3 Things to Consider when Launching
I had a great discussion with a new entrepreneur last week – he’s been working a few side hustles for a while, but after 2 years of thinking and planning, he’s ready to launch a new stand-alone business. Every business (and start-up) is different, but as we were talking, 3 key points came up that would apply to any new launch (even if you’re an existing business).
If you’re going to the effort and expense of putting something new out into the world, you hopefully have a pretty good feel for the marketplace that you’re getting into. You know the competition, you have a pretty good idea of what people want (in your space) and at least a rough idea of what they would be willing to pay for it.
But the reality is that we don’t know what we don’t know – which is why this first point is so important.
If Possible, Start Small…
This isn’t a new idea – Eric Ries published The Lean Startup back in 2011 and one of the big ideas in that book is the concept of launching with a Minimum Viable Product (MVP). Essentially Ries asks the question; ‘What is the smallest version of your product, service or business that you could launch that still generally fulfills what you’re trying to accomplish?’.
A similar idea from Jim Collins excellent book Great By Choice (his follow up to Good to Great) is the importance of the idea to ‘Fire Bullets then Cannonballs’. He calls it Empirical Creativity and based on his extensive research, it’s one of the key factors that enabled the companies in his study to grow by 10X more than their competitors. Try something small (bullet) before you invest in something big (cannonball).
Bottom line – the best way to learn is to run multiple, smaller experiments. Not only is is easier and faster to learn this way, but from a practical perspective, it’s much more cost effective. If you build out a fully fleshed out product that’s ‘complete’, it’s going to cost a lot more to launch – and without any real world data or experience, it’s likely that you will miss the mark somewhere along the way.
Make Sure Your Idea Makes Money – Early and At Scale
The second idea seems pretty obvious, but there are a lot of entrepreneurs that kind of gloss over this one. Unless you’re launching a non-profit, one of the core principles of business is the need to make a profit. But often the excitement of getting a new product, service or idea out to the world overshadows the practical, profit angle.
To be fair, the quickest way to get feedback is to give away your new product or service (or make it really cheap). And there is a (limited) place for that approach. But the reality is that if you launch something at below cost then you’re not accurately modeling market demand.
There’s an argument to be made in some cases that costs will drop substantially when the new offering is sold at scale. Which could lead to a long term viable strategy of taking a loss in order to build up enough demand to hit the scale needed to actually make money. Not a great approach for most startups that don’t have a lot of money – can you survive long enough to get to break even? Also… wouldn’t you rather just make more money once you start to scale?
Ideally it would be great to make at least a 10% profit per unit (after all your overhead / fixed costs) from day one – shooting for more as you scale.
Have a Workable Plan for Ramping Up – Before You Need It
The third idea to think through before you launch is to have a clear idea of how you’re going to be able to ramp up your production when the demand for your new dream really starts kicking in.
Sometimes with a startup, there’s a strong push to just get something launched, even if it means doing a lot of stuff manually just to make it work. And considering the idea of starting small (see above), there are benefits to that approach.
But the whole point of launching something new is because you want it to succeed and that you want people clamoring to buy. To that end, it’s important to at least have solid ideas on how you could deliver beyond that initial small start. What would it take to deliver at 10X your starting capacity?
The most likely version of this challenge often centers around the unique skillset of the entrepreneur. If your business plan is centered around the idea that you are the only person who can do X, Y, or Z in the delivery of your product or service, then you’re going to run into a wall if you’re successful.
Realistically a founder will have to do most of the work just to get started. But the plan shouldn’t require any ‘unique’ skillsets that couldn’t easily be served by outsourcing or hiring.
Congratulations on Your Entrepreneurial Dream…
We need people who want to build things, who want to launch things… and those are rarer than they should be. But success requires going beyond the dream – and that’s where these ideas come into play.
- Start Small: Can you create an experiment to test your idea in the marketplace?
- Make Money from the Start: How quickly can you reach financial break-even?
- Have a Plan to Scale: Who can you enlist to do the work once your idea takes off?
What do you think? If you’re thinking about launching something, do these ideas resonate with you? It’s not a complete list – so what did I miss? I’d love to hear your thoughts.
Shawn Kinkade Kansas City Business Coach