Starting a business is not easy. Believe me, I’ve done it several times. I’ve also helped countless entrepreneurs to pursue their dream. Once you’ve worked with 250+ clients, you start to find patterns. These patterns help you understand the business development stages that an entrepreneur goes through. As a business consultant, it is critical to understand at what stage the client currently is and what help he needs in order to move to the next stage.
Entrepreneurs usually draw their motivation from 2 sources: 1) they have a business idea and want to immerse themselves 200% in it until it succeeds, and 2) people simply don’t like the 9-5 jobs, working for a manager – and believe having their own business could give them flexibility. In both cases, it is very important to have support from someone that’s been there and done that. This could save you a fortune by tapping into a pool of know-how and avoiding the common start-up mistakes. Using external support will also free up your time, so you can focus on what is actually important, growing your business.
That’s why in order to help entrepreneurs, we’ve built up a business development stages infographic which you can see below. This infographic shows the stages, as well as the activities that you should do at each stage of business development. You can do it yourself, or you can call me and I can help you out.
1. Idea Generation
Believe it or not, we’ve had several people that had the excitement of starting an own business but simply couldn’t find the right idea. And it is not an easy task, especially if you intend to work in your business until you retire. While looking for the “million dollars” idea, you should have in mind that most businesses start small, and then grow to million dollar ones.
So instead of looking at the financial incentive, perhaps a better approach would be to look inside yourself. What are you good at? What do you enjoy doing? Do you have a hobby that excites you? The idea generation is a process of brainstorming what are your strengths as an individual and building on top of them. These are the areas you need to tap into and build a business around it. If you like what you are doing, the financial incentive would be a mere consequence, not the primary drive.
2. Idea Validation
So you have an idea for a business. Or few of them. Now what? Of course, you need to do your homework before considering starting a company. Have you done any research? Perhaps someone already had the same idea (there are 7.5 billion people on this planet). Or even better, someone in China is doing the same business, so you can actually learn from their best practices (we call this benchmark), and apply them in your business. Or if you have several, which one is “the one”? There are several ways how you can validate your business idea. To start with, a simple Googling will do just fine. Try to understand what you did already and what you can do further.
3. Market Research
If your idea hasn’t passed the idea validation stage, it means that is better to know now, rather than after investing all of your savings or getting into a big debt just to realize the same thing. You can go back and validate another one, or simply continue by paraphrasing the existing one.
If the idea still looks worth pursuing, then you would need more in-depth research. Market research is a tricky stage, as you can do lengthy research, and still not convince yourself that the business idea has potential. You will probably spend a lot of time and money on the research, but trust me, the information that you gather at this stage could have a huge implication on your business. It is up to your budget whether you will go with primary data (hire a company to do interviews, focus groups, questionnaires) or alternatively with secondary data (hire a company to screen the web and find all the already available information). Of course, you can do it yourself, but bear in mind that it requires a lot of searching and reading. Obviously, all three ways have advantages and disadvantages.
What should market research cover? I would point out 3 main areas:
- Market – is there a market for your product/service? Yes? Understand all about it, how big is it, what are customer’s desires, preferences? What problems do they have? How is your product/service addressing them? One valuable piece of information here could be worth a lot.
- Industry – Have you heard of Porter’s Five Forces Analysis? Well, you should definitely complete it at this stage. Also, you need to see the trends, is the industry is growing or shrinking? If there is a market, obviously there should be competition (there are exceptions, but not worth considering). You need to know everything there is for your competition. Who are they? How big are they? What services/products do they offer? What ideas can you steal from them? How would you differentiate between them (in other words, why would clients buy from you instead of them?) These are tough questions that you’d better answer now.
- PESTLE – You have a market, and you know your competition. But have you reviewed the bigger picture? What PESTLE (Political, Economic, Social, Technological, Legal and Environmental) factors might influence your business? Perhaps there are governmental regulations or import fees, or skills that you need but are not available on the market? The PESTLE analysis is a famous model that addresses these issues.
The end result of the research should be an identified opportunity/gap in the market that your product/service can satisfy. After the research, you should have some degree of confidence in your business. You will never be 100% sure, and there is always going to be uncertainty – all you can do is only reduce the risk of failure.
