10 May The Five Crucial Steps before Jumping down the Rabbit Hole of Entrepreneurship
We have divided up the business creation process into five steps. These steps encapsulate the thinking, planning and funding it will take to transform your business concept from an abstract idea into a tangible reality.
- Conducting a self-evaluation
- Coming up with a good idea
- Investigating the opportunity
- Creating a compelling business plan
- Raising Capital – Acquiring the resources needed to execute your business plan
The order of these steps is deliberate. You should complete each step before moving onto the next. It is designed to save you, the entrepreneur, time, money and frustration. Below is a short summary of each of the five steps.
Step 1: Conduct a Self-Evaluation
A Self-Evaluation is essentially an audit of your life. You need to take an honest look at exactly where you are at in your journey through life. This examination should include your skills/education, assets, credit, time, personality, lifestyle, personality/temperament, responsibilities, and state of life. Also, we take a look at several general categories of entrepreneur archetypes. We will explore how their motivations and goals influence the way they engage in the entrepreneurial process.
Step 2: Coming Up with a Good Idea
Notice we didn’t say a “new” or “revolutionary” idea. We said to come up with a “good idea.” A good idea can come from a myriad of sources: solving a consumer problem, an area of your expertise or experience, personal interests or hobbies, and even borrowing someone else’s good idea.
Step 3: Investigating the opportunity
Creating a business plan is a time-consuming process and can be expensive. Often, at the end of the process of creating a business plan, the entrepreneur can often discover that her business idea had one or more fatal flaws. By this point, she has spent weeks working on it and may have spent a small fortune on books, consultants, and software. The investigating the opportunity step is simply a targeted examination of whether your entrepreneurial idea is logical from a business perspective. It consists of three parts:
Creating a coherent business model out of your business idea
Building a pro forma projection of your business idea
Analyzing and deciding, within the context of your personal and financial goals, whether the business idea is worth the investment/risk of time and money needed in order to make it a success.
If you accomplish #1 and #2 above, and determine that the business idea is worth the investment/risk of time and money to make it a success, then you should invest the time and resources into writing a focused and compelling business plan.
Step 4: Writing a Compelling Business Plan
A compelling business plan is a focused, in depth analysis of the various parts and angles of your business idea. It is an essential document to solicit capital from either 1) a bank or lending institution for a business loan, or 2) investors for equity capital. To properly research and write a 25-40 page business plan, an entrepreneur must usually invest upwards of 50 hours, and sometimes more than 100 hours, of time researching and writing the plan. This is not a project to be taken on lightly. If you successfully put together a focused and compelling business plan, you are now ready to gather the resources (money, assets, leases…) needed to launch your business.
Step 5: Acquiring the Resources Needed to Execute the Business Plan
Finding money… Nothing gets started without the capital to put the business plan into motion. We will discuss both debt and equity financing: banks, non-bank lenders, securitized loans, government loans, friends and family, angel investors, venture capital, government grants and more. We even take a look at outside the box methods of raising capital such as crowdfunding.