Start-up without external funding!! Is it Possible? How?
Now that the external funding is drying up and most of Start-Up entrepreneurs are boot strapping. I touch upon some of the basic fundamental points which have been forgotten in the race to pitch for external funding at higher valuations.
I believe it is possible to create a successful business without raising money. How?
Three fundamentals to prepare yourself to start up your business without approaching Investors.
(1) Identify the “Right Opportunity”
(2) Follow “Four key business principles” from the beginning and finally
(3) Identify & Understand your “Capabilities”
1) When you’re starting, the identification of‘Right Opportunity’ is a key first step – a skill I think is something that can be easily learnt
- Evaluate your “Target Market” thoroughly
- Identify “The Pain” area that needs solution
- Figure out “The Potential Solutions” to “The Pain”
- Then try to “Innovate” these potential solutions by creating a simple & strong product for it
- Finally build your business plan to “Create a Commercial Value”for your product
2) How do you identify that you have been able to “Create a true commercial value” for your product?
Asses yourself, your product & your business by asking these questions to yourself about “Four Key Business Principles”
- What is my product?
Describe your product in one sentence, Keep trying until you have the most logical description!
- What’s the material benefit of my product to my target market?
Describe some key values & benefits that your customer can easily identify himself. If you cannot, keep trying!
- Who is my target customer?
If you cannot easily identify your target customer, try again!
- How do I make money?
If you cannot clearly define HOW you make money, try again!
I often come across quite a lot many entrepreneurs who keep forgetting these key business principles and focus on wrong areas by
- Trying to develop a technology to fit a need that doesn’t exist or doesn’t add any material value
- Under estimating the difficulty with launching a consumer product with limited marketing capability.
- Get over passionate/ over confident by the successes of companies like Facebook, Flipkart, Amazon etc… and forgetting about these basic business principles
3) Identify & Understand your “Capabilities”
To run a business you need a complete capabilities for covering all aspects of the business. Though we all know that it is unlikely that one person will have all the capabilities to run his business, so identify your weaknesses & limitations. Identifying what you can do and focus on filling in your capability limitation gaps. This can be achieved through identifying your co-founders, hiring or outsourcing it to experts for specific tasks.
And your budget will guide your decisions here. Whatever you do, be sure to own your capabilities which hold the most value to you and your business. For example, for any business a CFO plays a very important role to steer the business in the right direction, & if the business does not justifies a full time services, you may start with outsourcing it to interim CFO services providers.
After you’ve successfully executed the above three areas – Now think strategically and create the “Stepping stones of startup growth” – How?Challenge your business model and break the business’s growth into stepping stones by defining your obtainable objectives that unlocks the next level of growth.
Now you’ve got your super road map and plan – its Implementation time!!
- Utilize your network– Start by approaching your friends, family and social/ professional contacts
- Remember to keep your burn rate as low as possible and stay lean– work from home, work in shared office space, use interns, outsource wherever possible. Close grip on your cash flow forecast is the most important part of the business
- Identify & focus on the value add and outsource the rest.
- Be different and think creatively with a business mindset– in the midst of a growing pace of innovation, constantly innovate to set yourself apart from the crowd.
- Sustainable growth – the easier it is to do what you do, the easier it is to lose. Think about building entry barriers to business. This is not just about getting your trademarks/ patent etc. but also about like negotiating exclusive contracts with your bigger suppliers or even customers. Think about how you in your industry can start to build barriers and promote sustainable growth for your business.
Two final take away points.
First, If you’re starting out – challenge your assumptions, your choice of industry, client focus and product – in a noisy and competitive consumer market with big players spending millions to attract new customers, how will you make an impact?
If you are trying to develop a disruptive business model for a niche application, and have created barriers to entry and identified a major client which could be approached on equal terms – make point for a face to face meeting with the key decision maker. It doesn’t matter how big or small you are in this scenario – you can control a meeting with a CEO and speak on his level to unlock a profitable contract – much easier than trying to get the same out of thousands of small customers.
This will allow you to stay small, keep your burn rate low, remove the need for external funding – whilst operating at a professional level – until you are able to generate significant revenue to reinvest in the business.
With a little strategic thinking and a sprinkling of passion in what you do, perseverance and attention to detail – you can make it!
All The Best……..