Finally Starting Your Business This Year? Here’s Your Ultimate 12-Point Checklist
You’ve had the idea for a while. Now is the time to act. This startup guide will get you up and running fast.
PHOTO CREDIT: Getty Images
It's 2018, and you are really doing it. You have long imagined your product on the endcap at Walmart and practiced what you'll say when Mark Cuban grills you about your competitive edge. But this year, you are finally launching a business. Where do you start? We asked some of the top business minds what you should do in the first 90 days, a crucial time in your business's life. Get these early steps right and you'll create a sound foundation for a profitable, growing business.
The likelihood that your startup will be profitable is influenced heavily by the speed at which you launch. The number of tasks you do in those early months is more crucial to success than the type of tasks you do, although anything involving customer contact helps, according to the Panel Study of Entrepreneurial Dynamics, which tracks samples of new entrepreneurs. "Those implementing more startup activities faster are more likely to see profits," says Paul Reynolds, the study's coordinating principal investigator.
Beyond the specific tasks that PSED examines--things like developing financial projections and obtaining supplier credit--startup activities tend to fall into two categories. The first is open-minded discovery. Initially, everything is assumption: financials, customers, go-to-market strategy. The only thing you know for certain is your own strengths, and even there you may be surprised.
This exploratory approach is at the core of Lean Startup. It is responsible for the disdain, in some quarters, for business plans. It is behind what's called "effectual entrepreneurship," a research-based approach that considers launching a business to be largely an act of improvisation.
The second type of startup activity recognizes that entrepreneurship is social. Doubtless you have lived with your idea for a long time. Now that you're launching, you have to get out of your head. Figure out whom you will draw on, in what capacity, and how those relationships will work. Input from partners, advisers, potential customers, and others brings new perspectives and shape to the enterprise. Networking is like raiding the fridge: seeing who might offer you warehouse space or logo-design services or an introduction to a potential customer.
To help you fulfill this most exciting of New Year's resolutions, we compiled a list of the key steps you must take in your first 90 days.
1. Walk a mile in your customers' shoes.
The idea behind minimum viable product is to get your offering as quickly as possible into the hands of customers to generate feedback. But first, you have to make sure you are solving the right problem. Market data and surveys won't tell you that. For those insights, you have to get as close to the customer experience as possible. Doing so before you commit to a solution may save you a lot of frustration. --Leigh Buchanan
Jon Kolko, founder of the Austin Center for Design and author of Creative Clarity: A Practical Guide for Bringing Creative Thinking Into Your Company, says:
"Your first job is to know your customer. Not just who she is but also what she wants, what she does, and how she feels about what she does. That means embedding in customers' lives or work.
"Ideally, you will develop a kind of master-apprentice relationship, in which you are the apprentice. Ask the customer-master to let you observe her in action. Even better, have her take you on a tour of the relevant section of her world. Reach out to friends and family on Facebook for permission to watch them do laundry or winterize their boats. Or ask potential customers if you can spend time in their offices or on their factory floors.
"Once there, ask open-ended questions about the experience and workflow. Can you show me? Why? Can I try that? Maybe the answer to that last one is no. But if it's yes, think how quickly you'll build empathy with the person who does it all day long, whose life you are trying to improve.
"This process provides a pragmatic understanding of pain points and an emotional context that lets you see things through your customers' eyes. Simply interviewing them isn't enough. People who do something repeatedly may develop a kind of expert's blindness that leaves out or obscures critical parts of their descriptions.
"You should still do this even if you think you already know how you will solve the problem. Go in with an open mind. Don't be a hammer on a nail hunt."
2. Lead with your competitive advantage.
Arianna Huffington, co-founder of HuffPost and founder and CEO of Thrive Global, says:
"For both HuffPost and Thrive Global, the first question was 'What problem are you solving and what are you bringing to the market that's not already there?' For HuffPost, the answer was a destination website where both well-known and lesser-known people could share their views on the news of the day or on culture, entertainment, and every aspect of life. Blogs were around, but they were not yet widely respected as a way to express views and communicate. Before we launched, I emailed every person of note I knew and said, "If you have a thought and you can interrupt your day for 10 minutes to share it, send it to us--we'll post it and make it incredibly easy." Within the first week, we had Larry David, Ellen DeGeneres, Walter Cronkite, John Cusack, and many more. A lot of these people could've written an op-ed for The New York Times, but the difference was with us, it didn't have to be a heavy lift. We wanted their real and unvarnished voices.
