This is a guest blog post by John Belizaire, CEO of FirstBest Systems. FirstBest is a portfolio company that we share with our long-time friends at Flybridge. John shares his insights for first time CEO’s…
John: Recently I have received calls from friends and old colleagues that are taking the entrepreneurship plunge for the first time. They are starting everything from new Internet-powered high tech ventures, to no-tech traditional businesses. They’ve all called looking for sound advice from someone who has done it before. I guess, I fit the bill. 🙂
I am currently working on my third business venture (second software company) at the moment. While I am certainly learning a lot on this one, I wish I knew then, what I know now. So for all you first timers, I would like to offer the following advice as you embark on your maiden venture. When launching your venture, you need to focus on five key things – the People, Product, Market, Model, and Finance. I call it “PPMMF” for short. Sorry, I don’t have a better acronym. Here is what I mean by each of these:
No successful business can make it without the right team. If you are currently a one-man or one-woman show, then your first order of business is to find your college friends, former colleagues, and offer them the opportunity of a lifetime. Try to makeup the team with people with diverse experiences that complement each other. For example, all engineers is not the best combo – fill in with some business folks. Use your network to get introductions to people who can potentially make a contribution to the new venture. This may be in an advisory capacity or as an employee. Trust me, business is all about people – choose the right ones and many of your problems (potential or current) just seem to resolve themselves. Once you have a nucleus of a team, put together a plan for the rest.
The product or service is the one thing the company does really well and better than anybody else. It has to be something truly, unique and different. If you have an elevator in your building then get on it (preferably when empty), select the top floor and record yourself (using your smartphone) explaining exactly what your company does. What is the pain you are solving? How does your product or service address that pain? What does the company do? It needs to be about the “why” not just the “what”. If it takes you more than two minutes to complete your pitch, then you have not found it yet. Get off the elevator and try again. Your initial product must be in a very specific niche (sometimes it is a new niche) that is relatively defensible. My first company was a component-software company for e-commerce applications. Companies needed to get to market fast with e-commerce apps, but they only had raw infrastructure software to start with. We gave them 75% of what they needed that was common and they could then focus on their special sauce getting them live faster. I used to think about “lego” blocks to make my “elevator” pitch. One more thing… These days the software product or widget is not enough of a differentiator – you need to think about the customer’s experience, and how you service them. That is as much a part of the product as the technology you use to build it.
Who has the pain your product solves? That is your market. Is it the CEO of a bank? Is it a stay at home mom? Is it the CFO of a oil refinery? Or is it 30-something fashion-conscious shopper? Your target market is how you focus your energy. Don’t be wish-washy about it. It’s all about focus. You have to be able to calculate the size of your market, how much it will cost to reach them, and describe why they are the ideal candidates for your solution. Most products are natural results of the market you came from yourself. For instance, one of my friends is an investment banker and developed a neat solution for tracking hedge fund investment ideas. Who is his target market?… well hedge fund guys. Simple. Your target market may be broader but, you must choose one initial target or “beachhead” market to start.
This is important! How does this company make money? More importantly, how does it do it in a scalable way? Most first time CEOs struggle with this. Is the primary source of revenue consulting services or product licenses? Will you sell it online or via a direct sales force? My key message here is, choose one model to start. As your business grows that model will evolve as you discover new approaches to sell or new services that you might offer to your customers.
Remember that elevator ride? Well, that “elevator” pitch will be a handy tool as you seek capital. Your funding or capital plan is one of the most important aspects of your venture. If you have not given thought as to how you will finance your business, you are doomed to failure. Your funding and capital plan is all driven from the other components PPMM. You need to have a multi-stage plan that matches your company growth plan – along with the expenses that drive it. Try to plan in 12-18 month chunks initially, then look out at least 3-5 years. Think about the people costs, cost to reach your target market(s), cost to develop the product, and the support infrastructure. Give thought to different sources of funding – Family/Friends, Angel, Venture, Debt, Strategic/Corporate funding in that order. These days, one can get a lot done with a lot less, but you need to have a long term view.
PPMMF! I have seen several business plans over the past several years, and I have not found one that I didn’t review with eye on the PPMMF. I even review my current business with this lens periodically. If there is a lack of clarity in any one of the components, then the whole thing falls apart.
John Belizaire, CEO
213 Burlington Road
Bedford, MA 01730
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