psyche, so expect emotions to swing considerably. This means entrepreneurs and their spouses need to take care of themselves.
“There’s a lot being written about the mental health of entrepreneurs and how the stress and anxiety that comes with launching a company can trigger dysfunctional behavior,” Lavidge says. “It’s important to take time out to exercise, eat well, connect with positive friends and family, and refresh. Also, entrepreneurs need to remember that they’re never alone, and it’s never a sign of weakness to ask for help.”
Recommended reading: “Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur” by Brad Feld and Amy Batchelor
3. Map the territory before you chart the course.
Now to the nuts and bolts.
Understand the market dynamics and competitive landscape of your industry. That means answering questions such as: Who’s already in the market? How do they make money? Why do they have customer loyalty? Once you’ve answered those questions, ask yourself how your company will be different and why customers would turn to it. Better product or service? Lower cost? Do your market research to figure out where your business should be located – or if it’s even the right time to launch. Formulate your business purpose and mission. Who is your target client? What process or technologies are required?
Those are a lot of questions to answer, and crucial ones. The good news is there are resources – books, curriculum, flow-charts – to turn to when developing a business model and sales-and-marketing strategy.
“There’s never a need to feel like you’re starting completely from scratch when developing an implementation plan for any key aspect for your business-in-development,” Lavidge says. “Of course, there’s an adage that warns of ‘paralysis by analysis.’ No one ever feels completely 100 percent ready before launching a new company. However, going 100 percent blind into any industry without market intelligence is one of the most commonly made mistakes I’ve seen over the years, especially among tech startups that have a ‘fire, ready, aim’ culture.”
Read case studies and review some startup Gantt (project-management timeline) charts. The planning process from a project-management perspective can otherwise feel completely overwhelming, especially to first-time entrepreneurs.
Recommended reading: “Disciplined Entrepreneurship: 24 Steps to a Successful Startup” by Bill Aulet. Also, Chattanooga’s CoStarters program is a good starting point for anyone looking to launch a business, and Co.Lab has deep resources too, particularly for technology-oriented businesses.
4. Figure out the financials.
Put together an expected financial forecast to understand cash flow and capital needs. Once it’s complete and you’re happy with it, put together a second model that cuts revenue in half and raises expenses by 15 percent. “Now how much capital do they need for the business?” Brock says.
How do you put together that document? Determine what is needed and, from that, what the cost will be to get the doors open and sustain the business through at least the first two to three years.
“This information … is vital when planning and if the business will need to seek financing from a financial institution or venture capitalist,” Chesnutt says.
Sound overwhelming? Fear not. The Tennessee Small Business Development Center and other nonprofit organizations can provide templates and information on how to determine startup costs and cash-flow projections. Key items to consider and pitfalls include: the economic conditions of the area in which your business will operate and for its industry on the whole. Be mindful of zoning issues or regulatory obstacles and the time and cost to overcome them.
Recommended reading: “The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company” by Steve Blank and Bob Dorft
5. Be prepared to operate in an environment of scarcity.
Don’t expect people to give you money just because you have “a great idea.” There has to be a way to act on it, in order for investors to take note. Also, it’s probably better to launch a business because you want to solve a problem with your own money – not because you’re desperate for money and trying to get it from someone else.
“More than 99.7 percent of the time, it’s almost impossible that any investor will invest in a pre-revenue concept in a short period of time, unless you have world-class credentials or superior intellectual property,” Lavidge says. “Most companies get started by everyday people with personal savings, credit cards, a collateralized or SBA-backed bank loan, or an investment from trusted friends and family.” The exception is when startups win business-plan competitions with unrestricted cash prizes.
Don’t let your costs run ahead of your revenue. “Treat every dollar like it could be the last one you’ll ever see,” Bradshaw says. “Spend money on things that will help you build your business, not on things that you think will make your business look good. A top-floor office with lush furnishings can wait.” Scrounging around for resources is the norm for a startup. Salaries will be low to none early on, and that might mean fewer amenities.
“If you’re cursed with the misfortune of having a lot of money, pretend like you’re broke anyway,” Bradshaw says.
Recommended reading: “Predictable Revenue: Turn Your Business Into a Sales Machine with the $100 Million Best Practices of Salesforce.com” by Aaron Ross
6. Build a diverse (and happy) team and seek out a support team.
Build your team with people who have perspectives that complement yours. Look for partners who cover your weaknesses.
“We all have blind spots. Good friends might have the same blind spots as you,” Bradshaw says. “Pick your business partners based on what they can add to your business. The management team has to challenge itself with differing points of view.” In turn, everybody on a team should be aware of their strengths and weaknesses, using that knowledge as a tool for the business to not only survive but flourish.
The founders and partners build the business’s culture. Their values, attitudes, beliefs and personalities are a huge marker for their enterprise’s success or failure.
Don’t forget you’ll likely need outside help to figure out your business’s legal structure (are you a corporation? LLC?) and how to handle hiring people (are your workers employees? Independent contractors?), among other issues. Do you need a patent? Trademarks? One of the most valuable assets for startups often is intellectual property.
Enlist a team of professionals to help with these issues, which vary from business to business. All told, you’ll likely need a CPA or bookkeeper, an attorney and an insurance agent. “For those who think professionals are too expensive, how much will it cost if you hire amateurs?” Chesnutt says.
Recommended reading: “Delivering Happiness: A Path to Profits, Passion, and Purpose” by Tony Hsieh