Startup: An Insider's Guide to Launching and Running a Business (2 page)

Each subsection has a title that is intended to support your recall of the subject—a mnemonic key to assist your memory. In my businesses and my consulting with entrepreneurs, these are phrases or keywords that I frequently teach and use as labels for the important ideas within.

If you’re a new or aspiring entrepreneur, I recommend reading the book from the beginning, and working your way through the chapters in order. If you’re an experienced entrepreneur, this book can be read straight through or by sections in random order without loss of congruence.

Come Fly with Me

I was recently fortunate enough to be slicing a brilliant blue summer sky over Napa Valley at the controls of a sleek two-person glider. The flight instructor in the back seat gave me a great piece of advice when I asked how to gain altitude. She said, “Look for the biggest birds, and follow them.” You see, large birds gain altitude by riding thermals (not flapping). For them, the air up there is their natural environment, and they know how to make the most of it. As a (mostly) land-bound mammal, I didn’t have much idea of how to get what I wanted in that aerial environment. Thermals are completely invisible—and startling when you come upon them, because they whack you like a tornado looking for a double-wide. Spotting an upwardly spiraling hawk and following its lead with a similar flight pattern was a great strategy to begin to understand the mostly invisible, rapidly changing, and complex environment I was in.

This is a great strategy for aspiring entrepreneurs as well: find people riding the currents in the way you’d like to and then do what they do. Better yet, sit down with that bird and share a bottle of bourbon—get him to open up and fill you in on some of his flying secrets. That in a way describes this book: it is an intimate conversation, where anything goes, with the end goal of helping you to understand the invisible inside experience of being an entrepreneur. If you want to learn how to identify opportunities, fluently interact with markets, and grow a business of your own, then this book can help.

Let’s do some flying together.

Kevin Ready
http://kevinready.com
December 2011

Setting the Stage

As we get started on this business adventure together, I want to share with you what I mean when I use the word
entrepreneur
. The following definition sums it up succinctly:

An entrepreneur is a risk-taker who invests his time, energy, and/or capital to create a new product, process, or service that has resonance within a given community.

Let’s look at the implications of this idea.

Entrepreneurship and Resonance

Let’s flesh this out a bit. An entrepreneur needs to find a way to interact with people (preferably lots of people) in a way that
resonates
with them. This means that the product or service attracts their participation and buy-in. In physics, resonance occurs when a pattern in one system causes surrounding systems to begin to vibrate or move in a similar pattern. This is exactly what entrepreneurs do. This can be social entrepreneurship—for example, President Jimmy Carter working with Habitat for Humanity (lots of resonance and buy-in there). However, it is usually business oriented, such as Jeff Bezos’ Amazon.com. His creation certainly resonates with people, and they demonstrate this with their purchasing power. They keep going back to Amazon again and again.

Another great example of buy-in and resonance can be seen in San Francisco with Blue Bottle Coffee Company. It is an immensely popular coffee business, in an already crowded market. Even with Starbucks and numerous other options available in the marketplace, the 30-minute line of devoted coffee drinkers queued up every morning stands as a literal testament to the resonance the company created. Where did this resonance come from? A high-quality product, delivered in a way that people want. “
It’s really about an appreciation for unnecessary beauty,”
founder James Freeman says, “
and a willingness to work for it
.”
¹

Note
An entrepreneur is a builder of resonance.

In order to develop resonance, a startup has to start with a product or service. Selecting that starting point requires a few perspectives that are vital and definitely worth recognizing. Let’s look at each in turn.

Entrepreneurs Create Something New

Entrepreneurship always starts with a proposition: you are going to solve someone’s problem—specifically:

• You have information or insight that other people don’t have.
  
• You have a unique product.
  
• You will deliver an existing product to a group that does not have it.
  
• You will deliver an existing product in a new way, which could be faster, cheaper, or better.
  

__________

¹
Fortune magazine
, September 26, 2011

It Is Compelling

The business idea is important enough that, when properly executed, it will trigger a specific customer group to reach into their pockets, pull out their money, and pay you for it.

You Can Scale It

Does your idea structurally have enough potential transactions to make enough money? If you buckle down tight and build this business, identify how big it can get, and what resources you will need to get there.

If you are marketing your own time as a consultant, for instance, is it scalable to your needs? You only have 24 hours a day to sell—and will occasionally need to sleep and eat. So your inventory of product is limited.

If you are selling products, what are the physical limitations on how much product you can get your hands on and connect with customers? These include the following:

• Product availability
  : If you are selling large, complex products, how many can you actually manufacture per year?
  
