Hadi Aboukhater on Business Development:
Increasingly, more young entrepreneurs are starting businesses in the United States. Entrepreneurship hit a record high in 2012 with 13% of adults having positions at startups. This number has only increased since then, as over 70% of new businesses are starting at home, and over 60% of businesses are home based. It seems that young adults have a desire to follow through with their entrepreneurial ideas and jump into the business world headfirst. Historically, an entrepreneur’s first impulse may have been to gain immediate funding for their small business by joining accelerator programs or turning to venture capitalists which generally required them to sacrifice freedom and more importantly equity of their company at the earliest stage of development.
Recently, we have seen a trend where young entrepreneurs are choosing to bootstrap their early stage companies in an effort to avoid diluting their ownership and to retain decision making control. However, this approach often involves maxing out credit cards, working long hours with no pay, and starting the business from home without a professional office environment. Following are some guidelines that entrepreneurs in the early stage of business should not ignore:
Creating a realistic budget based on a concrete business plan is the most important step. Determining the length of time that the company can last without a revenue stream or outside investments is crucial. At a minimum, project monthly costs for the first 18 to 24 months and multiply this by a factor of 1.5 to account for unexpected spending.
Prioritizing is next. Funds and development must be prioritized so that the product or service can hit the market. A vital part of starting your business is getting your product or service out on the market as fast as possible. Often times new entrepreneurs can find themselves caught up in an endless cycle of trying to perfect their product before hitting the market. This type of paralysis typically comes at a cost of burning through much needed capital reserves but more importantly comes at the expense of the entrepreneur not experiencing early successes or receiving real life feedback with regard to the product or service.
Mastering the elevator pitch is essential. The elevator pitch is a 30 second opportunity to point out the key selling points and value of the product to potential customers, investors, and the market. The pitch acts as your company’s first impression. First impressions mean a lot in our fast paced business world, and it is important that the pitch is fine-tuned early. The pitch should incorporate the use of the product, potential value and market opportunity.
Next, investors have their time and place. When ready an entrepreneur should really consider the type of investment that is needed. Sometimes a bank loan or personal loan may be sufficient while other times true angel or venture capital investment is needed. Many entrepreneurs are quick to jump the gun and seek immediate investment because they are low on funds, but it’s important to keep in mind that the disposition of the investor is just as important as the dollars the investor is providing. If vetted properly an investor can turn out to be a mentor and a true partner that provides the entrepreneur added guidance. In the last 5 years we have seen a significant shift in the paradigm of the capital investment market for small businesses The emergence of crowdfunding has created an alternate source of capital that is only limited by the entrepreneur’s ability to create, on the part of the smaller investor, a sense of desire to be on the ground floor of a potential “home-run” company.