Tips for Overcoming Common Barriers to Finalizing the Creation of a Company
If you’re like most entrepreneurs, the idea of starting a business is exciting. The nuts and bolts of company formation, less so.
It’s like asking a kid whose been outside riding his bike all afternoon to come in and do his homework. The homework is going to translate into a good job someday, but right now all you want to do is sail down that big hill and feel the wind in your face.
On top of the fact that filling out paperwork can be a monotonous chore, there’s a lot of anxiety and uncertainty involved in creating a company.
- How do you know that you’ve chosen the right legal entity?
- Is your product or service going to turn a profit before you exhaust your start up funds?
- Did you do the right amount of market research?
- Is your family onboard?
- What licenses do you need to start operations?
- What about the formation documents? Is there an important requirement that you’re forgetting?
Don’t let yourself be derailed by second-guessing.
Here are some tips for overcoming some of the main barriers to finalizing the creation of a company. Take them to heart, and you can push through that confusion and anxiety and get on with realizing your dreams.
Face Your Fears Head On
There are so many fears related to starting a new business that Udemy even offers a class in overcoming them.
Some of the many forms fear can take:
- Fear of flying solo, without the security of a regular W-2 paycheck.
- Fear of disappointing friends and family.
- Fear of bankruptcy and destroying your credit.
- Fear of humiliation.
- Fear of not having anyone believe in your company.
Like any fears, these can take on a life of their own in the same way that all fears do — through avoidance.
Let’s assume you are afraid that your husband won’t be supportive of the long hours you need to put into launching your start up. You’re probably anticipating his negative reaction rather than sitting down with him to discuss the time you need to get the business off the ground.
In fact, you might be so afraid of his reaction that you’re planning on sneaking in work hours here and there — hoping no one in your family is going to notice, and that you’ll be able to count on your spouse to take up the slack when you do ask.
Not only is this a terrible time management strategy; it’s likely to cause the exact sort of resentment you were hoping to avoid.
The solution is to face you fear head on. Sit down with a calendar and plan the time you need to spend on getting your business established. Present this information to your family calmly and ask for their honest feedback and support.
The same principle applies to all the fears associated with creating your company. Don’t allow them to build up in the abstract. Develop concrete solutions and get definite steps toward resolution.
That could mean approaching a new potential funder every day, taking a community college class to refine your business plan, doing more industry research.
Matthew Toren, writing in Entrepreneur, explains: “Resilience comes from facing your fears. You become better than your surroundings and transform yourself above the fear and into bigger and bigger success.”
Create a Vision Statement
When you have a great idea, you see the future in broad strokes. Here you are striking the gavel on the floor of the New York Stock Exchange. There’s your product, the number one seller on Amazon.
What’s probably a lot more sketchy is the journey there.
That’s why you need a vision statement.
Before telling you what a vision statement is, let’s explain what it’s not. A vision statement is not the same as a mission statement. Nor is it a business plan.
- A mission statement tells your prospective customers what your company’s main purpose and goals are in the present moment.
- A business plan describes the nature of the business, including how you intend to source and market the product, your financial background, and a projected profit and loss statement.
Mission statements are usually included on a company’s website or founding documents, while the business plan is most often used to secure funding from banks and other lenders.
A vision statement reveals what your business hopes to achieve in the long term. It’s where you align your values with your objectives, producing one short statement that reveals who you want to be as a company. You can think of it like a roadmap for your company’s future impact on consumers in your market share.
Here are some famous examples:
- IKEA: “Our vision is to create a better every-day life for people.”
- Nike: “Bring inspiration and innovation to every athlete in the world.”
- Patagonia: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”
- Disney: “Make people happy.”
Vision statements aren’t long, but because they distill your company’s purpose down to its essence, they require a lot of thought. In a way, it’s actually this thought process that is the most valuable to a company on the verge of formation.
Once you have a clear vision statement, you will be better predisposed to make other formative decisions about your company, such as what legal entity to choose, how to choose your start up team of employees, and how to finalize a business plan.
Determine Your Market Size
Knowing your market size is a crucial step in avoiding one of the most significant barriers to getting your company up and running — accessing capital funding.
Alejandro Cremades, the author of The Art of Startup Fundraising and a serial entrepreneur, explains that new companies aren’t going to attract VC or angel investors unless they hit two targets:
- They can demonstrate that a large available market exists for their service or product.
As Cremades puts it: “Even if you have the perfect team and product the returns will be limited for potential investors” unless your available market is large enough, “making your investment opportunity less attractive.”
He advises that start ups determine not only market size but also how much revenue the market made — i.e., the total sales of your future competitors.
By examining the growth rate of the companies vying for revenue in your available market over a period of years, you can calculate a 1-to-3 year projected growth rate for the total market. This will allow you to estimate the potential viability of your company.
- They know what their total addressable market is.
When you start the business, you won’t be selling to the entire available market. Instead, you’ll target a smaller niche, price point, geographical area, and customer size.
You can determine the total market share for your company by calling around anonymously to your competitors to find out what their volume is. Those figures will make it easier for you to determine what fraction of the market share is a reasonable target for your company.
The more granular you are about your figures and projections, the better chance you have of securing funding from investors — that is, provided there is potential for long-term growth and expansion.
What if you don’t need to borrow a dime?
Determining market size still makes perfect sense. Like developing a vision statement, it is an exercise that forces you to delve deep into details that many entrepreneurs overlook.
Develop a Marketing Plan
Your customers need to know your company exists. Otherwise, no matter how much due diligence you perform, or how amazing your product or service is, you won’t be noticed.
In fact, failure to determine market fit and reach the people who want to buy your product is one of the top reasons businesses fail.
Your marketing plan should do several things:
- Conduct a situation analysis.
The situation analysis is an examination of the unique benefits you’ll provide, or your value proposition. Your goal is to capture a niche or segment of the total market. In order to do that, you need to know what you provide that no other company can.
- Make a list of marketing goals.
Your goals are the market share you hope to capture through marketing your service or product. It’s good to be specific when determining these goals. “Attract venture capital” is not a marketing goal. “Increase revenue by 20 percent in the next six months” is.
You should also segment your goals into short and longer term objectives.
You might plan to expand your mailing list by 1,000 individuals in the first quarter and increase sales by 10 percent. Your long-term goal could be expand your reach through outbound marketing and increase sales 20 percent each year.
The reason you want to segment is you don’t want to commit time and energy to a marketing plan that isn’t working. If you’re not hitting your short term goals, it’s time to head back to the drawing board.
- Identify your customer.
In order to reach customers, you have to know who they are. The market for bacon cheeseburgers is different from the market for vegan sandwich wraps. What attracts a retiree is very different than what interests a teenager.
Conduct market research to see who likes your product and use the data you collect to develop a list of applicable customer personae.
- Determine which marketing tactics work best.
You’ll need to decide if you want to focus on inbound marketing — posting relevant content on your website and social media channels — or use a combination of traditional outbound marketing and inbound marketing.
Never forget that the goal of marketing is to reach the people who want to buy your product.
We know a dog behaviorist who groomed her standard poodle to look like a mad scientist and lay the foundation for a successful career just handing out business cards at dog parks around the city.
Once you really understand who your customer is, creativity and ingenuity go a long way toward shaping the details of your marketing plan.
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