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Tips for Successfully Starting a New Business
- Categorized in: Union Resources
Tip #1: Get a 2nd, 3rd. … Opinion on Your Idea
Before you invest in any new venture or restart, can you say with 100% confidence that
your potential clients will buy the new product or service? While most firms are wise
enough to have a written business plan based on extensive research, many fail to do two
1. Get out into the field and talk to as many clients as they can! A great litmus test
for any idea is to ask potential clients “will our new product/service change your
life, or how you do business?”
2. Verify with 100% accuracy who their competition is and where the proposed
product falls in terms of value, pricing, and differentiation.
The trust outsourcing business mentioned previously is a perfect example. This business
was launched only after over 20 potential clients were interviewed to assess the market
potential of what was then a novel concept. As a result of this due diligence, first year
sales in excess of $10MM, and the firm enjoyed a first-to-market advantage with no
competition for over 2 years.
Perform’s Recommendation: Talk to as many prospective clients as you can before
launching any new initiative, then methodically gather and analyze the resulting data.
Tip #2: Maniacally Research your Competition
While we all know a competitive anal ysis is a must before launching a new business or
product, the question is how deep will you go? I tend to err on the side of paranoia. As a
result I’m “maniacal,” because I have learned first-hand how a competitive anal ysis can
significantly impact a business.
A detailed competitive review can help you understand how you will fare against the
competition, how you should price your offering, how you can differentiate your product,
and whether or not your investment will meet your expectations in terms of profitability.
A technology venture I was involved with, although backed by a $15+MM investment,
only met with limited success. During the analysis, the venture failed to identify all of its
potential competitors. In this case, the unidentified competitor possessed an emerging
technology that rendered its technology virtually obsolete.
The technology firm failed to identify the existence of this competitor because of
insufficient field research. The competitor was incubated from a Big 5 consulting firm,
5 Tips for Successfully Starting a New Business
and was well on its way as it was already working with prominent industry leaders.
Seems hard to miss, but it happened.
Perform’s Recommendation: Hire a subject matter expert to lead, or assist, with your
competitive analysis. Ensure that they and your team talk with as many potential clients
and industry players (vendors, industry associations, et al) as possible to prevent you
from missing something or someone, like your biggest competitor.
Tip #3: Build Financial Projections from the Ground-Up
Sound financial projections can make or break a business. Yet, often times, management
will approve an investment in a new venture based on financial projections that have not
been thoroughly researched and validated.
An investment business I worked with had a rocky start because its financial projections
were based on erroneous expense assumptions for processing investment trades. This
lack of understanding contributed to a change in vendors shortly after the launch of the
business. This disruption could have been avoided had the expense assumptions been
more thoroughly validated. And, before launching any new business, it would be wise to
run multiple scenarios: taking into consideration best case, moderate, and worst case
Perform’s Recommendation: One cell at a time. All revenue and expense assumptions
should be justified one cell at a time. A complete understanding of all line items, and the
thinking behind them, is an absolute must as any significant miscalculation or flawed
assumption can make it very difficult for a business to succeed.
Tip #4: Use Comparables
Many forecasts are built on gross assumptions where the conversation is something like
this, “Geez, we have a conversion rate of x% for this business. We should do the same
with this startup, even if it is a different business.”
A more reliable way of creating projections is to use comparable businesses as a
benchmark to help validate our estimates with well-grounded research, and not gross
In the case of the online broker, I did extensive primary and secondary research using
comparables; and I accurately forecasted first year revenue within $50,000 on a multi-
million revenue stream. Moreover, I was able to predict; within a month’s time, the
actual break-even point.
5 Tips for Successfully Starting a New Business
Perform’s Recommendation: Wherever possible, dig deep for highly relevant
comparables; and be realistic. When building your business case, one trap to avoid is the
“we can do it better” syndrome. You must only build assumptions with a high degree of
confidence based on well-ground research, and not gross assumptions.
Tip #5: Use a Methodical Due Diligence Process to Select Key Vendors
Having been part of 100+ vendor evaluations, I have seen all kinds of RFIs (‘Request for
Information”), RFPs (“Request for Proposal”), vendor matrixes; and I have dealt with all
kinds of buyers and sellers.
The selection of the right vendor(s) should be the result of a comprehensive, objective
and unemotional evaluation. Personalities and salesmanship should not significantly
influence your decision.
Most successful vendor evaluations involve a team approach comprised of
representatives from different disciplines (e.g. IT, marketing, accounting) to define
business, technical, and product requirements. This information would then be used to
identify potential vendors, who would be scrutinized based upon their financials, product
capabilities, pricing and customer service levels.
Perhaps the most important step before finally deciding on a vendor is a client site visit to
determine a good fit exists, and to raise your confidence level in the business and its
Perform’s recommendation: If you have not led multiple evaluations, hire a professional
that has. It’s really that simple. My belief is that managing evaluations is an acquired skill
that can onl y be learned through experience. Period.
If I can be of any assistance, please do not hesitate to contact me as (412) 441-1272 or by
email at firstname.lastname@example.org.
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