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