"We made a commitment from the beginning to be both a platform and a journalistic enterprise in a way that no one else was at the time. We also created a dashboard for our editors where they could see how a story was performing and do A/B testing with headlines. People talk about content platforms all the time now, but when we started, that was a new proposition." --As told to Sheila Marikar
3. Line up your mentors.
New founders seek copious feedback on their products or services. But getting the business itself right is just as critical. To do that, you should develop relationships with veteran entrepreneurs. Although it's too early to be thinking about a board of advisers, setting up a kind of proto-board comprising folks who've been there and done that will help you head off mistakes. --L.B.
Nathaniel Ru, co-CEO of Sweetgreen, a healthy, fast-casual chain with 83 restaurants and 4,000 employees, says:
"In the first days of being an entrepreneur, you need guidance and advice from other entrepreneurs. They'll tell you if you're on the right track. And they'll compel you to think beyond your immediate survival to the company you want to have two years from now.
"At the very least, you'll want an experienced eye to look over your business plan, if you decide to do one. At Sweetgreen, our mentors (the three of us each had three to five) asked a lot of tough, helpful questions--about our financial model, our brand positioning, our restaurant design, and more.
"But they also urged us to look up from the frenetic day-to-day activity and think more long term about our mission and the language we'd use to communicate it. They started us thinking early about the kinds of people we'd want to bring on board one day, so we'd be able to spot great talent even if we weren't ready to hire.
"University faculty often make good advisers (many business school professors have previous entrepreneurial experience), and you can meet people through entrepreneurship organizations and conferences. You can also just email someone you admire. Save up your questions and ask them all in a weekly or monthly conversation, so you don't pester anyone. And when you do talk, don't just talk about the business. This isn't a transaction. It's a relationship."
4. Go where opportunity points you.
Richard Branson, founder of Virgin Group and author of Finding My Virginity, says:
"When I began, I didn't know anything about business. I was excited about starting Student magazine, and then we had the idea to use the publication to sell music, too. I didn't create a formal business plan. That seemed really boring to me. I just thought about the high cost of records and the sort of people who bought Student; we believed we could sell cheap mail-order records through the magazine. We made enough money from mail-order to open a record shop.
"In 1971, music retailing in the U.K. was dominated by WHSmith and John Menzies, which were both dull and formal. We decided Virgin Record shops would be where people could meet and listen to records together. We wanted to relate to customers, not patronize them, and we wanted to be more affordable than our competition. Word of mouth spread, and people came to us rather than the big record stores. Cheaper records brought in a flood of inquiries and more cash than we'd ever seen. Virgin Records became very hip. People would stop by, lie on beanbags, meet friends, and listen to the best new music. There was no better place for a self-respecting 21-year-old to be. We aimed to open a shop every month in 1972.
"We soon realized the industry was ripe for further disruption. There was nothing overtly rock 'n' roll about the way artists were treated or records were produced. So we bought a property, the Manor, turned it into a recording studio, and launched our Virgin Records label in 1973. Mike Oldfield was our first artist. His album Tubular Bells became one of the biggest sellers of the decade and the soundtrack to The Exorcist. The Virgin brand and its global impact today all grew from those roots." --As told to S.M.
5. Stress-test your assumptions.
Numbers are beguilingly concrete. It's natural to want stats on markets, pricing, and competitors from the start. But market data would not have explained why Red Bull charged while the "lava lamp" soda Orbitz succumbed to gravity, or why Instapot commands twice as much as Crock Pots at retail. More important, in the very beginning, are insights about your own proposed business that you achieve by stress-testing your assumptions. The emphasis is on what you can learn not about your industry, but rather about your idea. --L.B.
Randy Komisar, partner at venture firm Kleiner Perkins Caufield & Byers and co-author of Getting to Plan B: Breaking Through to a Better Business Model, says:
"Start with the history. No matter how disruptive your idea, precedent exists for it. So once you've identified your value proposition, go back and look at real companies that have done something at least roughly similar. You'll want to find examples that have been successful. (If none have been successful, you should seriously question whether this is something anyone wants.) Study them and draw lessons about what worked. Then, research companies that tried something similar and failed. What did they do wrong? How do you avoid those mistakes?
"Next, identify your leaps of faith: what you don't know but assume about the market. These are things that, if they are wrong, mean you don't have a business. Devise quick, cheap ways to test those assumptions. Run a Facebook ad and see how many responses you get. Go stand in an aisle at Whole Foods next to a competitor's product and question shoppers about it. What do you like and not like about this product? What would you do to improve it? If I offered you an improved version for $1 more, would you buy it?
