Duedil Blog

This post was written by John Colley, who runs the business advice website Six Minute Strategist.

Using the Six Minute Strategist methodology of taking one issue and dissecting it into six points and presenting it in under six minutes, here are 36 questions for Start Up Entrepreneurs, under the main heading of “Goals and Objectives” and which are designed to help them in the planning phase of their enterprise.

The six main topics are:

• Commitment
• Business Scope
• Financial Planning
• Bricks or Clicks
• Business Structure
• Mistakes and Pitfalls

These topics are designed to stimulate thought and enterpreneurs can use these topic headings and the questions raised to think of further questions that will help you plan and organise your business.

Commitment

Entrepreneurs are risk takers and should be rewarded for taking risks. However, before you launch into your new venture, you should do some careful risk assessment. You need to make sure that you can commit to the effort that will be required to make this a success and plan for the downside scenarios if things do not work as planned. Here are some questions to ask yourself:

• Are you ready for the commitment of your time to this business which might be 90 hours a week and seven days a week?
• How are you going to sustain yourself and your family during this period?
• Are you going to quit the day job straight away, and if not, when?
• Is your partner 100% behind you?
• Will your relationship stand the strain?
• What will you do if the venture fails?

Business Scope

You need to give serious consideration to the nature and scope of your business. One of the first mistakes made is to try to turn a hobby into a business. Just because you are passionate about something does not automatically mean that the world will beat a path to your door. Consider the following:

• Is this going to be a product or a service business?
• Will it be a niche or a broad business – serving a narrow or a wide market?
• Do you intend to be local, national or global?
• Where will you source your products from?
• Is the business scalable?
• With whom will you be competing?

These issues will come up again in different forms as we continue through this self analysis.

Financial Planning

As you are starting a business, you need to make sure that you approach it from the right perspective – with a strong grip on the financial aspects. Good planning and organisation at the start will make your fund raising much easier, make day to day management far more efficient and greatly reduce the chances of a failure. Here are some things to think about:

• At what price are you going to sell your product/service?
• Where are the customers? Will they pay what you ask? What are they paying now for similar products/services from other suppliers?
• What are your gross margins (Sales less cost of sales)?
• What are your net margins going to be after all your other costs?
• What is your unique selling point? How will you differentiate yourself in the market to enable you to protect your margins?
• With growth, how can your financial returns benefit from economies of scale?

Bricks or Clicks

The influence of online marketing and social media is already having a profound influence on offline economic activity. A key area to be addressed is what is going to be the online/offline balance of your business? This can range from 100% online but is very unlikely to be 100% offline. With the impact of mobile computing, tablets and smart phones you are almost certainly going to want to be able to reach your potential customers through the internet. There is no template here. You need to address this issue when you have a clear idea of the form and structure of your business and then work out an internet strategy that is best suited to your business.

• Website – This will almost certainly involve your “home on the internet” website that you can drive all your traffic back to and which you control.
• Online Delivery – You may chose to conduct all your sales online or have e-commerce enabled to allow your customers to buy from you online as well as offline. You will need to make sure your fulfilment capabilities are properly thought through.
• Social Media – How will you use social media sites such as Facebook, Google+ and Twitter to connect with your customers and reach out to potential customers?
• Blog – Will you have a company blog to connect and interact with your customers? This can help to develop a sense of community and brand loyalty.
• Conversation not Broadcast – Do not make the mistake of talking at your audience. This is an interactive and sharing medium and you must make sure that the style and tone of your interaction fits the platform on which you are connecting.
• Social Media Policies – You will definitely need to think through how you and your employees use social media and explain this in a set of policy guidelines within your company.

Business Structure

Your business will need structure – otherwise it will not develop and probably turn into another hobby! Think through the following:

• Legal form – Will you operate as a sole trader, a partnership or a limited company? There are complex legal, financial and tax issues associated with all three and you should take the appropriate advice early.
• Management Team – Putting a good founding team together early is important, on the assumption that you are not going to do it all on your own. Track record is important here as well as the right mix of skills. Hire the right people, don’t just round up a group of chums.
• Shareholder Structure – Make sure that you control the allocation of equity carefully, reserving the bulk for the real founders which might be only you. As you bring on investors there will be dilution and you need to work out how much of the company you are likely to have after several rounds of finance.
• Building the team – You need to plan your organisation and decide who you will need to fulfill which roles and when. Think lean and mean and always watch your cost base. If in doubt, over-estimate costs, not the other way round.
• Infrastructure – Think through your physical infrastructure needs and what IT systems you will require. Set these up once and get it right, as it becomes very expensive to have to do it several times, particularly as you scale up your business.
• Information – Make sure that the information flows as the organisation grows. There needs to be clarity about roles and responsibilities as well as task and project management. On the one hand, you may find no-one taking responsibility for tasks and on the other, duplication of effort can be very expensive.

Mistakes and Pitfalls

Business plans and spreadsheets are all well and good. What counts however is execution and you will need to think through how you are going to execute on your plan. You will need to decide the order that you do things and the priorities you apply to them. However, it is still easy to make mistakes. Here are some examples:

• Don’t run out of cash – Funding is always a key issue for early stage companies. You should have a careful funding plan and make sure that you do not run out of cash. If you have to go to shareholders and you are in a tight financial spot, the resulting negotiations may make it a difficult round to close on terms favourable to management.
• Cost Management – Always over estimate costs. Cost underestimation is one of the most common mistakes. You should monitor your cash flow (http://www.duedil.com/site/short-on-cash/) daily and always know your monthly cash burn and how many months of cash you have in the bank.
• Build the Right Team – Hire slow and fire fast – make sure you bring the right people on board but if you make a mistake, correct it quickly.
• Intellectual Property – You should ensure that the company retains the absolute right to all intellectual property and if someone leaves the company they have no residual rights over anything they have helped create while at the business. If in doubt go and watch The Social Network, then Google “Winklevoss”.
• Equity Dilution – You should make sure that you have an equity pot for those who are important to the business but think through the game mechanics of funding rounds. If you work on the rule of thumb that each funding round will add 33% of new shares the pot, calculate the founders shareholdings after three rounds with different starting points.
• Focus, Focus, Focus! Keep a close eye on what you are trying to achieve. If each action is not core to the strategy ask yourself why you are doing it and is it important. It is too easy to drift away from the original goals of the business and waste effort and resources on non-core activities.

I hope this is helpful to you in planning your business!

If you find this interesting, please come and visit the Six Minute Strategist Blog. If you enjoy the content, leave a comment and/or join the mailing list. You can find my Podcast, A Conversation with the Six Minute Strategist, here – please rate the podcast and/or leave a comment.

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