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February 01, 2005
Advice from "The Art of the Start"
The Art of the Start, Guy Kowasaki's latest book about starting a new company, is a must read for entrepreneurs. I just started it the other day, but it has some great advice that would be useful to anyone launching a new product/service. Here are a few thoughts from the first chapter.
1) Create Meaning - how are you creating meaning in what you do - what are you doing to make the world a better place? Launching a new product is tough work, long hours, and a lot of sacrafices. You must also be able to handle rejection, because you will get it from potential investors, customers, or even family members that just don't understand what you are doing. To persevere, you must feel you are creating something worthwhile, that it will improve the world in some way. For me, its the fact that Jim and I re-connected with one another after 10 years and ended up starting a company together, which has been two of the most exciting years of my life. That is just the kind of "Jambo Moment" that I hope to create for our customers.
2) What's your business model? If it can't be described in less than 10 words you don't have a model. This got me thinking about our model. This is a great exercise that every entrepreneur should force themselves to do. If you can't explain how you are going to make money within a few seconds, then no one is going to invest in you. I have to admit the first time I tried seeing how many words I used, it was too many to count. So, I kept pruning until I got it to less than 20 words. Those words not only describe how we are making money, but also who will pay for it and how we will grow it from there. I can talk more about our model after we launch, but one last comment is that the simplier it is, the easier it is for others to visualize how it would work. Also, don't reinvent the wheel when it comes to your business model. Use a model that has already been proven, where you can point to other companies that have successfully used it. Let your product be what's innovative, not how you are going to make money.
3) Milestones - set them for any product you are launching. Guy lists the following milestones - prove your concept, complete design specs, finish prototype, raise capital, ship testable product to customers, ship final product to customers, achieve breakeven. We have done most of these already. We will be launching our product at DEMO and plan to raise more capital after that to further improve our product and reach breakeven.
4) Assumptions - Guy mentions a number of good metrics to track and use to develop your financial projections such as product/svc performance metrics, market size, gross margins, sales calls/salesmen, conversion rate of prospects to customers, length of sales cycle, ROI for customer, technical support calls/unit shipped, payment cycle for receivables/payables, compensation requirements, prices of parts/equipment, etc. - Each company will also have metrics that are better suited for them, that are a better way to evaluate how well they are doing and extrapolate what that means for their growth, but this should give you an idea of where to start.
I am looking forward to learning some more things over the next few days. If I find anything else that I think is particularly interesting, I will let you know.
Posted by Charles at February 1, 2005 02:04 PM
Comments
Yup - the concept of MAT is great - I sent around the first chapter to one of my clients who had just plastered their mission statement on the wall saying "what's your mantra?" and now, he's trying to find the right one.
Posted by: Andrew at February 2, 2005 05:31 AM