Noreen Hynes B. Comm, FCA 14TH April 2023
1. Research your product
Research your product or service and see if it is a right fit for the market that it will sell and is scalable. You are wasting your time looking for funding unless you believe through research that you have a saleable product or service. That means that if it's a product, you have a prototype to test on the market and work with real potential customers to get your product right. Don't procrastinate about it. Just get on with producing your prototype. Get this stage of your start-up right before you move on to the next stage.
2. Establish what human resources you need to run the business
Prepare a skills audit to establish what skills you need in the business and what skills you want the co-founders to have, and start your search for co-founders. Don't duplicate the skills. Decide how many co-founders you need and what equity split is reasonable to offer them. Also, decide if you want to lead the project or appoint one of the co-founders as the CEO. Many serial entrepreneurs move on to other projects and don't lead the companies they founded, so there is nothing wrong with letting one of the other co-founders lead the project.
3. Recruit a co-founder
If you are starting a business with products, you will need a production person with an engineering background, a finance person, and a marketing person. If you have two skills, one co-founder with a complementary skill should suffice initially. You can appoint other people later but you need some essential resources before raising funding. This is the team to make it happen, and it can take time and a lot of patience to get this right. You must understand yourself fairly well and know your limitations when recruiting co-founders. If you expect the co-founders to work with you without pay initially, especially when raising funding, then be prepared to sign vesting agreements with them, and include safeguards in case the co-founders do not work out.
4. Prepare the Business Plan
There is little point in seeking funding if you don't have a professionally prepared business plan with financial projections and cash flows, so seek professional assistance if required. The in-house finance person should be able to prepare this document by working with you and the other co-founders. This business plan will be a living document and will be updated as you progress with the start-up in its first year or years. Start-ups develop over time, and the business plans become more refined and realistic as more information is gathered and confirmed.
5. Protect your Product or Service
When setting up a business, you must create a strong brand and protect your product and service. Educate yourself on what you need to protect your brand, register patents for your products, register the trade names, and copyright your logo, website, and promotional materials. Consult with a legal adviser specializing in this area to protect you. Investors will ask you if these protections are in place.
6. Set up a company or other structure for your business
You can set up different structures for your new business depending on which country you operate in and the corporate laws in that jurisdiction. Many entrepreneurs set up a limited company. This structure protects the shareholders as their liability is limited to what they invest in the company. Directors of companies carry a lot of responsibility, and it is important that before you sign up as a Director, you understand your responsibilities under the law. Register for tax and ensure you make your corporate and tax returns on time.
7. Commence your search for funding
Looking for funding for your start-up can be daunting and take time. Funding can be from different sources, private resources of family and friends, government bodies, venture capital companies, or angel investors. Most likely, funding will come from various sources depending on what stage your start-up is at. Starting off, you may rely on your funds and close family members' funds. Don't be afraid to rattle the cages for the first few months to help you get started, and when you get money from the funding institutions, it might be best to repay your family rather than allocate shares at this early stage of your start-up. Ensure you do not dilute shares too much at the early stages of your start-up.
8. Prepare your Pitch
Before pitching to Investors, ensure you and your team are ready, and know all the headline financials. You have one opportunity to impress, so practice, practice, and practice before the real event. Choose your presentation's headings carefully and ensure you understand what the investors seek. Will your project be a good fit for them? Sometimes investors invest in people as much as in their projects, so impress and demonstrate your passion for the project and your team members' experience. Let the team participate in the presentation as well. Also, dress to impress and be remembered because investors attend hundreds of pitches annually. You will want them to remember yours.
9. Manage your cash carefully
Cash is king. You can have a brilliant business idea but jeopardize your project if you run out of cash before raising additional funds. Timing is very important when you are starting up a company. So many things can happen that adversely impact cash. If sales are slower than expected, you are not collecting cash on time; if costs increase, and you are paying your creditors too soon, these things can cause you to deplete cash. The key is to anticipate these events, take action months in advance, and start raising funds before you need them. Don't wait until the bucket is empty, as that can be fatal. Your finance person should monitor cash daily and approve all outgoings to ensure they have a handle on cash flows. As the CEO, you need to be informed daily about cash flows. Don't be caught on the hop where cash flow is concerned, as it is the blood of any business.
10. Set the culture of your business
The activities under this heading are very important and set your company's culture for the long term. Start as you intend to continue. Write the mission and vision statement and apply the triple bottom line approach. Most entrepreneurs starting new businesses want to achieve social, ecological, and financial goals. They place as much emphasis on the environment and people as they do on profits, which is a good place to start. Establish what technologies you want to adopt to help you run your business efficiently and how you want to lead the company. Your leadership style is important.
If you get all these things right from the get-go, you have a good chance of success and should be able to grow a sustainable business. Learn more about setting up a new business in my recently published book called Start-up Checklist for Success The Essentials You Need to Know available on Amazon https://amzn.eu/d/ckhMAuP
Check out my web site noreenhynes.com
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