How do I start a business?

Because I’m a serial entrepreneur and because some of those companies did well and because I’m a management consultant and startup mentor and coach and because I’m a business plan/pitch competition judge, I get asked this question in various forms—a lot.

Here is one recent example:

How would I go about researching an on-line business idea?  I have an idea and have done some Google searches but don’t know how to tell if there is room in the market for someone else.  I have some ideas to be more unique and have a plan to slowly enter the market, but not sure how to go about everything.  The last time I tried a business it failed miserably, so I want to avoid that and keep things simple.

My answer:

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Early Stage Priorities

During the very early days of a business, in stage one, decisions are made which determines the initial trajectory of a business. While you can always pivot and change direction, every pivot costs resources.

In the early stages of a business, you don’t have much in the way of resources, so limiting the number of pivots is directly related to efficiency.

Here’s some counsel I recently provided to a couple of engineers who have an early stage Big Data startup:

You are currently early in stage one here: You have made some preliminary decisions regarding the business model, but have yet to progress through the most important stage one section: market sizing.

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Does my startup idea suck?

Here’s how you answer that question in 10 steps:

  1. The top five things that differentiate your company from your competition (these must be things that make you different, not better)
  2. The specific pain that you solve for your customers
  3. No more than eight words that describe how you solve that specific pain
  4. The six defining characteristics of your ideal customer
  5. Your market size in annual spending on your products/services expressed as ARTS:
    1. Addressable (all customers on the planet who could conceivably buy your products/services)
    2. Relevant (the portion of the addressable market who currently buys your products/services)
    3. Target (your ideal customers)
    4. Serviceable (the customers you could service with your available resources; here assume that you obtained sufficient startup capital to create the minimum business model reflected in your financial projection scenarios)
  6. The four reasons your products/services are need to have purchases for your customers (as opposed to nice to have or want to have)
  7. The most important customer benefits of your products/services (these must be customer benefits, not product/service features)
  8. Your top three barriers to entry (the things that your company has that prevent competitive entry, e.g. intellectual property / patents, technology, sales channels, trade secrets, etc.)
  9. The three things that make this new business a low-risk proposition for potential investors
  10. One sentence that states the reasons why your founding team are people worth investing in

The answers to those 10 questions will tell you if your startup idea sucks.