The Indian start-up ecosystem is the third-largest in the world. More than 50,000 start-ups were incepted from 2015 – 20, and 11 unicorns (start-ups worth more than $1 billion) were added in 2020 alone. Entrepreneurs are leveraging opportunities across all sectors, with EdTech, FinTech, and HealthTech being the high growth sectors.
If you want to be one of the entrepreneurs and start your own venture, then read ahead to find out the necessary steps of starting your own venture.
Value creation is the core of entrepreneurship, you should only do what people are willing to pay for. Nothing else will matter if you build a product that no one wants. There are three ways to identify an opportunity. Observe the trends in the market or find gaps in the marketplace leading to business opportunities. Another way would be to solve an existing problem through a product or service that creates a sustainable business.
To understand what value creation is, let us take an example of selling melons. A businessman would buy a melon for $1 and sell it at $1.50, but an entrepreneur would buy a melon for $1, process it, and sell melon juice at $5. Thus, entrepreneurship is about moving the low economic value resources to higher economic value products.
From Idea to Opportunity
After you have your business idea, the next thing you must think of is your idea validation. You must know the aspects of your idea that need validation and plan low-cost experimentation for that. Some early prototyping techniques would include building a non-functional version of the product and visualising how the final product would look. You may also act out the use of the product or service playing the end consumer’s role.
Another great way of early prototyping is creating a fake entry for your product that does not yet exist. For instance, you can build a website for your product/ service and add the necessary details to make it look real. You may also add the expected price for your product/ service and fake testimonials. Finally, add a link for the people to register if they are interested in buying your product/ service. Now, circulate it among your network and buy some keywords on search engines. Using the number of registrations, you would get a rough idea about whether people would be interested in your product/ service even before you actually build it. Ideally, these early prototypes could cost you around Rs. 5000.
Know your Business Model
A start-up is an organisation formed in search of a repeatable and scalable business model. A business model is a method to extract value for your company. It tells you three things, feasibility, desirability and viability of your business. Neil Patel, the co-founder of NP Digital, suggests that building a start-up with a complete business plan increases the chances of obtaining a loan and receiving investment capital by 18% and growing your business by 21%.
A business plan is a written description of your company’s operations and its future, outlining what you want to achieve and how you are planning to do it. A business model canvas typically details your key partners, key activities, key resources, value proposition, customer relationships, channels, customer segments, cost structure, and revenue streams.
Manage your Finances
47% of founders say that high priority should be given to manage finances in a start-up. As set-up costs vary from industry to industry, your funding requirements would also vary depending on what you are planning to do. According to Neil Patel, you may start your business in less than $10,000 if you do not need to pay for your employee salaries, raw materials, and equipment. On the other hand, an asset-heavy business model might cost millions for funding.
Research shows that 82% of businesses fail because they are not able to manage their finances properly. To raise funding, you need to estimate how much money would be required, and for that, you need realistic predictions of your financials. To get an estimate of the amount of funding required, you may forecast your financial statements.
Once you come up with the amount of funding you want to raise for your start-up, you need to decide the funding source. The primary sources of funding may be through personal savings, family and friends. As your business grows you can approach venture capitalists and angel investors as well, for funding. Moreover, banks and crowdfunding may also turn out to be a good source of funding once your business starts making some revenues and profits. Depending on the amount of funding required, you might need to find a potential investor interested in investing in your business and then effectively pitch him your business plan and strategy.
Hire the Right People
88% of the founders say that high priority should be given to the founding team assembly. Research says that 3 – 4 co-founders are adequate for a new venture. However, there may be exceptions like Infosys, which had seven co-founders initially.
When starting over, you should try to delay hiring as long as possible. When you go for hiring, you must focus on hiring people who are generalists rather than specialists of a particular domain as initially there is a lot to be done, and clearly defined roles may not be feasible. A new venture team does not come together at once; it requires you to build credibility. The elements of a new venture team may include founders, key employees, a board of directors, lenders and investors, a board of advisors, management team, and other professionals. You do not need to divide your pie equally among all the members; you may decide to divide it based on individual contribution.
Do the Right Marketing
According to a study, 71% of the founders say that high priority must be given to marketing when starting a new venture. You may think that a start-up needs a business plan or infrastructure to support its business’s growth, but what you actually need is sales. You must estimate the number of customers you would need to make your business viable. You do not need to appeal to everyone; just reach out to your probable purchasers who would be interested in your offer. This would maximise your marketing effectiveness.
On average, start-ups spend 12% – 20% of their projected revenues on marketing. Depending on your needs, you may opt for traditional offline marketing channels such as print, radio, television, billboards, or you may opt for online marketing channels such as email, social media, pay-per-click. Some of the advertising channels in the decreasing order of their return on investment (ROI) are Email, Search Engine Optimisation (SEO), Internet display, keywords, mobile, catalogues, and banner advertisements.
Develop your Customer Base
72% of the founders say that a high priority should be given to selling. Just closing your sales is not enough; you need to develop the habit of repeat purchases in your customers. Acquiring new customers can be as much as 25 times more expensive than retaining your current customers. Also, to give you a better idea, typical online stores get 43% of their revenues from repeat purchases. The secret to getting repeat purchases is effective customer service. Customers are the most crucial element of your business plan, and they must be treated accordingly. Building and maintaining a customer base can help your venture for a long time ahead.
Be Ready for Anything and Everything
According to a study, 71% of the new ventures fail within 10 years of their inception. A lot of hard work, dedication, money, and sleepless nights are required for starting your own venture. Whether you are starting your business for the first or the fifth time, you are bound to make some mistakes. Be ready to accept and learn from those mistakes. Surely, there would be hurdles coming your way but do not let them stop you from achieving your start-up dream.
Reid Hoffman, the co-founder of LinkedIn, once said, “Entrepreneurship is like jumping off a cliff and assembling your plane on the way down.” It does not matter which part you assemble first or what sort of plane you make. The only important thing is that it should just fly.