This is a post that is long overdue. The formula in the picture summarises my whole philosophy about what is needed to create a successful business. I probably don’t need to say any more – just leave you with the picture. But for those of you who like details, I’ll expand below.
The startup formula
Having said that this is a formula, I want to emphasise that starting and building a business is not a series of steps that you just follow and then you are good to go. That’s the problem with those pro-forma business plan guides and software. They just don’t fit most situations.
Instead, starting a business is about using a series of fundamental principles that you apply to your particular idea and market context. How they apply and the insights you gain and the order that you use them will be slightly different for each business and will lead to unique solutions. You need to use your head. But if you know what the principles are and you apply them, then you can be confident in the decisions you make for your business.
Step 1: Have a good business idea
These days, ideas are rubbished a lot in the startup world. We’ve all heard things like, “It’s not about the idea, it’s about having a great team and great execution,” or “I’d rather have a B-grade idea and an A-grade team than an A-grade idea and a B-grade team.” Personally, I’d rather have both an A-grade idea and an A-grade team.
When people quote these comments, they are trying to emphasise that it’s not just about your idea. And that is correct. You need much more than an idea to start a business.
However, you do need a good business idea. If you start off with a mediocre idea, you are handicapping yourself right at the beginning. For instance, starting another café in an area full of cafés is probably not a good idea. Just like another mummy blog or online children’s clothing store or another app is maybe not a good idea.
You can’t tell if an idea is good because you’re excited about it or that your friends and family like it or that someone else is doing it successfully (or not.) A good business idea has certain characteristics that are independent of how you feel about the idea.
All the business ideas I mentioned above could be good ideas if they fit the definition of a good business idea. So here it is, my definition of what makes a good business idea:A good business idea solves a specific problem for a particular group of people in a way that removes their objections to using the solution and is different from what other competing businesses are doing.
You can read about some of my other personal criteria for good business ideas if you like.
Two things are required to come up with this kind of good business idea:
1. Personal rigour and honesty in thinking through the idea.
For example, not just, “my café will be different because it will have a funky vibe” but “my café will be different because it will have space for strollers and a play space for children.” Note that the second statement has encapsulated in it
- a problem (how to keep your child entertained when you want to go to a café)
- a target market, (mums with young kids) and
- a solution.
This solution would only be valid in your area if other competing cafes didn’t cater to this market in this way.
It’s easy to persuade ourselves that our idea is great and be less than objective, so this kind of honesty with ourselves is hard. It often helps to have feedback from people who understand what makes a good business and who you can trust to be honest with you.
2. Lots of practice in coming up with good business ideas.
Coming up with these sorts of ideas takes lots of practice in identifying opportunities and creative problem solving. Occasionally a great idea will hit us on the head, but if we want to think regularly in this way, it takes practice. You will likely need more than one good business idea to find a valid one for you to implement. Some ideas you come up with may be great, but you don’t have the skills and resources to implement them. The idea has to be a good fit for your skills, passion and experience as well as being a good solution for your target market’s problem.
So, step 1 on your way to a successful startup is to make sure you have a good business idea.