From student to CEO
How difficult (or easy) is it to start a new company? What are the steps you should take in order to get new business going? As it turns out, while being difficult, nothing is impossible; follow your vision and stick to it.
With our network of connections growing (yes I will be mentioning this all the time) and having learned how to go about a patent and possibly building a prototype for our solution, it is time to learn and figure out how to structure our business.
While the work on my patent was in progress, I had to figure out how to structure a real operating business. Not having done anything like this before, the internet became my second best friend as all the answers have been present in various forms online. You are looking for information on a business plan, as that is what your investor(s) (yes we will cover finding and talking with investors) will be asking for. Your business plan is a document that contains vital information about your business, such as company overview, industry and customer analysis, marketing plan, operations, management and the financial plan. If you don’t know how to structure such a document don’t worry, there’s a template at the end of this chapter that I have used for my own business plan.
When you will be pitching your idea/project to your potential investor, they will have many questions that you will have in this document, and many others that are not included. Your investor will be risking giving you their money and your job is to show them how prepared you are — show them that you are the best person or team to do this specific project that you need their money for.
Doing online research is quite easy; you sit in front of your computer screen, search for information in your favorite web browser, evaluate quickly if the information is useful, take notes and move on.
I browsed a lot of different websites, looked at strategies on how to structure such a document, saw many different templates and at the end of each day I still wasn’t sure how to structure such a document properly.
It was my good friend William, whom I invited for dinner and lunch several times that showed me a template he had. William was working as a CFO at his company and was also in the process of setting up a company of his own, so he already had a lot of knowledge and insights in this area. I first presented him my idea of the whole project and he was quite intrigued. I even asked him if he was interested in investing in it and working with me, although I just simply wasn’t at the stage of asking for funding. Don’t ask for possible investment at the wrong time. Once you are unprepared, it is difficult to go back and ask the same person for funding again. I did ask William I believe 3 times in total, although it wasn’t a real ask for funding, and it’s just weird with each subsequent time; be a professional.
William showed me how to structure a business plan, what information is necessary to have, how to create a solid financial plan, what to watch out for and gave me lots of pointers and strategies.
As we are in the summer of 2019, I’m putting in all this information I am researching online (and some in person) on the sport industry and my competitors. I am learning what similar products cost, how they work, how many users certain companies have, how many downloads do they have, how they operate, what their business model is; always keep coming up with how they work and how they do things. The more information you learn now, the less you will need to learn later when you are really working on your product and marketing possibilities.
Make sure you spend enough time learning about your potential and current customers. You need to know who you are targeting — not everybody will be interested in your product and you can’t satisfy everybody. Doing customer research will vary a lot depending on the project you are doing. Getting certain statistics can be easily done online, especially if there are solid documents and research done on the topics you are looking into. However specific topics can be difficult to research online, as perhaps the statistics you are looking for have many variables that make such research very complicated.
Search for the number of users to your problem and look for the current solutions. Imagine you are building a new type of bike. In this case I would be looking at how many people use bikes and how often, what an average price of a bike is, and how many bikes are made yearly. How many categories of bikes are there, how many people use those specific bikes. What are the countries with the most bikes per person, where do people use bikes the most? How often do people replace their bikes? How often do they repair their bikes, how many bike shops are there? In other words, really study the market so that you can not just validate that there is potential business here, but also to validate that users might be interested in what you have to offer.
Now that you are doing your study online, it is also time to go into the real world and talk to your potential users. I used to go to the table tennis club where I used to play and just talk to people there. I tried several different approaches and figured it all depends on your style and preference. You can engage people with a pen and notebook, record your conversation or hope that your memory is good and that you will remember the details as they happened and not ‘fabricate’ the details by yourself.
My personal preference was to come to a total stranger, be friendly and through a friendly rapport start asking them questions about table tennis.
I never disclosed that I am working on a new product as I wanted them to be completely unbiased in their answers and I wanted to learn about their habits and their individual personalities. Keep a journal at hand so that you can write the information down quickly and later put it into a spreadsheet to keep your data organized.
After this meticulous process I did marketing research, which was the easier part, mainly because you already most likely have a rough idea how you want to make money with your project and have a general idea how you want to promote it. Keep in mind that you will be updating your document (at least I have) many times over and over again as you will learn new information. It will become annoyingly painful to always keep coming back to this document, making changes, saving it again and again, sometimes only because you just found out a new person you want to show it to or because you need to submit it somewhere (perhaps immigration lawyer; yes we will get there as well).
Make sure you document your management team well, as your team is the core value you have to offer. It is not just you that is behind your project, but it is the whole team that you have. You will be convincing your potential investor why he should be investing their money into you; when in reality perhaps they could just hire someone else to build your idea and just reap all the rewards themselves. The answer to that is quite simple; you have done all the research, know all the problems and the solutions, you have planned and figured out the perfect strategy.
Making a financial plan can be quite tricky, as there will be costs that you simply don’t know about at this time. Most of these may be estimates since you may not yet know exact costs of everything, so it could be tricky to have a proper argument with an investor. However, use your research and your best judgement.
There are two numbers in your financial plan that you should be aware of: the minimum required funds you need to execute your project, and the optimal funds. The minimum is quite easy to figure out, but will be the most difficult to pull off as you will be extremely cautious with every dollar. This can ultimately slow your progress, which in turn will cost you more money and can lead to a hard stop to the whole project. The optimal funds are trickier to argue for when you are pitching to an investor, simply because you are asking for more money and will be arguing for a case where you are not certain of specific costs because things may not go as smoothly as you would want. This was (and is) my case, where the initial plan to build a complete project was 8 months, and 8 months after the start we are not there yet.
You need to progress as fast as possible. If your initial funding runs out before you can start generating income, your project and your vision stops. You cannot let that happen, ever.
Certain delays however will be out of your control; such as Covid for example. A short 1 week delay from a possible vendor could delay other parts of your project, and things will just naturally accumulate. You as a CEO need to be aware of possible issues before they even occur and instantly figure out solutions and pivot if needed.
Whatever price you think you will need in order to pull off your project, from experience I strongly suggest you to at least double it.
Most of your costs will most likely be spent on crucial employees and their salaries and you will have to argue with your investor why these costs are necessary. It may not be a pleasant conversation, but you know exactly why you need your team; you need to be sure they can pull it off and are not here to hire some freelancers or contractor who most likely will be able to do the same work for half the price, but would give you a half assed solution that will need to be redone.
While you are and will be working on your business plan, next time we will look at how to work with vendors, freelancers, contractors and how to set up your contracts with external companies.