You have an idea for a product or a business, what’s next?
Although I will give specific ideas and steps you should take, the MOST IMPORTANT thing you do is START. The first step in starting a business is daunting and often paralyzing. In the history of the world, 100% of all accomplishments had a start, and your only guarantee is that 100% of ideas that didn’t start, failed. This is somewhat ironic because, technically, if you never start after having an idea, it’s a failure, and the prospect of failure is what keeps many from starting.
I understand being confused about where to start, I know feeling insecure about lacking experience and skills, and I understand not wanting to fail, but I don’t care about those feelings. You need to squash them and JUST START. I’ve had failures and successes, and the successes are so sweet, it’s worth it!
I’ll give you my most recent example of how I started a business and cut through the daunting complexities often unnecessarily manufactured. It’s a lip gloss company! I didn’t even know the purpose of lip gloss, and I never started or ran a physical product business or had to manage inventory. But whatever, let’s try.
The other two founders and I spent about three months analyzing the business opportunity, finding manufacturing and logistics partners, setting up the website and e-commerce system, designing the brand, and launching the business. We invested about $12,000, and almost all was spent on product inventory. Most of the value was in the founder’s time spent designing the website, creating the products, and finding suitable partners and staff.
The main point of “just starting” a business, or some aspect of the business, is to learn. The reality is no one knows how things will turn out until we see a result. Too much planning, speculation, and devils advocating are both annoying and a waste of time. For this business we put minimum effort into the brand, business setup and didn’t write a business plan for this business. The most diligent and time-consuming process was creating the products because no business can succeed without good products.
Another reason I’m so adamant about “just starting”, is setting up a business today is ridiculously easy compared to my first business in 1999. The million dollars I raised back then was barely enough. Now it can be done for thousands. Also, the technology is inexpensive and easy enough for anyone to use.
There you have it. All this initial setup can be done in one week, seriously ONE WEEK. Running a business is hard, lots of stuff breaks, and people will disappoint you, BUT this is about starting and learning.
Remember Apple, Airbnb, Google, and Amazon had a simple and small start (I’ve read all their great stories) then they built big, complex, and ever evolving businesses.
After having a great business idea, I immediately become desperate and urgent to learn if a business will succeed. For me, the only way to discover this is to launch a test balloon or miniature version of the business.
Four months ago. we launched the lipgloss business with 6,000 units of inventory. To be successful, it would need to sell at least 50,000 units a year. One of my co-founders is a celebrity, and we leveraged her social media presence, so finding customers, in this case, was easier. However, we still didn’t know if anybody would buy lip gloss in a very crowded cosmetics space, and if they did, how many would they buy.
With $12,000 and a lot of work from the founders, we successfully started and tested the viability of the business in about 90 days. It turns out, we sold out of our inventory in the first 90 days! It worked, and it’s now time to build the business. We had a long list of crap that broke, issues with a logistics company, wasted $3,000 but all of this is fixable, and we plan on going to the next step of the business, which is advertising, new products, more inventory and building the team. The business is Formless Beauty. Check it out (formlessbeauty.com).
Here are the platforms and technologies we used, and I have used them for years. It should be pointed out that all of these businesses are worth billions, and all were just ideas at one point!
Manufacturing or logistics/shipping partners: Google search, common sense, and many phone calls to vet the partners. $0
Create your brand. 99designs.com. $300
Website domain: Godaddy.com. $100
Website and e-commerce: Shopify.com. Buy a template for $300, $80/month.
Marketing: Reviews (Yotpo), Email marketing (Klaviyo). Both have small monthly fees.
Communication: Google Workspace and vocal cords.
Skilled contractors: Upwork.com
Employees: At the beginning, always friends of friends. (better than direct friends)
4 Steps to start and test a business idea
Step One - Refining your idea and vetting the viability
Ideas that live in our heads tend to be vague and unfinished. Your first step should briefly describe the idea, problem, and solution in writing. Read it back, sleep on it and continue to refine what you read. The summary should be no longer than a page and is NOT a business plan. Our theme here is to do the minimum with each step, which dramatically increases “starting” and moving to the next step. The process of writing the idea and refining it will also develop your “elevator” pitch, which is an often-used term used to describe the spontaneous pitch you’d give to an investor you bumped into inside an elevator.
Next is vetting the idea with a small group of people, you’ll learn a lot when asking people, and often continue to refine and organize our ideas. You want to do two things with a group of around 10 people. First, give your elevator pitch and observe if they “get it” from their questions and feedback. Their response will either be, “that’s a great idea” or “I have no idea what you’re talking about”. This pitch needs to be 30 seconds or less. If the majority understand the idea right away, great, move forward. If you find your need to further explain the idea, you should refine your pitch or idea.
