Have you just commenced a startup business? That is, a brand new business rather than one you inherited or bought; a business you started from scratch using your craft or from a new idea, or a business based on a product you invented?
To a large extent, all startups of any kind of business in any kind of industry are the same. They have one, or at most, 2 key individuals with the idea and the drive, full of enthusiasm and energy, probably not many staff if at all, and most of them family and friends. Typically, you would have shuffled together some (but not enough!) working capital, leased new premises and bought new equipment. The sense of newness is exciting and the startup begins breaking through walls.
In time, it finds its market and settles down. The passion and excitement may still be there but there is no longer a sense of newness, things start to feel normal and the days are spent doing pretty regular things.
If you have survived this phase, typically over the first year, celebrate!
But don’t get settled because most startups close their doors within 2 years, mainly because after the gains at startup, they fail to establish a sustainable business.
So, if you are in that position, what do you need to do to establish your startup?
There are 5 steps to establish your startup after the initial blaze of hyper-activity.
1 Check the fundamentals
You are an expert in your field, or you created a world-beating product or app, or you invented the better mouse trap. But you are unlikely to be a lawyer, accountant or finance manager. These are the things often left behind in the initial startup phase where you are looking to find a market and establish your product or service, hoping that you will find the time later to “catch up”.
The time has actually come and gone – you should have been set up correctly before you opened your doors. However it’s not too late in the early days to check that you have your fundamentals right. It’s not too late to check your corporate and legal structure. Does it secure your assets and separate them from any private assets? Are there firm agreements between partners and shareholders? Have you worked out and documented what happens if a partner wants to leave before too long? What about any intellectual property – is that protected?
You also need to ensure that you have a good accounting and administrative system. If your startup grows, you will be entering into many more daily financial transactions, you will have debtors to collect and creditors to pay, you will be hiring more people and paying taxes. Are your systems set up now so that it expands with your activity? Have you set up your tax filing system so that you are able to lodge any returns and pay them on time? Is your administrative filing and systems up to date – can you find documents you need from time to time?
I don’t mean either that initial mad plan that assumed everything would be alright (“get money, buy stuff, open doors, make sales”) or the other visionary plan that made you feel confident (“we will become the biggest and best at what we do in the world and hold quality and customer service as our key values”).
I mean a long term plan about measured steps and long term sustainability.
You should be preparing a strategic plan that sets out your long term direction, and then be breaking it down into smaller step-by-step annual business operational plans. At this stage of the startup you need to know where you want to be in the long term, and what exact steps you intend to take in the short term to get there.
In particular you need to include in those plans a financial plan (cold-headed forecasts and estimates of budgets) so that you can plan your spending and expansion instead of hitting a brick wall without sufficient finance. An annual budget is critical, and best if backed up by a longer term (3 years) forecast.
You also need a marketing plan. Although you expected the world to beat a path to your better mousetrap, it will only do so if you market it properly. You need to know who is your target market demographic (millionaires don’t buy mousetraps, their housekeepers do) and what benefits your product will bring to them. You then need to design your packaging and placement in the right places to attract that demographic, and you need to promote your product through the most appropriate channels – and pay for it. This takes planning.
3 Hire and delegate
You are probably at the stage where you realise you cannot do it alone.
To expand a startup to become an established business, you grow through delegation. A one-person manager, bookkeeper, salesperson and chief bottle-washer will find that in one day they only have the time to write two cheques, talk to one potential customer, and wash three bottles. If you hired three people, you can be manager while the bookkeeper records 100 transactions that day, the salesperson makes 20 sales calls, and the bottle washer washes 200 bottles and makes the tea for all of you. It’s called delegating, and delegating leverages your time.
But before you hire and delegate, you need to ensure that everyone knows what they are doing, so you need to have drawn up an organisation chart showing what each person does and who they report to. You need to have recorded the way you do things into a “procedures manual” so that you don’t spend all your time instructing the bottle washer every day on how to wash different shaped bottles.
Organise it right the first time and everything flows.
4 Secure your markets, open new ones
It’s an iterative thing – you can’t really leverage your sales because you don’t have the time; so you hire staff; and now you need to make sales to pay for the higher expenditure.
Well, that’s called a growing business. You need to do step 4 as you’re doing step 3.
As your business grows, it’s no longer enough to trade off the old relationships you have with existing customers. You need a system. This can be a formal CRM (Customer Relationship Management system) or it can be simply a schedule of regular customer contact and acting on feedback. Your most important task is to protect your customer base so listen to them – regularly.
Then you need to expand your customer base. Marketing (see step 2) will help of course, but you also need to be proactive and be aware of new opportunities and new markets. You can find new markets by entering a different geographic market, changing your product to appeal to a different demographic of customer, or by providing related products and entering the vertical market.
5 Product and quality
And that brings us to the fifth step which is all about ensuring that you have what your market wants.
You need to continue developing and innovating so that your product changes with the market, according to market needs. You need to develop or find new variations of your product to fill gaps where your original cannot go. You need to find related products so that your customers’ growing needs are met by you and not a competitor.
The demand for your product is based on fulfilment – does it fulfil the needs of your customer? It will do so if it meets their needs, but even if it does it probably has competitors which also do, so fulfilment is also about customer service and the quality of your product. Make sure both are 100% and getting better!
To establish your startup, you need to work at it. Successful businesses know that they cannot rest on their laurels, if you want to grow.
To find out more about growing your business, go to teikoh.com and find thousands of dollars of business ideas for free.
If you don’t want to miss out, click here to subscribe and we will make sure that every new idea and tool for creating strategy, showing leadership, and growing your business is sent directly to your inbox.
If you have a great idea and you are thinking of starting your own business, click here to see my step by step system on starting your own business.