• Demand
  : What will the market bear in terms of transactions that you can compete for?
  

Play it out, and see what the outer bounds of your idea look like in terms of scale, product availability, and demand of the market.

You Can Control It

Having chosen a product or service, can you control the vital elements of the business? These include things like access to merchandise, licensing, and so forth. This is a structural aspect of the business that you are responsible for figuring out before you jump in.

• What political, legislative, or economic factors are you depending on to stay in business? For example, building a vehicle emissions testing device as a core product is highly dependent on having states legislate that such testing is required.
  
• If your chosen business model is dependent on a third-party license or company, what are the risks associated with that dependency? What guarantees do you have for the long-term stability and availability of that relationship? For example, becoming an independent agent of an insurance company creates a clear dependence on that company’s strength and evolving reputation.
  
• An example of this is the current fad of serve-yourself yogurt shops, which is hitting hard in Austin, Texas. A dozen such shops have opened there in the last 18 months. These market players cannot control how many more of these will pop up and eat up local market share from them—they just have to watch what happens.
  
• An example of “control done right” is a car dealership. When you are lucky enough to get the go-ahead to open a Honda or Lexus dealership, you are given a region wherein only you will represent the brand. That is a powerful type of control.
  
• If you are licensing a solar technology from China to build a customer base in Europe, can you negotiate an exclusive right to do so? Or will any company with an interest in the technology be able to do the same thing?
  
• If you have a novel technology of some kind, can you get patents to cover your invention and make it defensible?
  

Exercise: Get a whiteboard and visually draw out the relationships between your idea, the customers, the dependencies (licenses, product, sales channels), your staff, and any other details you can think of. Become fluent in the story and explore the relationships thoroughly before committing to any particular strategy or business model.

_________________

A Ticket to the Game

Most folks think that building a product or packaging a great service is the hardest part of becoming a successful business owner. The thought is something along the lines of, “If we can just build the web site, or open the restaurant, or create the widget—then we are going to start making money!”

Building it, opening it, or inventing it is often the easy part. The hard part is usually what comes next—connecting with customers, communicating your value, and convincing them to pull out their wallets to give you money.

Figuring out exactly how you will
connect the product
with enough customers in a short enough time span so that you survive, and grow to thrive—that’s where the real work awaits.

To be successful in business you do have to have a great product; a product that is developed and ready to go. This alone takes a great deal of time, effort, and investment. However, this great achievement is nothing more than
a ticket to the game
. It is the cost of admission that allows you to enter the coliseum and fight the battle for the attention of your customers. And this is competition against those who are already in the market trying to make a dollar in your chosen space. This process of connecting your idea with customers is your business. Not only that, you have to connect your idea given a rigid set of constraints:

• Time
  : How long can you go before you establish a base level of product sales?
  
• Money
  : How much money you have for marketing determines what strategies are available to you. Never use your whole budget for product development—make sure to allocate a significant amount of money for the marketing effort.
  
• Product Category Awareness:
  Is there already awareness in the market for what your category of product does?
  
• Brand Awareness:
  Do you have any market awareness associated with your particular product or service that you can leverage? Are you starting from scratch?
  
• Competitive Messaging
  : How much messaging is already being directed at your customers by competitors?
  
• Non-competitive Messaging
  : How heavily is your customer base being messaged by other businesses that are not related to what you are offering? (You are in competition with them, too, when you are trying to get a customer’s attention.)
  

Takeaways:
Building a product is nothing more than a step in your business. For most companies, the hard part—
the business part
—is the process of connecting that product or service with customers given a limited set of resources.

_________________

Nobody Cares About Your Business

When consulting with entrepreneurs that are struggling to get a business off the ground, I often end up telling them this:

I read a great book on starting your own business. It’s the most important book on the subject you could ever read—and it only had two words in it.

Those two words were “nobody cares.”

To close the story and make the point, I tell them that as an entrepreneur, your
entire job
is to make those two tiny, awful words wrong.

That’s it. Make people care about what you are doing.

The fact of the matter is that at first, people won’t care. People are busy. People won’t know who you are when you start out, and they won’t go out of their way to find out. As you create a business, and move beyond your product to the point where you are figuring out how to connect your product with the market, you realize that the whole purpose behind your effort is to get people to care about what you do. If you are in the computer business, it is not just about computers. If you are in the pizza business, it is not just about pizza. The best product in the world is just a starting point, and it won’t make you a dollar unless you can figure out how to make that product relevant to
the lives of your customers and get them to understand that relevance. Having a great product helps, but that alone is not enough.