What does it take to really start a business?

As a consultant and mentor to small businesses and entrepreneurs, a problem I too often find is many entrepreneurs get stuck in the mundane and unimportant details of setting up or developing a business and hence waste valuable time and resources before ever getting out of the gates.

Launching a business really comes down to three things. If your business meets these criteria, then the remaining details will fall into place.

Partnership Agreement

Starting and running a new business is a challenge, especially for one person. These days, it is almost a standard that new companies, especially disruptive or innovative companies, have two or more founders.

Before you throw yourself into a business, it is essential that all partners and founders of the business have a clear understanding of ownership and responsibilities. Nothing will unhinge a business like a misunderstanding or miscommunication from the onset.

Minimal Viable Product

Many entrepreneurs have grand ideas for their business, with short and long term iterations thereof and countless options to include. It is first and foremost important to understand, however, the true value delivered or the market problem solved, and how your base product or service, or minimal viable product (MVP), will deliver on this.

Once you understand this, you can research and determine whether market demand exists for your offering. This is important to do before you go about adding features and additional services.

Customer Number One

While an entrepreneur may develop a spectacular business plan and be able to effectively communicate the value of the business, all of it means nothing if nobody buys your offering.

In the past, developing and having intellectual property with no proof of concept often meant, at the least, success with investors. Paul Singh, a serial entrepreneur, rightly has pointed out that "traction (developing a strong customer base) is the new intellectual property," meaning that having evidence of market demand has become far more important than just an idea.

Many entrepreneurs mistakenly think that lack of capital (money) is the main reason companies fail. Yes, lack of resources and cash flow planning can sink a company, but in reality, capital is a small problem if you have market demand.

Think about these two scenarios:

#1: I have a great idea but not enough capital to make it and get it to market.

#2: I have customers that want my product but not enough capital to deliver.

One of these two scenarios will have a much easier time finding the capital needed to successful move to the next stage (Hint: It's #2).

Reid Hoffman once famously said, "If you're not embarrassed by the first version of your product, you've launched too late." For certain, if you spend too much time developing and launching the business, you will never get a chance to be embarrassed by your first version.

Corrections and amplifications: an earlier version of this post misstated Paul Singh's title. He is a serial entrepreneur.

Published on: Jun 16, 2017