"You will do market research, but that comes later. Before trying to figure out how big your market is, you need to know that people have accepted and will continue to accept the gist of your value proposition. Otherwise, you'll be piling assumption on top of assumption."
6. Be creative about getting your name out.
Payal Kadakia, co-founder of ClassPass, says:
"One of the crucial things that we had to figure out when we launched our product was how we were going to reach our target audience. Most of the fitness market was targeting performance athletes. It was about results. Our platform was about discovery and education, and we thought the average Lululemon shopper might identify with that.
So, over the first year, we gave out $100 Lululemon gift cards to get people to commit to a ClassPass six-month membership. We also had a one-month subscription option, but it didn't make sense to give away $100 for a plan that cost less than that. We started the campaign at the end of 2013, and at that point, people didn't even know what ClassPass was--they were just excited about getting $100 to spend at Lululemon. But they became our ambassadors, and that helped start virality for us. Over the course of about six months, we gave out about 500 gift cards. We had no rank, and no clout, so we had to find a way to get people to know who we were so they could fall in love with us." --As told to S.M.
7. Cautiously harvest low-hanging money.
For most founders, banks and professional investors are later-if-ever capital sources. In the beginning, it's you, your family, and friends. Self- and personal-circle funding requires you to jump through fewer hoops than other sources. But it is almost always more fraught, and in some ways the risks are much greater. --L.B.
Meg Cadoux Hirshberg, author of For Better or for Work: A Survival Guide for Entrepreneurs and Their Families, and who is married to Gary Hirshberg, co-founder of Stonyfield Organic, says:
"In all the euphoria of a startup, it's easy to discount that you're putting your family's financial well-being in jeopardy. People talk about entrepreneurs starting their businesses with "personal savings." But those savings are often held in common with a spouse, who may have wanted them for vacation or to draw on while he returned to school. The spouse is also affected if the founder leaves her job and a chunk of the family's income disappears. Even if the founder is nonworking, she may have been responsible for child care.
"You and your spouse must determine on day one (if not before) how much you can afford to invest and how you'll make up lost income and maybe benefits. Schedule regular business meetings between the two of you. And when the business needs more money than expected, you should resist pushing too far beyond your spouse's comfort level. Another $25,000? OK. A second mortgage? No.
"When pitching friends and family, be confident but also lay out the worst-case scenario: "I don't know when you are going to get this back. You may lose it all. I may need you to up the ante in order to prevent dilution." Insist on drawing up shareholder agreements. Explain that you're doing so because you care about the relationship. There should be no ambiguity, no cause for recriminations. Don't take advantage of their eagerness to help. They may offer to dip into college or retirement funds. Don't let them.
"Your investors' hope is that this launch will be an exciting and profitable ride. Your role is to be the sober designated driver and bring everyone home safely."
8. To excite investors, focus on the big picture, not the details.
Philip Krim, co-founder of Casper, says:
"When we started to raise money, we were told no dozens and dozens of times. We were really focused on the specifics and also trying to get every part of our story into the conversation. With early-stage fundraising, you're lucky if you get 30 minutes with someone, and all five of us founders were talking about our expertise, our pricing strategy, the product we were going to build. We learned to take a step back and say, "What's the vision we all share?" It was creating the world's first sleep brand and changing the way people buy sleep products. You don't need to tell your entire life story in an investor pitch.
"Early-stage investors get excited about hearing your story, and how you're going to change the world and why, as opposed to your saying, "Tactically, here are the next six steps we're going to do, and this gets us to launch." That tactical conversation--you need to have a keen grasp of it, but it's not what sells the dream. It's important to build your 12- or 18-month projection and build a spreadsheet that shows a driver of the business, but ultimately the only thing that's certain is that that spreadsheet probably won't be right, so the only thing they're betting on is you as the founder.
"So as we were figuring out how to focus more on the big-picture vision and not get so much into the weeds, Red Antler, the agency we'd hired to create our branding, made an introduction to Ben Lerer. He and his team got our vision." --As told to S.M.
9. Forge a functional founding team.
The hang-together-or-hang-separately adage applies to startups, only one in six of which is a purely solo venture, according to Reynolds. There can be just one page. You and your co-founders must all be on it. Though equity stakes are on everyone's mind, at 90 days that discussion is premature. But you must clarify roles, expectations, and responsibilities, and then revisit those repeatedly. --L.B.
Phillip H. Kim, associate professor of entrepreneurship at Babson College, says:
"It's rare that all founding partners are equally committed. How much time each will invest, what opportunity costs each will accept, and the level of ambition each has may differ. That's especially true if one founder had the original idea and brought on the others, or if one founder devotes himself to the business full time while his co-founders hang onto their day jobs. You should all acknowledge disparities up front and address them to avoid disappointment.
