I 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. Any startup coach or business advisor will tell you that, on your way to being a great chef, you don't start your journey by inventing the ultimate entre. First you work in the kitchen for a while, learning some tools of the trade, experiment with a few recipes, and test on willing clients. Finally you create and document your recipe (business plan).
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 must follow a tried and true recipe for startup success:
- 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)
- 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)
- 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)
- 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)
- 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.
