As a founder, your are a leader and a teacher. Business, like any other part of life, is subject to change and unexpected problems. In order to motivate your team, you must be able to effectively guide them and keep them focused on the mission. You cannot learn to be effective in building a company sitting in a classroom. You learn by doing, and only then are you equipped to teach others. If this material is new to you, you can expect to spend 6 to 8 weeks or longer working through the different steps.
The things that you learn in the Do-It-Yourself Accelerator are things your will need to teach your leadership team. The reports and textbooks will not only guide you, but will become some of the tools in educating your leadership team. Companies die if the team deteriorates into internal competition, rather than staying focused on delivering the solution or solutions to the target customers.
Frequently, you will need outside advice on legal, accounting, regulatory compliance, and many other areas. Before these needs arise, you must learn how to find effective resources, consultants, and advisors. As with any curriculum, having an instructor to clarify the written information can accelerate and improve the retention of the curriculum. As the number of companies that we advise grows, we will add experienced professionals that can act as advisors to a listing on our website.
I spent decades helping big companies fix technical issues, related market analysis, and business methods, but now I serve startups and small business. I provide complimentary reviews of executive summaries and new product specifications to founders, investors, and other advisors, though more in depth reports can be created.
From both watching management ruin companies that I worked for, and in observing the tragic quality of existing accelerators, I saw the need to develop a process to improve the dismal odds that good people face in trying to serve us. VCs frequently say that only past failures can prepare founders for success, demonstating no respect for the curriculum of any traditional educational institution. The root cause of these terrible results is that the western academic cartels only respect and produce specialists, who typically have little knowledge and respect for people, who might be future customers, but who do not have impressive academic credentials.
If you look at people like Nikola Tesla or Steve Jobs, we find that they took some formal education, but had to go outside of their initial focus to learn all of the things that made their success possible. They also had to sell other people on joining their ventures, Before they were able to actually build anything.
As is required by ISO-9001, a company needs to have a clear mission statement. What do you want to do, who do you want to do it for, and how will it benefit them more than their current solution. If there is no current solution, there probably is no market at this time.
Once a company or person has a mission statement, it needs to be shared to validate if there really is a need and if the mission statement makes sense. The more diverse the people that you share the mssion statement with the more effective this validation process will be. For founders who lack experience in market validation, we recommend the textbook, "The Mom Test" by Rob Fitzpatrick. A link is provided below.
The Mom Test by Rob Fitzpatrick
Most startups fail, and we will share with you a report on the typical reasons, but first we suggest a textbook that tells the story of a founder, who was successful on his first try. We strongly recommend "Toward Entrepreneurship" by Milton Chang. A link is provided below.
Toward Entrepreneurship by Milton Chang
After reading and understanding the message of Milton Chang, about how it is really all about collaborating with all kinds of people, we feel it is important to note that good health is a requirement to have the energy to lead and educate your team. For this reason, and because good health is important to all people's success, we recommend the textbook "Eat to Lead" by Luci Gabel. A link is provided below.
Now is a time for the founder or founders to decide what roles to play in their startup. An effective CEO spends half their time on sales and market analysis and the other half keeping the team focused on the mission and building relationships. A solo entrepreneur is more a comedy act or a consultant, rather than a serious leader. In most startups, the absolute minimum is a CEO and a CTO. If a CEO cannot find a partner or collaborator to assist in building a team, the mission statement is inadequate and the company has little hope of later finding customers or investors.
After reading "Toward Entrepreneurship", the founders should have a rough idea of waht a successful startup might look like, and it is time to review the reasons why so many fail. A link is provided below to the best report I ever found on the major reasons that startups have failed in the past.
The 13 Top Reasons Why Startups Fail
In the report on startup failures, 42% failed to validate their target market. This is why our curriculum starts with a mission statement and then the validation of that mission statement.
If the misssion statement fails to generate a good response, or if conditions in the market change, it becomes critical to pivot to a more effective mission statement. The below link takes you to a report on the importance of responding to the feedback from sharing the mission statement.
Before They Were Famous. 15 Startup Pivot to Fame.
A business is like a complex machine that takes input from potential customers and provides solutions of clear value. Your competitor are not just companies making similar products or providing similar services, but anyone competing in the same budget category.
A real business plan requires a degree of detail that requires the experience of people who have carried out the soon to be defined rolls. For example, estimating startup and operating costs requires the experience of having seen these costs as an experienced CEO or at the least as an accountant, not just a bookkeeper. We have additional curriculum giving a step-by-step process to create an effective business plan. Please contact us for this guidance.
A business plan should frequently referred to and updated as the core guiding document that all involved in leadership need to refer to. This is a living document that is never finished, unless the business is sold or fails.
If we depend on word of mouth management direction, this is akin to the times before mankind learned write on cave walls.
In sports, we have guidelines, sometimes painted on the ground that assist us in playing a game to win. Unlike in team sports or war, there is no need for anyone to lose, but frequently we see that most do lose. As mentioned earlier, lack of market validation is frequently the cause of startup failures. A Market Survey is a complete analysis of the market that the startup wishes to compete in. As mentioned earlier, if there is no competition, there is no market. Not analyzing and understanding the nature of the market, dooms the startup to failure as surely as driving onto a freeway with your eyes closed.
Market survey should start with a brief explanation of the product or service being offerred to a defined set of customers. When writing this section, the purpose is to give an understanding of how the need was first identified and how the first successful solutions were invented.
The next section should cover how the product or service is presently being sold. Some products are sold only online, others are sold directly by the manufacturer, others are sold through offices owned by the manufacturer, others are sold through authorized dealers, others are sold through distributors, who resell to retailers, and others are sold through combinations of channels.