"You also need to hash out how you will work together during the first 90 days. Over the long haul, Bill will handle sales and marketing while Marla does tech and Kathy handles finance. But a startup's first days are chaotic. Everyone does everything and may switch roles on a dime. In particular, people coming in from senior positions who are accustomed to structure may struggle in this volatile milieu. Establishing temporary--possibly shared--roles for the first few months is wise.
"Finally, you will need to decide how to decide. Even if you have known one another for years, it is unlikely you'll have made these kinds of high-stakes decisions together. What will be the decision-making model? Consensus? Democracy? Is there a third party to break a stalemate? It's best to designate a single arbiter for each type of decision."
10. Find ideas in inefficiencies.
Pierre Omidyar, founder of eBay, says:
"I have always been interested in what drives financial markets and the idea that transparency and access to information create an equal playing field for regular people. Ultimately, if everyone has access to the same information, goods and services will trade at fair value. With eBay, I saw a real opportunity to create a place where we could bring the power of an interactive and egalitarian marketplace to the general public.
"This idea of a level playing field became apparent to me when I had a little bit of extra money and had decided to invest in a gaming company called 3DO. I called my broker and said I wanted to buy into this IPO coming to market--the fact that the first step was having to get on the phone with my broker says something. The IPO went public at $18 per share, but I had to pay closer to $24. This seemed kind of imbalanced, and when I put it together that individual investors can get locked out of our most efficient markets, I began to think more about how this applies to other areas of commerce. In the end, one great thing about eBay is that we tied the company's success to our constituents' success. We wouldn't make a dollar unless our sellers did." --As told to S.M.
11. Make them pay for something.
For entrepreneurs, this may be the greatest shock: Within 90 days, you should be pursuing sales. It's not about the money, although money is nice. Rather, selling is the best possible indicator of whether someone wants what you're making. The challenge is getting creative about what, so early in the process, you are able to sell. --L.B.
Craig Wortmann, founder and executive director of the Kellogg Sales Institute at Northwestern University, says:
"On the first day of your company, your only product is you. You can sell that. You can sell your time, and you can sell the knowledge or insight that will eventually power your product or service.
"I know the founders of a company that, years ago, was developing an app to help high school athletes optimize their choice of college. They did what most founders do: went into their cave and worked on the product. And when they finished, people looked at it and said, huh. Instead, the founders should have offered to sit down with students and their parents and, for a price, build spreadsheets with all the variables they meant to include in the app.
"Doing so would have helped the founders hone their sales message, focus their value proposition, and develop sales discipline. It would have also earned them candid, reliable feedback. Just because somebody is willing to take something rudimentary from you for free is not proof you have a customer. But when someone commits financially--even at a major discount--that person is serious. And he or she is going to evaluate your product or service much more critically. That's the kind of feedback you need.
"You can also try to get upfront sales, though that's a risk if you can't deliver. Still, people are getting more comfortable with that model, thanks to Kickstarter and Amazon. Offer a deep discount because they're willing to sign on early.
"Selling is the best indication that you have a viable business. A yes is great. No is fine too. That tells you to move along."
12. Don't pull the plug on learning too soon.
There are things you should do in the first 90 days. Other things you should postpone, like trying to raise money for your product on Kickstarter or another crowdfunding platform. The money is tempting, but why ask people to fund something you don't know is the right thing to make? --L.B.
Steve Blank, Silicon Valley serial entrepreneur and Stanford adjunct professor whose customer-development methodology launched the Lean Startup movement, says:
"Kickstarter and Indiegogo are world-class inventions that changed the nature of funding for startups. But don't use such platforms prematurely. If you're trying to crowdfund your initial idea, that almost guarantees you are working on the wrong thing.
"New entrepreneurs misunderstand what Kickstarter is for. They think it's a way to do customer discovery, to test their product's appeal. In fact, going on Kickstarter freezes customer discovery in its tracks. The minute you commit to Kickstarter, if you get funded, you are entering two years of indentured servitude until you deliver that product. The money isn't worth the sacrifice. Instead, do the hard work of customer discovery, which will likely take more than 90 days. Potential customers should be grabbing your minimum viable product out of your hands and writing a check on the spot. Once you have a product you know solves a real customer problem, then Kickstarter can help you scale demand.
"Kickstarter before customer discovery is the lazy entrepreneur's approach to starting up. Don't be a lazy entrepreneur."