Nathan and I have been getting an increasing amount of feedback about the way we are starting our business…or NOT starting it. While some people are applauding our efforts, others are scratching their heads and saying, “Why haven’t you guys started yet? It’s been over a month now.” So I wanted to talk about our business start-up strategy so you can see our reasoning. If you have any comments or critiques, please let us know. We can get pretty lost in our own thoughts sometimes, so maybe you can help shed light on something for us that we're not seeing.
So, as far as I can tell, there are two major strategies, or schools of thought, for how to start a business:
Just start! Make stuff, sell it, and the details can be worked out as you go along.
Get your ducks in a row. Try to work out as many of the details as you can first, THEN start.
I think both are appropriate for different situations. For example: this summer, I want to make and sell granola at the local farmer's market. When I do that, I'm going to do it using strategy #1 (just start!). After all, it's just a hobby.
Natril Gear is a totally different animal than my granola stand though. With Natril Gear, we have goals and a future in mind for the company, we are planning to have contractual agreements with many different business partners to help us sell, and Nathan and I both plan to work full-time for Natril Gear someday. In order to hit the ambitious mark we are aiming at, we need to plan carefully from the beginning. For this reason, we are using strategy #2 (ducks in a row).
There are some who may argue that strategy #1 (just start) is the best way to start ANY business, because it takes less time and money up front, whereas using strategy #2 (ducks in a row) can take a lot of time and money up front. They would say that by using strategy #1 (just start), and waiting to spend money until you need to, there's no the risk of losing valuable resources if your business doesn't work out.
I can see the logic here, but starting a business is like rolling the die below - you'll get risk no matter what. So risk AVERSION becomes key, and to avoid risk, sometimes it's better to spend time and money up front.
Here's another way to look at it: consider the differences between building a dog house and building a family home. Could you imagine building a house for your family using strategy #1 (just start) and not doing very much planning? No way! First, you'd draw blueprints, buy some land, hire professional help, etc.. That makes sense for a family home, but you'd never build a dog house this way. You might look up plans for the dog house online, but for the most part, you just start building it. Now some of you (like my dad and my husband who like to overly plan and build EVERYTHING so it can withstand “end of the world”-type forces) might actually use strategy #2 (ducks in a row) on the dog house...but for the sake of my example, you know this is silly, and you really only need to use strategy #1 (just start).
When it comes to effectively using your time/money and employing the right strategy to start up your new business, think things through before you make resource-based decisions. Over-using your resources could leave you with a deficit you can't overcome (which could lead to business failure), and under-using your resources could create gaps in your business or cause you to make poor decisions due to lack of information (which could also lead to business failure). Check out some of these strategy/project mismatches:
Strategy #2 (ducks in a row) dog houses - unnecessary overuse of resources:
Strategy #1 (just start) family houses - lack of planning and under-use of resources:
Like I said earlier, Nathan and I are using strategy #2 (ducks in a row) for Natril Gear. One of the biggest motivators for us to use this strategy was reading the book "The E-Myth" by Michael Gerber, an excellent book on why some small businesses make it and others don't (I highly recommend this book). We have never done anything like Natril Gear before, so we know we are in over our heads from the start and need help if we want to do things right.
If you remember, Nathan is currently working full-time at another job, so it has largely been my task to start up Natril Gear. In keeping with strategy #2 (ducks in a row), here are some of the things I've been doing:
Lawyers - Interviewed 3, hired 1
Insurance Agents - In the process of getting quotes from 3, will pick 1
CPAs - Interviewed 4, hired 1
Graphic Designer (for logo) - Interviewed 9, hired 1
Manufacturers - Emailed 22, spoke over the phone with 11, will pick 1 and 2 backups
Business Owners/Mentors - Interviewed and made personal connections with 20+
Bicycle Industry Professionals - Spoken with and/or made personal connections with at least 5
Bicycle Industry Misc - Have researched 18 industry-specific organizations and publications, currently in the process of selecting the one's I'd like to use
Competitive Analysis - Have identified 40+ potential competitors, currently in the process of researching them further to find product/customer gaps Natril Gear could fill
Business Plan - I have written the first draft of a business plan. It needs to be revised, but I haven't done it yet.
Panniers - Have checked out 3 bike stores, 5+ fabric stores, and 10+ plastics/hardware vendors to learn about materials and style options for making our panniers. Have not made any specific selections yet.
Whenever I meet with anyone (like the people listed above), I always make sure to take lots of notes. When I get home, I transfer everything I can into one of three excel sheets "action items", "good ideas", and "resources". Then, I use those lists to help me manage my time productively and learn more about being a successful entrepreneur and leader. I currently have about 90 action items, 40 good ideas, and 70 resources (I'd be happy to share these if you're interested).
If I tried to come up with action items, good ideas, and resources for Natril Gear on my own, I'd be floundering all over the place, not knowing where to begin or what to do, and Natril Gear would most likely fail before it began just because I'd be so frustrated and out of my league. However, using strategy #2 (ducks in a row) has helped me to find directions and is teaching me how to think more and more like a business owner. I am feeling more confident and knowledgeable about both my current and future tasks, and I am glad that we have decided to use the start-up strategy we did.
So that's what we've been doing. I hope you can understand more the reasoning behind our decision to use strategy #2 (ducks in a row) as we start up, and I hope this post sheds some light on the things I've been keeping myself busy with for the past month or so. Even though we're not up and running yet, I AM actually doing work. Haha :-)
P.S. Right now, I'm planning on an official business launch date of June 1, 2011 - about two months away. I think we may be able to start sooner (maybe in May), but I'm not sure yet. I haven't told Nathan my idea yet, so I'll have to see what he thinks first, but I wanted to tell you this so you could get an idea of how much longer I think we'll be spending planning and working BEFORE we start. If we launch on June 1, that means we will have spent 3.5 months in the pre-planning stages.