Next ask the 10 people if they have experienced the problem you are solving, and how often the problem happens. If 8 say yes and often, then move forward. If 8 say no and almost never, consider not moving forward with this idea.
Step Two - Define your market, customer base and competitors.
This analysis can be refined and modified later, but this is an important step to determine how big the market can be and is an important to narrow and focus your efforts. Let’s say you want to launch a company that sells cakes, it’s much easier to market and brand a business that specializes in birthday parties and celebrations than cakes for everyone, all the time.
You want your market to be big but you must narrow the market segment and focus. Someone once famously said, “if you make a product for everyone, you make it for no one”.
Your focus could be just men, or just women, or a subgroup inside those big groups. Like men that like outdoor activities and have beards. This is still a large worldwide group but will allow you to create a brand and the marketing material more suited and attractive to that group.
All product and business ideas have competitors, even new ideas. As before, this analysis should be just an overview but will help you understand your market, pricing, and how much competition you’ll face. List your main competitors from largest to smallest, and make some notes about what you like and what you’d do differently. As a side note, if you raise money for your idea, this is an important part of your presentation.
Step Three - Conceive an MVP and estimate the amount of time and money to make and launch it.
What is the absolute “minimum viable product” you could start the company with? This is harder than you think, it’s brutal to forego your ultimate product vision for something much less with minimal features. But it’s crucial to test small at the beginning which can save you years of time and possibly your life savings developing the wrong thing.
I think was Mark Cuban that said “If the first version of your product isn’t a little embarrassing, you’ve launched it too late.” Almost all good product or business ideas have a time to market consideration, or a race to who builds it first often wins.
Then calculate how long it will take to make and the budget. Don’t worry, just like all aspects of entrepreneurship and business building, this is a guess, do your best and do it quickly.
My buddy recently came to me with the idea of reinventing the way physical therapists and trainers test muscle strength over time. There’s no good way to do it other than the amount of weight or reps done in each session. We discussed his MVP, which took a minute to figure out. He found an amazing engineer on Upwork.com, went through a series of designs, found a local manufacturer, and figured out a budget to build the prototype. All in, I think the cost was going to be around $14,000. He will take the prototype to his friends in the space to test and then probably raise real money if it’s successful.
Step Four - Building a team and launching
We need a team to launch a business, the size of the team wil be determined by going through the above process. How big is the market? How long and how much will the MVP take? How much can I do on my own? Most businesses have multiple “founders” or individuals from the beginning. They are famously focused, hyper energetic, unrelenting, highly under compensated and a little nutty with an undertone of annoying.
The group of founders should be extremely compatible with each other, enjoy hanging out with each other, AND their skills should be complementary and have minimal overlap. For example, you want a technical person and a more business oriented person. No what the business is, building stuff and finding customers is a different skill-set.
This is where you’ll start using the pitch and analysis you created above, and pitch people to join you. Nobody wants to join or give their time to a terrible idea with no chance of success. Use your close network of friends and family to find these first team members and be a little careful to collaborate with your closest friends and family members, unless you know they are great.
It’s time to test if anybody cares, launch it!
With our MVP, we will launch or sell it or beta test it to a small group of people. This could be for a price or free but at least a small fee is important. The ultimate market size will determine the size of the group. In the case of my lip gloss company, we test marketed it to thousands of people because only 10 wouldn’t adequately prove the concept. However, in the case of my buddies physical therapy product, it will be tested with five people.
The most important aspect of this step is determining if anybody cares about the idea as much as you do. There is a reason that you see the first dollar framed on the wall of restaurants and businesses, it’s because there is a huge difference between someone saying they will buy someone and trading their precious money for the product!
Finding this small launch group or beta group could be through online advertising, friends, or just through hard work. Take the incredible and creative launch story of the popular dating app Tinder. The founders had a huge chicken and egg issue when launching. If no one was registered on the app, then you couldn’t find a date, but no one wanted to join the app without a users. Their solution was to host and throw large college parties. The price of admission to the parties was to download the app. After doing this once as a test, users realized they could see the men and women they wanted to talk to at the party and hook up later from the app. Wow! They repeated this process by throwing dozens of parties until the app had a critical mass of users. Match.com bought Tinder for $3 billion.
My best friend and co-founder of the investment firm we started has a mantra he learned from launching and running his private equity company when he was 25 years old. The firm now manages more than $1 billion. These simple three phrases sum up the most important aspects of starting, running, and being successful in business.
Get sh*t done.
Move on.
Don’t be a wimp. (yes, he says a different word here).
Now get out there and stop just talking about your big idea, and get started. This process is designed to vet the idea and vet whether you are cut out for entrepreneurship. If you get through the steps and build a successful business, it’s genuinely the promised land of life and riches. Good luck!
