So, you’ve found a problem that you’re passionate about tackling, and you’re thinking about taking the leap and starting up a company of your own. Hey, it’s a great time to be an entrepreneur, right?
Yes it is, and I see a lot of people right now jumping in and chasing a great idea. But I also see people doing so without totally knowing what they’re in for. The truth is, a great idea will only get you so far, and it’s important to take the time to invest in proper strategy and planning if you want to improve your chances of succeeding.
If you think you’re ready to start your company, here are some initial steps to make sure you’re giving yourself and your business the best shot.
Assemble a Founding Team
While individual founders do exist, your odds of success are much higher if you have co-founders. If you’re not sure where to start looking for someone, think about the skills and experiences that you bring to the table, as well as those you’ll need, since the best founding teams are made up of a diverse mix of talents and backgrounds. A classic combination is an engineer, a UI/UX designer, and a business/marketing person, but every company is different.
It’s easy to want to have your closest friends as co-founders, but before doing that, I recommend putting some thought into whether their skills are the right fit—and how your friendship will hold up through the stresses of a start-up. One of my co-founders is my brother (another potentially complicated relationship), but the dynamic works because we’ve never been afraid to speak our mind to one another. We also give each other space by not spending time together outside of the office.
Also keep in mind that founding teams don’t always come together overnight. (And that your co-founders have to choose you, too!) When we set out to find a technical co-founder, I reached out to and had drinks with dozens and dozens of engineers, and I met up with Joey (our eventual co-founder) every few months over the course of a year before we decided to work together. Choosing your co-founders is one of the most important decisions you’ll make for your company, so it shouldn’t be rushed.
Outline a Plan
So you already have an awesome product in mind—and that’s great. But give yourself a sanity check as soon as possible by putting together a model for growth and a pitch deck for investors (even if you’re not planning on raising money anytime soon). How big is your target market? What percent of it do you think you can feasibly capture and how quickly? How many people are you going to need to hire? How much do you need to charge in order to build a profitable business? If you don’t plan on charging, how are you going to make money eventually?
You don’t need to write a business plan, but you should force yourself to think through potential growth opportunities and how you’re going to execute. There will invariably be tons of open questions, but understanding the knobs that will drive your business is crucial to your viability as a company.
Look at Your Personal Finances
Unfortunately, starting a company almost inevitably means going without a paycheck for a while. So, before quitting your day job, take a close look at your current savings and spending habits and calculate your personal runway—how long can you realistically afford to go without getting paid? Compare that with when you plan to raise money (or generate income from your business). If you’re planning to raise a seed round (the first round of funding—in tech it’s usually less than $1.5 million), remember that you’ll probably need to build a prototype before meeting with investors and that fundraising can often take six months (or longer) from start to finish. In the meantime, you’ll probably need to put some of your savings toward company expenses.
Sound daunting? It can be, but it’s not insurmountable. One option is applying to and joining an accelerator program (like Y Combinator or TechStars), which can help cover early expenses while you build your prototype. Or, start working on your business on nights and weekends to minimize your time without a salary—we did this until we were making money as a company, which lessened the risk. (Disclaimer: it was helpful for a while, but I wish I’d gone full-time sooner.) If you’re still a little ways away from starting your company, start cutting back on unnecessary expenses now to save up.
Once you’ve put together a founding team, worked out a plan, and found a financial situation that will work for you, you can feel confident that you’re ready to hit the ground running. And my advice to you then? Go for it!