Every business starts as an idea in someone's head. Maybe one in a thousand ideas actually turns into a start-up. Few start-ups succeed. Experienced lenders and investors know this, but you can still get money from them if you follow the right approach. Here is 20 years of small-business wisdom boiled down into a page.
1. If you can't write it down, or don't know how, don't start.
Lots of people want to get a meeting with my firm to get some feedback on some great new business idea. They say things like, "Can I buy you a coffee for 15 minutes?" Or, "Could you spare 20 minutes to hear a pitch?"
The only pitching we like to see is no-hitters at SkyDome. There is no such thing as a 15-minute coffee. If you want to get an investor's attention, put together a business plan with financials that don't project $100 million in sales in year 3. A tight plan and good execution, not a verbal story, get money.
2. Can you take it? Day after day?
Every business is started by uninformed optimists. Ever watched a good adventure movie like Die Hard or Lord of the Rings? Yeah, the hero triumphs in the end, but a lot of turds get thrown your way as you pass through SmallBusinessLand. Do you have the stomach for the setbacks and the obvious crow you will have to eat, like grovelling and cutting your prices way too low just to say you got a client? 3. If you want a partner, find someone who is good at what you're not.
The worst thing you can do is start a company and have some huge personal deficiency, like being incredibly disorganized or being too focused to notice a business-crushing competitor. So get a partner--not one who can do things you can do, but everything you can't. I have one of those and she drives me crazy sometimes. But I know that, in the end, we make money because she's watching the whole Swiss movement--and understands Swiss customs--while I redesign the components of the watch.
4. Figure out exactly how slowly you can make money.
It always takes longer than you think. No business plan has "Year 2: Expect major setback because of unknown fishhook planted through the start-up cheek." The more money you burn, the less you'll have left to help generate a return, so make sure the steps to profits are modest.
5. No one will give you money for a bad idea, and they'll want the moon for a good one.
If you pitch to an investor and you hear words like, "Maybe I don't understand your business," it really means, "You're not listening, and I can't wait till this meeting is over." On the other hand, if you have a great idea, a good plan and an executable strategy, the VCs will want almost total control for their money. They'll only be reasonable if there is competition. But don't bluff: VCs catch more bluffers by calling their VC buddies than in any business I've seen.
6. Big names don't make the best advisers or business partners.
We see lots of business plans with this retired big shot or that supposedly smart senior manager as an adviser. They have usually received some shares or options to have their name used. Sure, they can open doors, but so can any good potential entrepreneur willing to kick hard enough.
7. Persistence, bobbing and weaving, and luck mean more than an MBA.
Newly minted MBAs as entrepreneurs? Not likely. Modelling in Excel is not the same as having your ass kicked by customers. Listening to some professor tell you about "the theory" is nothing compared to the reality of figuring it out yourself. I'm a fan of MBAs, lawyers and other higher-ed types, but not in this arena.
8. Don't sell an "If we get just a 1% market share" story.
Every market is huge, especially if it includes China--and all big business ideas include China these days. It's almost impossible to get a little market share anywhere and keep it, so the math never jibes with the real deal. And remember, there are also more smart, ruthless and competitive people in China than there are here, and they will eventually whup you at whatever you think you're doing well.
9. Your spouse and friends can only take so much.
If you experience misfortune, spread your misery around. I've heard too many stories of loved ones bailing because of the tales of woe heaped on them.
10. If you're doing it properly, you should be going home four or five days per month hating what you're doing.
Running a great business, with all its successes, doesn't mean bliss. Every successful business owner I know loses sleep and worries, and a few days a month steps off a plane or locks the car in the driveway at 2 a.m. and wonders if it's worth it.
It is. So go start something small that will eventually turn into something big. Now!
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