So, you’re sick of your 9 to 5 and you’ve come up with (what you think is) an amazing business idea. Yet is it really as good as you think? Are you willing to bet your savings on it?
Here are 5 steps every aspiring entrepreneur should take before taking the ultimate leap and starting a business.
1. Talk to potential customers
Whether or not your business will sell to consumers (B2C) or businesses (B2B), you need to know who specifically who they are and what is troubling them. You won’t find that out sitting at home – you need to get out there.
Ask probing questions to understand what solution they are missing and one they would gladly pay for. Listen closely with an open mind to see if your solution is the one they actually want. If they don’t like your idea, that’s great to find out now! The amazing thing about discussing problems with random customers is you may, in fact, discover a better idea from them.
Meanwhile, if you are selling to businesses I have one critical piece of advice. It is not enough for you to solve a problem, it needs to be a priority problem. If your solution doesn’t rank in the top two of their top three problems, don’t do it. You will never be able to sell to them at the speed you need. They will say things like, “Let’s talk about it next year.” Next year you won’t be in business anymore.
2. Test your business idea
In the eagerness to run their own company, so many founders spend a year building a product, only to launch it in the market and find that it falls on deaf ears. No one cares. Wouldn’t you like to fail faster and more cheaply?
Set up a landing page for your product that sells all of the benefits your imaginary company offers and shamelessly pretend it’s real. Spend a few hundred dollars on Facebook ads and drive traffic to it. If enough people convert (i.e. sign up), you are onto something. This alone will make you more confident as you take next steps.
Another cheeky way to test and validate your business idea is to get your hands on a targeted opt-in email list that includes at least 1,000 email addresses. You can buy or rent an email list or partner with established online magazines, trade magazines and journals to send a dedicated email blast to their subscribers. Email the list explaining your product/solution and include a call-to-action (e.g. ‘Sign up Now’) button. Track the percentage of people that take action using website analytics tools like Google Analytics. If 20 percent or more people click, then you might be on to something.
3. Research the industry
In order to win in your industry you need to become an expert. The reality is a lot of founders aren’t when they first start. So you need to swiftly get up to speed.
When I have a business idea the first thing I do is dive into Google and research the heck out of it. Is there are a lot of competition? Does anyone dominate it? What products and services do they offer and at what price point?
You need to determine if there is a gap in the market for you. If there is no competition, that isn’t always a good thing. It can mean there is no viable market. If you read enough you might find someone tried your idea before and failed. Reach out to them on LinkedIn and see what you can learn.
Some of my investor friends have shared stories about pitches they’ve received from founders who were adamant they had no competition. The investors then pulled up Google, typed in a few keywords and then point to competitors on the first page. Yes, this happens. Don’t be that person for your own benefit.
4. Save up money
It is going to take time to make money, let alone be profitable. Do not underestimate this fact. If you’re a new entrepreneur without funding, it’s likely you can’t rely on a paycheck each month to cover your rent, let alone pay staff salaries. You need to focus on how to prove your idea and scale your business – not the fact you might be homeless soon.
I recommend saving up enough money to cover 12 months of runway alongside enough to cover basic marketing and startup costs. You may have a job but it is time to start acting like you are a broke founder and save every penny. Quit going on exotic holidays and buying $5 Starbucks Vanilla Lattes.
I can hear you thinking, “What about investors?” Don’t bet on it!
Most startups don’t raise money, it’s just not talked about much. Investors also effectively become your boss and you will need to report to them. I’m sure not having a boss is a big reason why you want to quit your job in the first place.
5. Find co-founders
Entrepreneurship is terribly lonely. There will be more downs than ups for a few years. Wouldn’t you like to have someone in the trenches with you?
The best thing about co-founders is that they are effectively free labor! Yes, you split the company ownership, but increasing the chance of success can be worth it.
There is a reason why investors prefer to invest in companies with multiple co-founders: one person can’t possibly do everything. If you have three smart co-founders, you’re able to do 3x more than you can on your own. You may also have complementary skill sets. A developer, a marketer, and a business development founder is a powerful combination.
I am asked all the time, “Where can I find talented co-founders?” The answer is simple: you know them already. They are in your network. You need to have a shared history of working together so you can rest assured you can navigate stressful situations. It will take time to find a co-founder, so start now, before you quit your job.
Alexander Jarvis is the founder of Perfect Pitch Deck which helps founders and investors make fundable pitch decks. He quit investment banking at Lazard to start companies and failed terribly at the start. He has since gone on to found and scale multiple companies, including three unicorns and work in venture capital. He teaches founders to build startups at AlexanderJarvis.com. Connect with @adjblog on Twitter.