4. Business Development
At this stage, you have identified an opportunity/gap in the market, the competition setting is in your favor, and there are no hidden external factors that could prevent you. You must use that information in tailoring your product/service to the market. Here comes the handy 4P/7P model (Product, Price, Place and Promotion and additionally People, Processes and Physical Evidence for services.) If you have several market segments, then you should tailor your service to each of them. At this stage, you have to define your business model. I strongly recommend the business model canvas as a model to define what is your input, value-added process and output. It should demonstrate how you intend to make money from your business.
5. Business Plan
Now that you have all the bases covered, you are ready to combine everything into a business plan. If you followed all the previous steps, the business plan should be a piece of cake. But if you got to this stage skipping the previous ones, then there’s a lot of work ahead of you.
Every business plan has to cover 5 main sections (regardless of which template you will use, and what structure, each business plan must address all these points):
- External analysis – which we covered with market research (market, industry, competition and PESTLE.)
- Internal analysis -which is mostly covered by business development. You will need to add a marketing plan, sales plan, action plan etc. in order to have this section complete.
- SWOT and risk analysis – a graphical summary of the external and internal analysis, followed by identified risks and how to avoid, reduce or mitigate them.
- Financial analysis – translating the business plan into financial statements (income statement, balance sheet, liquidity statement.)
- Pitch deck – A 5-10 slides executive summary of your entire business plan.
If you look at the structure of the business plan, you already have most of the elements. Having a business plan is critical for you as a guideline for what to do and to ensure that you covered all aspects. More importantly, it is for showing to external people either to obtain funding, attract partners or highly skilled employees. People can’t read minds and don’t have the time to re-do the research you did, so the business plan is the only document they can use to understand your business.
Up to here, all the work was thinking, researching, writing, and back to thinking, then more researching, and more writing. At the end of this stage, you are either going to quit or take a leap of faith and start a business. Never expect 100% certainty, and it is up to the individual whether you are comfortable with 70% or 80% certainty.
Being a start-up requires constant effort in 2 main areas, improving your internal capacity with systems and processes to enable growth and continuously build your external capacity by improving your sales.
6. Systems and Processes (Internal Capacity)
Have a start-up? Welcome to the club. Now what? You should start building up your internal capacity. At the beginning (in most cases) it is 1-2 people running the company, so no need to think about systems and processes. These people will juggle between roles from working with clients to social media marketing, accounting and administration. But as you introduce more and more people who will specialize in different areas (e.g. marketing team, sales team, administration team, implementation team) things get complicated. All of a sudden you need to have an organizational structure, with clearly defined roles and responsibilities. Your main job will be to ensure that each area (or you can call it department) synchronizes with each other and acts as one company, rather than each working on its own. This means introducing workflows, a CRM (to capture all client knowledge in one place), project management software (to manage a bigger team more efficiently), a data management solution (Dropbox works well with a few people, try using it with 30 people). If you are working with physical products, you must have a constant overview of suppliers and their offerings. You can achieve profitability by increasing sales, but also by reducing costs.
Without addressing these issues, you will face a lot of stressed people and a lot of duplication of tasks, which will result in unhappy clients and reduced revenue.
In parallel with the internal capacity, you must grow your sales. Easier said than done. In the beginning, you know your product upside-down and can sell with the needed passion. But then you introduce the sales team, and you have to ensure that they have the same vision.
Once you have your products/services, and you are aware of your SWOT, the next step is to define your ideal clients. Who are they? Where can you find them? You will have problems if you haven’t done your market research correctly. For each ideal client you need to define job positions that you want to target and the content of your multi-approach (whether via email, calling and/or LinkedIn).
A continuous inflow of potential prospects (leads), a clear qualification system and standardized multi-approach communication will require constant improvement and adjusting.
Now you are big enough and you have a constant profit. You can choose whether you want to keep growing (the Ansoff Matrix will be a great help) depending on your expansion based on the market/product. Alternatively, you can create a franchise which can be then offered to the market. Ultimately, if you want to continue the entrepreneurial spirit, you will need to say farewell to your company. Selling a company requires an objective valuation of the company worth, as well as research of potential buyers.