Over the past 10 years I’ve created many businesses, and in that time I’ve learned what you need to do and don’t do to take those ideas and visions and turn them into a successful startup.
In fact, I’ve figured out that it takes about seven steps. Let’s take a look at those steps so you can turn your vision into a startup and avoid common mistakes that will guarantee your failure.
Create a compelling vision
One mistake I see a lot of would-be entrepreneurs make is not clearly communicating their idea in a compelling fashion. And because people have short attention spans, it’s best to create a message that you can communicate in 60 seconds or less.
Sure, that’s not a lot of time to explain your idea, but that’s the point. If you can’t state what your idea is in that amount of time, then you probably don’t understand what it is you want to accomplish. And if you don’t understand what you are trying to accomplish, how can you expect other people to?
Listen: you have to be able to convince partners and investors and employees, so you don’t want to confuse them with a muddled message because you’ll definitely lose them.
You should even think about a high-concept pitch. The pitch of the iPhone app Foodspotting, which created the above image, was “Pandora for food.”Cisco’s is “We network networks.” YouTube was “Flickr for video.”
Also, your purpose should be compelling, and one of the best ways to do that is by appealing to the investors desire to make money. The more money your idea can make the better.
Stay focused, flexible and fast
Another reason a compelling vision will help you is that once you’ve got your vision crafted into a simple, clear and compelling pitch, you can codify it…and then filter all of your decisions through that vision statement.
If you are fortunate to have a start-up idea that’s gaining traction, the rush could lead to distraction and even bad decision making. One great way to slow and even kill your momentum is to start spreading yourself too thin, or to get carried away with things that don’t add value to your startup. You have to understand, most startups don’t make it past six months.
You don’t want to make things harder for yourself by getting distracted. This means that on top of your vision statement you need to define your goals and establish a schedule to accomplish them.
Another mistake that can kill your vision is getting ahead of yourself. Never start worrying about future versions of your product if it’s not even out of the idea stage. Stay focused on the next year or two.
Finally, make sure you are flexible and adaptable. Make sure you are listening to your investors, partner and anyone else who you trust so you don’t drive your business into the ground. You are more likely to succeed when you can constantly adjust your course while keeping your end goal in sight.
Value should be obvious
It goes without saying that the value of your vision should be obvious. Will customers immediately know what you are offering? Will it be meaningful to them? Here are some questions to ask yourself as you think of value:
- Is the value simple to understand?
- Is the value interesting to the customer?
- Will the value somehow make the customer more productive?
- Will the value be something that lasts for a long time? Or will it die out in three months?
Of course value doesn’t have to last for five years to be worth pursuing. Sometimes you can have a strategy of planned obsolescence where you sustain profitability because customers must replace the product every season, like clothing manufacturers do. Keep in mind this strategy may back fire on you by a competitor who chooses to provide a product that outlasts yours, giving customers better, more meaningful value.
Understand the costs
When it comes to getting funding for your vision, you need to calculate how much you will need and how you will get that money.
What you need to do is estimate how much it will cost to operate your new business for a year or two and then raise the money you will need for that time. When you are about six months away from running out of money, raise more. Do some research and then fill out the following table to figure out how much you’ll need.
After you figure out how much you’ll need, add another forty percent. This represents Augustine’s Law. This law comes from a man name Augustine who was a project manager in the 80’s famous for some unique sayings, one of them being that every project overran at least 40%. By the way, startups will never go the way you expect, so be prepared.
Limit your spending
Lot of startups fail because they run out of money. If you can’t raise the money, then you’re vision will not get off the ground. But if and when you get the money, spend as little as possible. Here’s how much and what startups are spending:
To save money, try these tips:
- Instead of hiring people, use temps and contractors.
- Keep your salary small.
- Do not live above your means.
- Pour money back into the company.
- Don’t go all out with office furniture. Buy it cheap, used or borrow from friends and families.
- Run your startup out of an apartment in a decent neighborhood where it’s cheaper than in an industrial park and less lonely after 6 p.m. when the park closes.
Listen, be patient and take your time. Getting big fast should not be your goal. The best companies are those that mature slowly. Your goals should be to reach sustainable profitability, which takes time, so be patient.
Hire people for the position—not who you like
It may be tempting and cheap to staff your startup with family and friends…but don’t do it. More than likely they will not work out, and when you have to ask them to leave, it will not be pretty.
My business partner and I always try to hire a core team of smart people who know an industry inside and out. We always try to create a knowledge pool that has a good grasps of the risks in any new business so that when problems come up we go to that team instead of thinking we have all the answers.
We also hire fast and fire fast. Only hire A+ people, but the moment you sense they are not working out, fire them. You will never regret firing someone. You will, however, regret not firing someone soon enough.
By the way, if you’ve got your vision and product offering narrowed and the procedures documented you can start hiring junior people. If you’ve got a good procedure for what you offer, you don’t have to necessarily hire the best talent. You only have to hire competent and passionate people.
Plan your exit
Not too many entrepreneurs make good managers. This is one of the reasons why 54 percent of the The Wall Street Journal’s 2010 top 50 VC backed companies are run by non-founder-CEOs, while 23 (46 percent) are run by founder CEOs.
This sort of makes sense. When there is a lot of money at stake, VCs don’t want to leave a company they’ve invested in the hands of a founder who may be incapable of scaling it. Of course, some entrepreneurs have no desire to be the CEO, and so at some point plan on stepping down.
Keep in mind that stepping down doesn’t mean you are turning your back on the company. You always want to stay involved in a new business long after launch. At some point you do have to decide when you are going to hand over the controls to someone else when the management team starts to come together.
Yet just because you’ve stepped down doesn’t mean you can’t reinsert yourself or share your thoughts about an issue in the company. It’s your business, so don’t be afraid to ask some serious questions when necessary, even climbing back into the CEO position for awhile like Larry Page did at Google in April 2011.
I think it’s important to think about your exit as early as possible. Even if it’s a sketch, you should have a plan that defines a successor and how long that transition is going to take. At minimum, your plan should answer the following questions:
- When do you want to exit? Define the time frame.
- Who will be your successor? Are you going to hire someone from the inside or from the outside? If you can’t find the talent to develop from the inside, then you will have to look outside.
- What are the leadership skills important to your position? Do you need a CEO who is good at managing talent or thinking strategically?
- What are the technical skills that are important for your position? These will be what’s specific to your industry.
If you can pull together some people to help you think through this position and these questions, you will develop a much better succession plan, making the transition easier.
Ideas are a dime a dozen. It’s in the execution…taking your vision of a great new product or company from an idea to a reality…that truly will matter. Hopefully the seven steps I shared will help you clearly communicate your vision, find the funding you need to run it and even hire the right people so you can turn your vision into a successful startup.
What other steps are there in making a vision become a successful startup?
More from Neil Patel on GeekWire: Seven signs that you might just be an entrepreneur… Eleven things every entrepreneur should know about innovation… 17 things I wish I’d known when starting my first business…