In the initial post in this series, I suggested a step-by-step process for launching a business. This post will focus on the first post of two posts on Step 4 – Launch, where we lay out the requirements to fully launch the opportunity you’ve decided to pursue. (See Part 2 and Part 3 for other posts on the process).
Launching the Best Opportunity
In this phase, you are prepared to launch the best opportunity that was fully vetted in the earlier steps of Define, Generate, and Evaluate. If the idea passed your evaluation criteria with flying colors in Step 3 – Evaluate, you should have full confidence to move forward with the Launch phase, which will require considerably more time, resources, and risk. Most startup ideas fizzle out at this stage, but if you keep at it (and with the Lord’s blessing), at some point you may reach a “burn the ships” moment where you need to commit full time or bring additional resources to bear as your business plan gains more traction. The goal is to begin your business while never losing sight of the target customer and their unmet needs. There are at least four core requirements for a launch, and there are various methods of pulling it all together (we will cover the various methods in Part 5 in this series).
Core Requirements for Launch
You will gain much valuable insight with your attempts to land initial customers and this should be an iterative process of trying, failing, learning, adjusting, etc. As with the army artillery, you should find yourself in the mode of “fire, adjust”, “fire, adjust” for a period of time prior to getting to the “fire for effect” with all of your guns (read resources). These are the critical aspects of launching and you will need to push forward on all four simultaneously and iteratively as you gain more information and responses from the marketplace:
- Offering platform – Determine how you will be delivering your service or producing your product.
- If a product company…How will you create your product prototype and how will you get it tested to gain valuable early feedback?
- If a service company…How will you deliver your initial service engagements and how will you get feedback from your test customers?
- What partners or suppliers will you rely upon to successfully deliver your offering?
- What negotiated supplier agreements or strategic alliances need to be put in place?
- What infrastructure can you leverage from larger organizations that allow you to launch faster, cheaper, and better than from scratch (hint: never invest in infrastructure that already exists).
- Go-to-market strategy – Determine how to get, keep, and grow your customer base. In the early stages of launch, you should crave customer feedback, so even giving away your initial offering to gain valuable input will help you refine your go-to-market strategy. Based upon early customer experience, you can narrow the focus to customer niches that have the most pain, make the quickest decisions, pay the highest price, and gain the most value from your offering. If you followed our Venture Analysis at NewVentureLab.com during the Evaluate step, you should already have a good sense for customers, but here are a few highlights for this phase:
- Largest potential customers – If you haven’t already done so, call the largest potential customer(s) and directly ask them “If I offer “x”, will you buy from me?” Their response should be very insightful. Example: When I was investigating a bankruptcy processing idea, I called the judge presiding over the largest bankruptcy jurisdiction in the U.S. and asked him what it would take to outsource the process to me. His answer of “never” (related to losing several hundred jobs and him losing the next election) in part led me not to pursue that idea.
- Largest potential channel partner – Call the largest potential affiliate, distributor, or reseller to determine what it would take for them to take your offering to market. Example: A storage products client wanted $25 million of financing to build a global sales and marketing team, but instead I helped them negotiate a private label program with a large storage company that now resells their product. It was a much more efficient way to launch. (Remember: never create infrastructure where it already exists, including go-to-market infrastructure).
- Customer acquisition process – Keep track of all data to build insight into your customer: customer source, sales process timing, cost of acquisition, average price point, feedback regarding your offering, etc. Be sure to properly implement social media tools into your strategy, as a “friend’s” recommendation is one of the best, lowest-cost customer referrals available. And, since 84% of people use the web to look for local businesses and 70% of those searches start at Google, it is critical to optimize your website for effective Google search so customers can find you.
- Business model – Develop a detailed financial model of the economics of the opportunity. You will need to understand the “unit economics” of each unit of your offering, the cost of acquiring and servicing each customer unit, the cost of hiring, training, and employing each employee unit, and other key units of measure. Using those unit-based assumptions, you can then build up a credible and detailed financial model. It is also critical to understand the cash cycle timing of when you begin experiencing the costs of acquiring and servicing a customer compared to when you get paid. A detailed financial model will help you fully understand the profitability and cash implications of your business model as well as the overall capital requirements.
- Team – Assemble your team and the pipeline of those you want involved when the timing is right. This may consist of family members, employees, partners, outsourced providers, etc. Be sure to find the most experienced people possible. Ideally their experience includes having successfully done what you want them to do, in the same role, with similar resources, at a similar stage of development, using their existing network, and within the same market context. In the new virtual world we live in, it can be surprisingly easy to assemble a team on a variable basis to avoid the risk and expense of the “chunky” costs of hiring a fulltime employee. At this stage, you will only need a fraction of any one skill set, so it is far better to crowdsource or outsource as much as possible.
Join us in Part 5 of this series as we continue to explore the best method to launch. Given the core launch requirements outlined above, we will explore the benefits and challenges of various methods of launch from a rank startup to a franchise to an acquisition of an existing business.
- See Venture Academy Course #11 – Building a Business from Start to Finish for detailed video instruction.