It takes a tremendous amount of discipline, luck and skill to move your great idea off the whiteboard and into a viable company. Ideas are plentiful and the discipline to weed out your bad ones will leave many a promising idea on the trash heap. This culling effort can take many forms but the best way is to systematically develop your ideas until they either take off or fall by the wayside. To achieve this, examine the following steps for getting your idea off the whiteboard and formed into a real company:
Step 1: Idea Formation and Refinement
Hardly a day goes by that someone, somewhere has the next big idea. Entrepreneurs, inventors, students and housewife’s generate lots and lots of “great” ideas. These ideas can be the nexus of the next big thing if these ideas can be take from the raw and into a cohesive, actionable plan. To achieve this, you can apply the following method:
Brainstorm for 15 minutes about descriptive words for your idea: Write down as many words as you can. Don’t filter or erase anything. After 15 minutes, sort the words and phases into like groups. This will form the basis of the next step.
Explain the idea in a paragraph: Now that you have a list of descriptive words, it’s time to formulate them into a simple paragraph that captures the essence of your idea. Try and keep this as short and descriptive as possible.
Write a paragraph on the pain that the idea cures: Customers buy products or services to solve some sort of issue. Capturing this issue into concrete words will help you craft a better product.
Describe the necessary technologies to create the idea: Creation of your idea will most likely take some sort of technology. These technologies may exist or need to be created. Knowing this will allow you to plan your product development which tells you how much money you may need.
Research who else might do something similar: Competitors are important to understand. Your competitors product offerings will affect how you define your product. Any investor will obviously ask you who your competitors are and how you plan on winning against them. Be cautious if you are going after a market opportunity that has no competitors. This usually means that it’s not a viable market.
Idea formation and refinement is an iterative process that will make your concept more vivid. During the process, you will start to think about how your concept works and will interact with the world. Most ideas will never make it past this stage but that’s okay. Invention and entrepreneurship will have a lot starts and stops. Just remember to stick with it because one day, one of your ideas will launch a company.
Step 2: Vet Your Idea
Every entrepreneur thinks her idea is going to change the world. This optimism fuels the drive to see her concept become reality. If this was enough, then your done. Unfortunately, raw optimism is not enough to get your idea off the ground. You need to convince others to share your passion for the concept.
It’s best to vet your idea with people who are respectful and honest. Getting honest feedback is critical to the formation of a solid idea. Diluting yourself by only seeking positive feedback will only lead to wasted time and money. You really need an honest, constructive evaluation of your concept before you waste your time and money on it.
Step 3: Write a Business Narrative
Most inventors have great ideas but they usually fail to understand the business aspects of how that idea will make money. The best way to work through this is to start with a Business Narrative. People love a good story and the business narrative is meant to clearly and simply explain your business concept so that your audience can get excited about it. This narrative also forms the basis of all your other plans.
Step 4: Prepare Your Pitch
Your pitch should flow off your lips effortlessly. The pitch needs to be short and to the point. It’s whole job is to get you the next meeting. Think of it as your mini-business plan. Your pitch will evolve (as with everything you do), so practice it as much as you can.
Step 5: Assemble Your Executive Summary
The first thing a potential investor will want to see is your Executive Summary. This one to two page document is solely meant to get you the pitch meeting. Both the pitch and executive summary need to be tightly coupled so that what the executive summary promises the pitch delivers.
Step 6: Formulate Your Financial Models
Critical to any business is to figure out how it will make money. This is done by building financial models. There are a couple of models that you business will need. One is a Cash Budget that determines how much money it will take to realize your vision. The second is a Sales Model which is used to model your sales process. The important thing to remember about a model is to document your assumptions and be open to changing it. As with everything you do, your models will change as you gain more insights into your business.
Step 7: Define Your Minimal Viable Product (MVP)
The MVP is an essential element of your overall plan. It’s the minimum product offering that you can put in a customers hands that gives you the maximum amount of learning with the least amount of effort (taken from the link above). It’s critical because the sooner you can get to market, the sooner you can learn what works and the sooner you can get revenue. MVP’s are not quick and dirty products. Rather, they are learning vehicles that need to be well thought out in order to be effective.
Step 8: Protect Your Intellectual Property
The first seven steps are meant to weed out most of your ideas. I know, it seems like a lot of work but being systematic about idea generation and vetting will produce better ideas. Once you have a vetted idea, you now need to protect it. There are various ways to protect your Intellectual Property but the most common is to File a Patent.Intellectual property is one of the items a potential investor will want to know about.
Step 9: Build A Demo Or The MVP
Investors like to touch and feel products. The best way for them to do this is to see a demo or interact with your MVP. The scale and breath of your demo or MVP will entirely depend on your business. If you have a software company, then building an MVP is a lot easier than if you have a hardware company that needs to build physical products (like a chip or system). The power of the demo is the fact that you created something. This tells potential investors that you have the ability to define a vision and execute it.
Step 10: Go Raise or Make Some Money
Once you have a demo or an MVP, it’s now time to go raise money or start to selling. The MVP route is used to gain customer traction. This means that you are attracting lots and lots of customers to your product. Most investors will want to see this traction since that is once step closer to breaking even. If you just have a demo, then you need to convince a potential investor that the demo can be turned into a real product.
Step 11: Build Your Product or Work on the Next Revision
Traction in the marketplace is a essential ingredient for a successful company. If your MVP is gaining traction, then you need get going on the next revision that incorporates the majority of the MVP learning. If you raised money, then it’s time to rapidly build your MVP so you can get into the market. The most powerful validation of any idea is when a customer actually pays you for it. This is true even if you give something away for free since your true customers are not who sign up but rather the advertise that pay you for access to your community.
Step 12: Get to Break Even
A successful company needs to make money. The sooner you start making money, the better. Any plan you come up with needs to have a Break Even Analysis done to ensure that your business model is sound and that you have raised enough money to get you there. Breaking even is one of the most exciting points in a company because it means that you are on your way to becoming an ongoing concern (i.e. A profitable company).
Step 13: Scale for Growth
Growing a business is far different than starting one. The challenges mainly revolve around systems and procedures that allow for growth while still delivering to customers. To scale for growth requires more of a focus on product refinement than product invention. This does not mean you stop inventing but it does mean that the invention steps tend to be more incremental rather than disruptive (although, you still need some disruptive ideas since those will fuel future growth).
One critical thing to remember about scaling is that the people who helped build your company may not be the people that can scale it. This can be a tremendous source of conflict with founders who have built the company from the ground up. Mitigating this requires honest dialog as to how the company will scale and who can actually do the job.
Throughout this whole process, it’s best to focus on incremental learning that validates your assumptions, products, strategies or customers quickly. Failing quickly and moving on is far better than failing slowly where you cannot adjust your strategy. One other important consideration is not to be too in love with your idea. Building a company goes through so many zigs and zags that it can make you nauseous. Being tied to a particular strategy or product definition will just bog you down when tough decisions needs to be made. The path from whiteboard to company is exciting, stressful, chaotic and rewarding if you embrace this zigs and zags and learn to roll with them.