Where products require service of some kind, some require return to the manufacturer, some have authorized servicing dealers, some make it easy for users to self service, and others leave it to the customer to find a competent service supplier. US law tends to encourage manufacturers to allow customers to service themselves or to chose servicing companies that are independent of the original manufacturer. In some industries, other companies may sell their own spare parts and compete with the manufacturer. This is very common with automotive replacement and improvement parts and supplies.
Particularly in vehicle servicing, specialty suppliers provide services not available from the manufacturer or the manufacturer's authorized dealers. Automotive transmission and body repair are typically not done by the authorized dealers. For more complicated to repair items, such as transmissions, many dealers buy and install rebuilt items that are sourced from the manufacturer or from independent rebuilders.
In studying the automotive market, I found that with internal combustion engine vehicles that dealers make little or nothing in profit from the sales of the vehicles, but get 80% of their revenue from out of warranty repairs and selling spare parts. After sales support should be considered as an important source of cash flow that tends to be more consistent than the sales of expensive and complex products.
Using search and industry directories, you need to identify the potential competitors for the market segment that you wish to do business in. Articles, that are easily found online may contain interviews or technical information about company's plans and problems. For those that are publicly traded, you can view their annual reports on https://www.sec.gov/.
Annual reports will generally tell us where a company sees its future and where they are investing in research. If there is no current investment in research, this may indicate that the company sees little future potential for them in a specific market segment.
In researching technology and intellectual property, you should invest the effort to understand the information that is available on https://www.uspto.gov/. Expired patents are free to use and can be a rich source of information on how problems were solved in the past. Additionally, you need to be aware of patents that are still inforce, which may prevent you from accidentally copying products currently in the market and being sued for patent infringement.
After verifying that there is a market, where you being a better solution, and after beginning to plan how a business will be structure, founders need to incorporate. Incorporation reduces liability and provides a tool to formalize founder's ownership, sell shares to investors, and offer shares to recruit key employees.
To begin, it is generally recommended that a startup incorporate in the state where they are basing the business. Because of favorable laws and tax regulations, many venture capital companies expect a startup to reincorporate in Delaware.
Incorporation creates a kind of virtual person, and requires having written bylaws. While there is significant advice online, which founders can benefit from exploring, an experience corporate attorney should be used for guidance and document preparation. The attorney can adivse on the specific requirements.
The are several different kinds of stock that a corporation can authorize and issue. Stock can have voting rights or be non-voting, can be common or preferred, can be with a par value or without a par value, or can be treasury stock that the corporation has repurchased from shareholders. Why information is available online, discussing the best solutions for a specific corporate structure and to support founder goals with experienced attorneys and accountant can avoid future nightmares.
A capitalization table is a spreadsheet or table like document that lists all of the equities of a corporation, showing who owns different kinds of instruments, such as stocks and bonds, and authorized instruments that may be issued in the future.
A corporation must file income tax returns, which have different rates and rules than the personal income tax return. The advice and assistance of a certified public accountant may needed.
Both to provide the data needed to prepare tax returns and to see and control how money flows into and out of the corporation, it is important to have accounting software. Many startups begin with QuickBooks, but as changing accounting systems can be a complicated task, I advise discussing what accounting system to begin with with a qualified corporate accountant.
A term sheet is a non-binding document that details the terms and conditions of a potential investment that become the basis for the more detailed and legally binding investment agreement or agreements.
For example, liquidation preferences in the terms of the deal, decide who gets any remaining value or cash if the startup fails.
An anti-dilution clause gives the investor rights to purchase additional shares, in order to maintain the same percentage of ownership.
There is significant online information and opinions on what can or should be included in the terms and conditions, related to negotiating an investment, but competent professional advice can avoid future nightmares. There are attorneys, who specialize in assisting startups with term sheets.
A typical term sheet will have numbered sections. The heading section identifies the company and the potential investor, or purchaser. There is typically a disclaimer, which states that except for terms stated in section X through section Y, this term sheet is not legally binding and there will be no obligation to complete the proposed investment as a result of signing this term sheet. The parties wish to negotiate possible terms and explore the possibility of offering shares in the company in return for investment, based upon a possible future binding agreement.
The first section typically shows the transaction details listing the number and kinds of shares offerred and the investment to be made in return for these shares. There may be a single transaction or a series of transaction, based on specific conditions.
The next section typically details a series of conditions and requirements. The company is usually expected to comply with various legal and regulatory requirements, which may be listed. Specific documents that must be provided to the potential investor.
The next section or sections may list legal requirements and responsibilities, such as each party responsible for their own legal expenses, non-disclosure of certain subjects, a requirement for that financial statement be compliance with generally accepted accounting principles, the governing law of the appropriate state, and a list of deliverables due at closing.
The term sheet may have an expiration date and is signed by both parties.
A Pitch Deck is a series of slides that introduces the audience to the business concept. It is useful in raising capital and also in recruiting founders.
1 - The mission statement: What do you wnat to do, who do you want to do it for, and how do they benefit more than from their current solution.
2 - What is the problem that you intend to solve?
3 - What is the nature of your solution?
4 - What tells you that the market is ready for this solution?
5 - What do you think is the market size and why?
6 - What is your competition?
7 - Briefly describe your solution.
8 - What is your business model?
9 - Describe your team.
10 - Describe your financial estimates.
At this point in your startup path, you have reached the point where a more specific and custom kind advice and curriculum is needed. I recommend that you take advantage of our complimentary reviews of executive summaries and product specifications. I strongly advise that you complete the lessons in this introductory curriculum before jumping ahead to the executive summary. For some we are able to find ways to bootstrap the startup and avoid the dillution of equity that turns many from founders back into employees.