Sunday, December 30, 2012

What You Can Learn About Startups From Great Cooks

0:00:38I realized a while back that creating a new company for the first time is a lot like whipping up a great dinner entree for the first time – you need a recipe, even though it may look simple. You know the basic ingredients, and you can visualize the results you want. Yet you may not be so sure where to start, and how to put it all together.

In all cases, don’t skip the basic training. Alain Theriault, better known as StartupCoach, tells entrepreneurs that, on your way to being a great chef, you don't start by writing a cook book (business plan), you work in the kitchen for a while, you learn some tools of the trade, you experiment with a few recipes, you test on willing clients ... then you can start writing a recipe.

There are two parts to every recipe – the specific ingredients, and the instruction steps for putting the ingredients together. For a new business, you can provide unique ingredients, but the preparation steps in your business plan (cook book) must follow a tried and true recipe for startup success:

  1. Identify a market with a real need. This means find some hungry people who would love a good dinner, and be willing to pay for it. If you can’t identify customer interest, it doesn’t matter how good your product is. (not a solution looking for a problem)

  2. Be sure you have a great team. You need a good cook, good marketing, and first-class service. Domain knowledge and experience is a huge success factor. All the investment money in the world won’t make your company succeed, if you have the wrong team. (investors invest in people, not ideas)

  3. Effective and timely go-to-market. Don’t be afraid to test your ultimate entree on customers. Make them “feel the love.” Be adaptable to cultural tastes, trends in the market, and economic realities. But don’t practice too long. If your startup is over a year old, and your business isn’t yet ready, you have a problem. (time-to-market is critical)

  4. Viable financial model. Have you set the right price for your entree, and correctly included all costs? Have you projected sales and marketing costs, cash flow, and capital requirements? Show return on investment, growth rates, and market penetration. (validate your business model)

  5. Continuous improvement. Don’t stand still. Emeril Lagasse is always ready to “kick it up a notch!” Companies and cooks who rest on their laurels don’t last. Develop metrics with which to measure yourself and use these to incrementally expand and improve your offering as fast as the market and capital will allow. (scale up the business)

If you are already a chef, and you have your own money, you can skip the instructions. You can vary the ingredients, change the formula, or add an extra pinch of salt, and your pasta salad will still be great. If it’s your first time, don’t try to get creative on the “how to” side just yet.

If you are already a celebrity chef like Emeril, meaning you have a record of success using your creativity despite the odds, you don’t even need your own money, and you only need to scratch your business plan on the back of a napkin to get funded.

For the rest of us, the business plan must be the complete recipe, combining ingredients with process. If you don’t have one, your chances of success are low, even if you are an experienced chef. Now you know why professionals and experienced investors are quick to toss an incomplete plan.

Follow the “how to” instructions above for combining the ingredients, combined with you own “special sauce” (competitive edge), and I’m sure you will deliver a tasty dish, on time and with a profit. You can look forward to being a celebrity chef later. For now, get cooking!

Marty Zwilling


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4 comments:

  1. That was very insightful. Thank you so much for the valuable information!

    If I might ask a question, I'm planning to a launch company in the industry of media. I'm currently writing the business plan, but I was worried by two points on your list.

    1 Identifiying a market need: I believe there is a market for the media I will produce since there is already an established market, does this simply mean I need to produce something of more appealing value to the consumer than my competition? If not, how would I go about verifying the need?
    2 Time to market: I first started my media experience 6 years ago, and have been growing since, but this summer is when I finally figured out the purpose of where I was going with all of this, as a result I got my final goals in place as well as intermediate steps to take me to those final goals in place. I still have not taken the action of producing the media yet as I've been busy planning and learning the tools needed to produce the media. Is this a problem? Should I take action and go for it or be more patient and get the right things in place first?

    Thank you for your attention and time! May you have a wonderful day! I very much enjoy reading your blog.

    ReplyDelete
    Replies
    1. Andrew,
      Thanks for your questions! Here are some quick thoughts:
      1. Identifying a market need: The need statement should be independent of any existing players (competition must be addressed elsewhere in the business plan). The market definition and opportunity should come from reputable third party research (like Gartner Group or Forrester) rather than your own estimate or sizing.
      2. Time to market: You need to go for it. Time to market is critical, as it changes every day. Too many entrepreneurs wait forever for the time to be right, or work so hard on something that it is obsolete before it gets out the door.
      Have fun!
      Marty

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