Day 1: Start with a viable idea.
Start thinking about whether your core idea makes a viable business.
How do you know? Well, honestly, you don't always. It does help to take a step back from the idea, try to be honest and objective with yourself, and ask these questions:
- Does anybody need (or want) what we're going to be selling? How bad is the need, or how much do they want it? Think about it in commonsense terms. Vigorous market research will come later.
- Will they pay for it? While they say people will beat a path to your door for a better mousetrap, that's not always true. Think about it in your case.
- Are they paying for something else, now, already? Can we go from that to honestly believing they'll pay for what you're going to offer?
- How will you focus? Do you have a strategy, or are you planning to do everything for everybody?
The answers to these questions may seem obvious, but the point of this exercise is to give yourself a reality check. Essentially, you're asking whether there's a market for your product or service. If you're laying out a lot of money, and especially if that's somebody else's money (like investors), it's worth it to do the background research.
Day 2: Determine ownership
There are no formulas for ownership, and it may seem awkward at first, but if you're partnering with someone, it's a thousand times easier to do it now than to wait until after the money starts flowing. Determine the percentage of ownership, who does what, whose idea it was and how much that matters. There are no formulas for ownership. The closest thing to it is money spent, especially if you add in time spent (so-called sweat equity) and work that into a money value. It's extremely hard to value the original idea - I say the idea has very little real value, because it's the work that matters. You have to talk through this.
For now, talk about it first, and leave it to settle for tomorrow.
Day 3: Get the agreement in writing.
Now that you have mulled over the potential legal issues surrounding ownership, it's time to get concrete. Today, get a draft of the agreement in writing. We don't mean go to the attorney, but we do mean write down the main points of your agreement with the other people involved. You don't need formal legal language. That will come later (actually, Day 17). What you want is a simple, plain agreement: percentage of ownership, money invested, time invested and who owns what.
Day 4: Name the business.
That might be just using your own name, but usually it's more than that, including not only coming up with the ideas, but also checking them for availability, and registering the name to make it legally yours.
You don't have to make it final, at least not yet (you will later, Day 17 again). Start with the ideas, though, and start thinking about it.
Many people misunderstand what you can and can't do with names. You can waste a lot of time with those misunderstandings.
Day 5: Think about the initial sales forecast.
Some people dread the forecasting, but your business won't succeed without it. How can you estimate expenses without knowing sales? How can you estimate your initial cash needs, as part of your starting costs, without knowing sales?
A lot of people think sales forecasting is some highly sophisticated scientific thing they don't know how to do. Don't worry, back here in the real world, a sales forecast is an educated guess.
How can you forecast something brand new? Break it down into pieces. Lay it out onto a spreadsheet over 12 months and make your estimates for each month. Think about how many tables, how many stalls, how many hours? How much per each? Multiply those units by the dollars per unit, and you have a sales forecast.
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Day 6: Create an initial expense budget.
Like your sales forecast, lay out a spreadsheet with rows on the left, months along the columns and a sum at the bottom to come up with an initial expense budget. Think about rent, utilities, marketing costs and payroll. Note: Remember to include what you're going to pay yourself.
Day 7: Estimate starting costs.
Start this with two simple lists: expenses you'll incur before you start, and the things (assets) you'll need to have. Expenses are things like legal costs, fixing up the location, setting up your website and so on. Assets are the stuff (inventory) you're going to sell.
The harder part is estimating how much money you need to have in the bank, to support the company through the normal drain period during the early cash-negative days. You have to lay this out month by month, comparing your sales to your expenses, watching the way the money goes in and out. Remember, in most business-to-business settings, you have to wait to get paid.
Tune in next week to find out what to do on days eight through 14 in order to get your business up and running in three weeks.