When you are planning for your own Startup – Part II

In this second post in the series , we will address WHAT stage of planning a venture .

Value Proposition

What

When you decide to your own startup , it is sort of implicit that you know the business you are going to do . However , it may not always be the case . Every great enterprise started with completely different vision and idea . Be it IBM , Google , Apple , GE , Flipkart, Facebook and many more . In some cases the broad ideas remained same but in many cases , the company evolved rapidly from the vision of founders and by the time they hired their first employee .

In today world , one needs to become specific on what they want to do . Starting with a generic idea to start a venture based on your work experience or to build up on talent say to bake awesome cakes or to start a AI based tech company to achieve efficiency in a production plant, is not enough.

Let us take an example of launching an adtech start up . The industry is changing at a blazing fast speed . New tech is emerging every day , Behemoth of baby bloomers era are looking for survival . Agencies are changing their models , consumers are becoming aware of privacy , antitrust suits are order if the day and advertisers are becoming smarter by the hour . What could you possibly launch in such a cut throat environment with challenges that question every plan of yours at each step?

Value Proposition

There a few global companies that control the digital advertising . Google , Facebook , Apple, Amazon , Thetradedesk and some more . It takes a deep contemplation to put your value proposition together .

For example

  • Will you focus on sell side on buy side ?
  • Will you provide technology or service ?
  • How will you build and acquire your basic tools like an adserver ?
  • How much should you spend initially ?
  • What capabilities you need in your team ?
  • Will you work alone or do you have cofounder(s)?
  • Will you bootstrap or raise funds ?
  • What is your proposition and how it is different for someone to invest in your venture ?
  • What will you give in lieu of investment ? And many more ..

Best will be start with a cofounder whom you can trust. If you have known each other for long time and are aligned on the Common goal , it is usually the best .

Having a co-founder is very important for many reasons :

  • Moral support
  • Strategic support
  • Voice of dissent
  • Encouragement and hope when you are dealing with challenges
  • Division of labour
  • Developing strategy and planning
  • Risk mitigation
  • Connections and networks

Business Plan

Your business plan should be the first thing to do before you spend a single penny towards your business . A well planned start take cares of many issues that you might face otherwise , makes you wiser on spending and improves your chances of success many fold.

Sit down with a pen and paper . Start listing what will your business do. What expanses you would need ? How will you generate revenues ? What time frame are you looking at to recover costs and break even ? When will you turn profitable .

Learn the basics of financial planning

  • Developing a Profit and loss statement
  • Assets and liabilities
  • Capex and Opex
  • Balance sheets
  • Cash flow management

Cash Flow

Most basic concept is Cash flow . Is is understood that if Cash is King, Cash Flow is Queen. Your business should start churning revenues in a defined time frame as per your plan . The sole objective should be to turn cash flow positive in shortest possible time .

Cash flow positive doesn’t mean that you are profitable by any stretch . It just means that you are making a small surplus over and above your operational expenses . Like infra, wage bill or salaries , office rent , incremental expenses like office supplies , travel , internet , raw material and any other expenses that your call as cost of doing the business .

It is also true that many business like Amazon were loss making and turned profitable over a period of 10 years but continued to attract investment from VC and investors . This happened due to people’s belief in the business model. But that is not the case 99% of times .

Until and unless , your business idea is path breaking and current cash flow positive stage is not defined or viable , you will find extremely hard to raise funds . Despite such situations , you should not dip into funds allocated for family . This risks multiple lives and futures just for your belief , which may not be a healthy outlook .

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