A Quick Review
In my last column, I introduced the first step to turning your idea into an actionable business plan: understanding the four pillars of starting a business.
The four pillars can be defined as such:
- The Customer Market
If you can answer all of the key questions about these four aspects of your idea, you are ready to get started on building your business.
The First Pillar of Business: People
As an investor, you have two options or methods for how you can decide on which company to invest in. You can bet on the horse or the jockey. The horse is the makeup of the business model and the idea’s potential to add true value to its market in the long run.
On the other hand, the jockey is the entrepreneur or the founding team of the business. Getting to know them and understanding if they have the right skills, experience, and acumen is an extremely important aspect of being an investor.
So which do you go with? All investors and private investment firms have different strategies to choose their portfolio companies. From my experience speaking with angel investors and venture capitalists, it appears as if the jockey may be the most important factor in the final decision.
“Is the person that we are potentially giving our hard earned money capable of making it multiply?”
With all of that in mind, I define the first pillar of building a business as the people. I then break it down into 5 key areas:
- You…the founder
- The co-founder
- Your first employees…the founding team
- Strategic partners
Follow the activities below to fully understand who needs to be involved to make your business idea become a reality.
1. You…the Founder
Identify your professional experience, skill sets, and passions. Ask yourself the following:
- Are these facts about you aligned with the business idea that you want to build?
It’s important that you are building a business around a topic of industry that you know well. It’s also important to identify the skills that you still have to learn to successfully run a business.
- Do you know how to manage financials of a business?
- Are you self motivated and able to lead others towards a vision that you have?
- Do you have experience creating the strategy to achieve a goal?
If you’re unfamiliar with these specific tasks of a business owner, don’t let it hold you back. Instead, prepare yourself to read new books and learn from others as you grow as an entrepreneur.
As I decided to start two new companies, I spent the time digging deep into my mind to fully understand the value that I add to a start up team. I reflected on the skills that I had obtained while building Portlight and imagined how I could use them to solve a problem that others were having in the eCommerce market.
2. The Co-founder(s)
Reflect on whether you need or want a co-founder or multiple co-founders. Look at your areas of weakness and identify where you need more expertise.
While it is advantageous to own 100% equity in the company that you are starting, it’s a lot harder to build true value in the long run without all of the right skill sets. To make sure that you are doing this right, complete the following:
- What are the key skill sets that are required in most startups? Many seasoned entrepreneurs have a formula for the skills and traits that make up a successful founding team. You can view one entrepreneur’s perspective here.
- What areas of the perfect start up team are you missing?
- What skill sets would you be looking for in a co-founder(s)?
- Create the ideal makeup of your co-founder(s).
As I started eCommetize and FreeeUp, I decided to partner with two entrepreneurs that I had been working with for over 5 years. A history of working with a co-founder can create less tension as the business grows and allow for synergistic productivity. It’s a lot harder to build a company with people that you have never met before, but it’s not to be said that it can’t be done.
3. Your First Employees…the Founding Team
Reflect on recruitment, hiring, and training. While it may be 6 months to 1 year out, it’s critical that you, as the founder, understand who you’ll need on your start up team in order to reach your long term potential. It’s also important to understand the type of talent that you will need in the beginning to geographically relocate if necessary.
Here are some questions to reflect on:
- What skill sets will your first hires possess that you and your co-founder(s) do not?
- What experience in the industry are you seeking?
- How much are you going to have to pay to get what you want? Is it realistic?
- How are you going to find these people?
- What is going to attract your first hires to your company instead another similar one?
With one company under my belt, I have over 4 years of experience recruiting, hiring, and firing team members. As I started FreeeUp and eCommetize, I knew that I wanted to approach hiring slightly differently.
For both companies, I want to utilize online workers to keep costs low while growing the business. As the need for more specialized work becomes a reality, I want to continue to hire people based off of their cultural fit and area of expertise. One lesson that I learned from Portlight is that quality greatly trumps quantity.
4. Strategic Partners
A strategic partner is another business, individual, or piece of software that is required for your business to exist. A simple example from eCommetize is WordPress. We build our online stores using the WordPress content management system because it offers the most active developer community for us to customize all of our stores to our clients’ wants. Without them, our business model would have to change.
Identify the strategic partners that you will need to acquire for your business to successfully grow.
- How will you form these strategic partnerships?
- Will these partnerships cost you any money?
Caution: Be careful not to put yourself in a situation where a strategic partner can end your business. The relationshi should be mutually beneficial.
Using the questions from the third pillar of business, determine if you need an investor or if you will be able to front the initial investment. If you decide that you need an investor in order to start your business because the initial investment to reach profitability is too burdensome for you to take on, it’s time to learn about your options.
Investors come in three different forms: friends and family, angel investors, and venture capitalists. Depending upon the initial investment that you need to bring your company’s product/service to market will determine which type of investor you will need to approach.
Throughout my career as an entrepreneur, I have not had the need for outside investors. For my first company, I bootstrapped the founding of the business with my two co-founders and we reinvested the money that the business made to grow at a steady pace. However, I have read multiple books and interviewed handfuls of investors to learn more about the fundraising process. It is a feat that I hope to tackle one day.
Mission, Vision, and Values
To bring it all together, I encourage founders to reflect on the mission, vision, and value of your company. Over time, these three cultural indicators will glue your team together and keep them focused on achieving the same future that you first imagined.
As the founder, it’s your job to communicate the mission, vision, and set of values to the team on a regular basis. More importantly, it’s critical that you become the embodiment of them in human form. When you lead through the culture that you are attempting to create, your team will become more loyal than you ever could have imagined.
I saw the power of creating a values based culture as we started to expand Portlight into a 10+ person team. At the time that we decided to downsize the company, we had grown to a team of over 60 people, locally and internationally. Keeping a focus on the culture and the idiosyncrasies that we had developed as a group of people in the interview process allowed us to build a bond within our company.
The next time we meet, I’ll break down the second pillar of starting a business: the product/service. We’ll examine how to define your value proposition, who your competition is, how to differentiate, the technology necessary, a MVP, and how you can validate your idea with your market.
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