Excerpted from Smart People Should Build Things by Andrew Yang
There is a common and persistent belief out there that entrepreneurship is about creativity -- that it's about having a great idea. But it's not, really. Entrepreneurship isn't about creativity. It's about organization building -- which, in turn, is about people.
I sometimes compare starting a business to having a child. You have a moment of profound inspiration, followed by months of thankless hard work and waking up in the middle of the night. People focus way too much on the inspiration, but, like conception, having a good idea isn't much of an accomplishment. You need the action and follow-through, which involves the right people, know-how, money, resources, and years of hard work.
I learned this the hard way. Here's a list of things you can reasonably do on the side as you're working a full-time job to explore an idea for a great new business:
- Research your idea (figure out the market, talk to prospective customers about what they would like, see who your competitors are, and so forth).
- Undertake legal incorporation and trademark protection (the latter when necessary; most companies don't need a trademark at first).
- Claim a web URL and build a website or have it built; get company e-mail accounts.
- Get a bank account and credit card (you'll generally have to use personal credit at first).
- Initiate a Facebook page, a blog, and a Twitter account if appropriate.
- Develop branding (e.g., get a logo designed, print business cards).
- Talk it up to your network; try to find interested parties as cofounders, staff, investors, and advisers.
- Build financial projections and draft a business plan (if necessary).
- Engage in personal financial planning (e.g., cut back on expenses, budget for startup costs, and so on.)
- Create a mock prototype and presentation for potential investors or customers.
If all of this sounds like a lot of work to do before you've even really gotten started, you're right. Getting this stuff done while holding down a job would be a significant commitment. You might not have time to hang out with friends and family and do the things people like to do when they're not at work. It is doable, though; I've seen it done or done it myself.
You're just getting started. There's a big jump in difficulty when it comes to the next things:
- Raise money. In my experience, fledgling entrepreneurs focus way too much on the money -- you can get most things done and figure out a lot without spending much. That said, most businesses require money to launch and get off the ground. For example, the average restaurant costs about $275,000 in construction and startup costs. Finding initial funds is the primary barrier most entrepreneurs face. Many people don't have three or six months' worth of savings to free themselves up to do months of unpaid legwork.
- Develop the product. Product development is a significant endeavor. Even if you're hiring someone to build your product, managing them to specifications is a huge task in itself. You can expect vendors to take twice as long and cost twice as much as you've planned for. Think of the last home improvement project you paid a contractor for; most experiences are like that. Depending on the product, you may need to travel to find the right ingredients, partners, and suppliers. This phase might require raising additional money as well. In some cases, you might want to patent your product, which will involve a patent search and thousands of dollars in patent attorney fees.
- Build a team. Most people don't build a business alone, and finding quality partners or employees can be time-consuming and unpredictable. Your first employee is going to look to you for guidance, and her productivity is going to depend on your ability to guide and manage. And with partners, you'll need to make sure you can work well with them, since they're going to be with you from the ground up and for years afterward.
- Get customers. Going to trade shows or trying to get your first handful of paying customers is typically a major time investment. This can involve web marketing, producing content, and search engine optimization, all of which take significant energy and resources to generate a return. Despite the advent of social media, most things gain traction and spread at a deliberate pace. Even if someone likes your service, it's not going to be a priority for him to go around telling friends about it or liking your service on Facebook. Think about your own behavior; when's the last time you went around telling everyone you know about a company you liked? Getting early sales is very hard work. You'll likely depend on relationships to help you get the ball rolling.
You could give most people a fantastic business idea, and they would get excited about it but wouldn't quit their job to take it on. And no one has an extra ten people in the back room waiting for a good idea either. How many great ideas have you had through the years that have remained just that thing you dreamed up with your friends that one time?
Starting a new business is generally going to be a multiyear commitment at the very least. One of my mentors, Manu Capoor of MMF Systems, once told me that it takes at least four or five years to see if a company is going to work. If you're exceptional, you can tell where you're going by year three. My experience has shown me that in almost every case, he was right.
If you just read business articles and blogs, you'll get the sense that tons of companies enjoy immediate success, particularly in the Internet realm. But those are the anomalies. For most, overnight success is an extreme rarity. Generally, a company makes progress incrementally. Someone (or multiple people) likely suffered while figuring out how to make it work. Even for the rare product or software application that does become a rapid hit, it often took the programmers, product developers, or designers time to build up the necessary expertise. They might have worked on some earlier product that no one ever heard of, learned from it, and come back to build something great. This is a good description of Rovio, which was around for six years and underwent layoffs before the "instant" success of the Angry Birds video game franchise. In the case of the Five Guys restaurant chain, the founders spent 15 years tweaking their original handful of restaurants in Virginia, finding the right bun bakery, the right number of times to shake the french fries before serving, how best to assemble a burger, and where to source their potatoes before expanding nationwide.
Most businesses require a complex network of relationships to function, and these relationships take time to build. In many instances you have to be around for a few years to receive consistent recognition. It takes time to develop connections with investors, suppliers, and vendors. And it takes time for staff and founders to gain effectiveness in their roles and become a strong team.*
*Experienced entrepreneurs have a number of advantages where pace is concerned. First, they know roughly how long it will take to get something done if they've done it before. Second, they can move faster, because many of the necessary relationships are already in place (e.g., they can call people they've worked with, use the same lawyer, accountant, and public relations firm, draw on earlier investors, and reach out to past customers). Third, they can proceed more decisively because of greater confidence in their judgment, both internally and externally. Last, they sometimes have lots of money. These are all reasons why some entrepreneurs seem so prolific.
From SMART PEOPLE SHOULD BUILD THINGS by Andrew Yang. © 2014 Andrew Yang. Reprinted courtesy of HarperBusiness, an imprint of HarperCollins Publishers.