Starting a new business and making it successful is a huge undertaking and if most entrepreneurs really knew what they were getting them selves into, there’s a good chance they would never go ahead with it. Fortunately for the world, ignorance is bliss, otherwise we wouldn’t have many of the things we love and enjoy today. But this ignorance is why most startups fail and why the successful ones take much longer and more money than the startup forecast.

In this blog I’m providing the minimum first steps a hi-tech startup should follow in order to establish a solid foundation upon which it will build its business. The majority do not follow these steps and thus build products no one wants.

Step 1: The Idea
All startups begin with an idea. Not a vision or mission statement, but an idea usually hatched when the soon-to-be entrepreneur identifies a problem or gap in the market.

Step 2: Develop a One Page Business Plan
Until the entrepreneur writes down their idea, all they really have is a bunch of neurons running round her head. Until the idea is written down in a form that looks like a business, it will be really hard to attract partners and investors. So write down the idea ASAP.

Now, when the idea is written down, it needs to be kept to one page using the structure below. This is a very important exercise, as it forces the entrepreneur to be concise, thus making it easy to present their idea to other people. It also makes it easy to revise and share the idea as it evolves.
When KENOVA takes its clients through this process it uses a revised form of the Lean Canvas referenced by Ash Maurya in his book Running Lean. KENOVA’s version is based on a spreadsheet, where each item listed below has its own box.

Like all business plans, the OPBP is a best guess at what the business will look like in the future. In other words a business hypothesis that the startup will prove. Because, in reality, the OPBP is only a hypothesis waiting to be proven, you shouldn’t spend more than a few hours completing it.

One Page Business Plan Structure:
1. Define the problem (see below)
2. Who is the target customer (see below)
3. Define the solution to the problem (see below)
4. Construct the unique value proposition (another blog posting)
5. Determine the channels to the customer (another blog posting)
6. Revenue streams (another blog posting)
7. Cost to build the business (another blog posting)
8. Key metrics for measuring progress (another blog posting)
9. What are the unfair advantages (another blog posting)
10. What is the size of your target market (another blog posting)
11. Team (another blog posting)
12. Advisory board (another blog posting)

Step 3: How Big is The Problem?
This is a crucial question to be answered before spending any money or other resources such as precious time that can never be reclaimed. A problem may well have been identified, but what if only 100 people in the world care about it enough to pay for it. Even if it’s a 1,000 or even 100,000 people, there may not be enough of a market to justify building a business. But understand also, with a target market as little as 1,000 customers, a small business could be had, known as a life style business (a business only capable of supporting the life style of the owner and a few employees). It’s important to understand this before progressing further, because in order to attract private investors you must have the potential to tap into a very large market, at least millions of dollars in annual sales.

Step 4: Vision / Idea Team or Advisory Board
If possible this step should be done before Step 3, as a team can help you interrogate a market from numerous angles much better than an individual. But, the Catch 22 is that you don’t want to waste yours or anyone else’s time until the idea has been validated, especially if you have a new idea every day. So that’s why this step is sequenced after Step 3.

No matter what one calls it, i.e., Vision Team, Idea Team, Advisory Board, one should look to start building a team as soon as possible to accelerate the project. There are many benefits to this exercise, such as identifying future partners, a core from which to build a network, potential investors, hone the entrepreneur’s team building and management skills, etc.

At this stage though, a team will help to form the vision and mission for the company. They will broaden the horizon and possibly turn a $1,000,000 potential into a $1,000,000,000 potential…why not, it happens all the time.

Step 5: Clearly Define the Target Customer or Customers
Make sure you know who the customer is. This is the person who pays for the product or service. Don’t confuse the user with the customer. They are often the same person, but don’t make that assumption. The reason this is important is because you have to appeal to both the user and customer, which usually requires two different messages, i.e., 2 different business value propositions. For example, think of kid’s cereal, the message to the “user” (the kid) would be very different than the message to the customer (the parent). Also, be prepared for the fact there may be multiple customers, which means you need multiple OPBPs.

Step 6: Define and Validate Your Solution
At this stage, where the problem(s) and the target customer(s) have been identified, the startup is NOW ready to envision and speculate the solution. For example, if the startup doesn’t thoroughly understand the problem, how can they expect to truly provide a solution? And it’s essential to understand the target customer and user to be sure the solution is appropriate. For example, if your user is a retired senior, you wouldn’t want to build a phone app. Also, the senior might be the user, but their kids are probably the customer.

When building the solution, first build a minimum viable product (a solution with the least amount of investment of time and money that is sufficient for the early adopter to use). A startup is all about learning, finidng out what the customer wants, so early feedback is crucial!! At this stage we don’t mind a few bugs or complaints, as long as people want to use it. In fact, if we get a lot of RFC (requests for change), we probably have a lot of engaged users, which is a very good sign.

Step 7: Revenue Stream - How Will The Business Make Money
During an investor presentation, the most common question put to the startup by investors is “How is the business going to make money?”. I’m always amazed how many startups are unable to give a straightforward answer to such a fundamental question. How can someone ask for an investment if they have no idea how the investor will make money? It’s OK to not have all the answers, it’s a startup after all, but the startup must have a sense of where the revenue is going to come from and some idea of the potential amount.

In concluion, if you follow the steps above, this business sequencing, you’re way ahead of the majority of startups and will greatly increase your odds of success. Also, investors will see you as a lower risk than other potential investments, which may be enough for you to get their dough

KENOVA Technologies is an early stage investor in technology companies that require application development

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