Each day, new entrepreneurs launch high-tech companies with the hopes of becoming the next Bill Gates or Steve Jobs. Unfortunately over 90 percent of these businesses fail. However, some tech company business owners are able to remain long enough to accomplishment their goals and live their dreams. Not surprisingly, there are many commonalities to how they began their technology empires.
In order to validate and then solidify starting a tech company, there are several common steps that must be followed in order to be successful. These include:
Step One: Call Target Customers—After you have an innovative product, start the process by calling target customers in your personal network to ask them if they feel this is a good idea. This type of direct feedback can be extremely beneficial as you may think you have a good idea, but others may see it differently. At the beginning of the call or meeting, make sure to put them under a Non-Disclosure Agreement (NDA) preventing them from revealing secrets to others.
Step Two: Conduct Market Research—Next, perform market research on your target market. Market research firms charge a large amount of money for their reports. However, if you read press releases of the competition, it is easy to find the Total Available Market (TAM) as well as Served Available Market (SAM). TAM indicates all methods that a customer can meet a specific need. SAM relates to the portion of the TAM that a specific product will cover.
Step Three: Analyze the Market Research—After market research information is gathered, it is important to analyze and summarize the information. Make sure to keep the most important points handy as it will be a major part of your investment pitch and business plan.
Step Four: Create a Marketing Plan—Then, create a market entry plan which incorporates how the product will enter the market, advertising, public relations, sales channels, etc. Make sure to create a comprehensive plan that can be easily added to your business plan.
Step Five: Recruit Team Members—Find the best business talent you know from your contacts and recruit them to the team. Initially offer them equity in the company. Given that you likely have a slim budget, equity stake will help you acquire excellent talent without having to initially pay them a salary. Focus on your biggest needs for now: Marketing, Client Management, and UX development.
Step Six: Create a Sales Forecast—The first-year sales forecast can be determined by speaking with the customers in Step 1 and then extrapolated up to five years.
Step Seven: Determine Incorporation Location—It is important to select a location that is attempting to spark commercial growth with low taxes or other types of tax breaks. Try to take advantage of any local benefits for starting a business in that area.
Step Eight: Select an Advisory Board—Select trust business and technical partners to serve on your board of directors. These individuals have tech experience and can help you solidify your strategy and acquire funding and bank approval for short-term credit.
Step Nine: Choose a CFO—By selecting a CFO, you can truth-test your sales forecast, create balance sheets and capital structure. The CFO is usually the most important individual in any company. Also, find and retain a corporate attorney that deals with tech matters.
Step Ten: Develop a Business Plan—Creating the business plan is the most important aspect of the process as it includes all information about the company. By starting with an outline, you will be able to create the foundation of the plan and put it into a formal document later. Make sure to add quotes from market research companies, use plenty of tables and graphs and create an executive summary. Also, it is important to develop a Microsoft PowerPoint presentation outlining the business plan.
Step Eleven: Seek Investors—Discuss potentially investors with your team based on everyone’s collective contacts. Use technology to create technology with online crowd investors who typically invest a small amount of capital but retain smaller equity. During the process, make sure to brainstorm questions they will ask and be prepared with an answer.
Step Twelve: Establish the Brand—The final step is to establish the brand by creating or outsourcing a company logo, developing a website with content related to your technology, create timetables and deliverables, set up sales channels and create solid financial milestones.Like in any endeavor, you put in what you wish to get out. Long hours and hard work from you and your team will sometimes result in success. Even if you have an innovative product, you must work hard to become the next Facebook or Google.