Is Your Business Idea Ready to Get Funded? In case you do have to look for monetary support to get your startup going, here are a few things that you might want to prepare before you ask for it.
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In the new decade, entrepreneurship is seen as a key to European growth and competitiveness. In the Netherlands alone, the government has set aside €75 million for just one of the programs. Besides solopreneurs there get various tax deductions that help them to stay on their feet during the first few years. There is also a special startup visa that was not around before 2015. For self-starters from other countries who want to "make the world a better place", it means more chances of actually succeeding. We can already see the implications of all these support measures: the new businesses are appearing like mushrooms after rain. Since 2015 the number of registered sole entrepreneurs in The Netherlands has increased by 22 percent.
With growing support towards entrepreneurship in the European Union, it's becoming more common for yet-to-be entrepreneurs to jump directly into looking for funding. The reason is simple: they want to have a monthly pay while they are building a business. Moreover, they look for money to outsource the heavy-lifting jobs on strategy, marketing, administration, etc. to various service providers.
Once the idea gets into the heads of these aspiring entrepreneurs, they make a slide deck to pitch it (sometimes not even that), and start approaching various entities asking for money, wondering why nobody is willing to give it. Although, it is no surprise that investors and funding agencies don't jump in excitement when the pitch deck features vague words and phrases like "many," "most," "little number" instead of actual facts and figures.
This tendency is more common among people with little or no work experience in general or in a specific industry related to their idea. The lack of wider knowledge about the world makes them think that what they came up with had never been done before. The step that can make up for that and provide a reality-check, market research, is usually skipped or not done thoroughly.
I believe that one of the true entrepreneurial skills is to be able to work on zero-budget, meaning what you can do yourself, you should do yourself. Funding is the last resort because in most cases you will have to pay back one way or another.
In case you do have to look for monetary support, here are a few things that you might want to prepare before you ask for it.
Know WHAT you are getting into.
Often first-time entrepreneurs see market research as tedious, unnecessary and time-consuming. But what is really time-consuming is to build up a business based on assumptions without doing a facts-based reality check. The market research can give you a few very important insights on your idea:
Is there a real need or want for it? Is anybody willing to pay for it? Who is?
How big is your market? Meaning how many customers are out there and how often are they willing to buy it?
Has it been done before? Who did it and how?
What can you learn from them on marketing, pricing, production and delivery?
Are there alternative solutions to your idea that are already strong and well-known on the market?
How much of the market is already taken by your competition and alternatives?
This is not an exhaustive list. If you want to learn more have a read of Kotler's Marketing. Answering these questions, you save yourself time and effort on reinventing the wheel. Don't think that your idea is unique simply because you don't know that somebody has already done it.
Figure out HOW you are going to deliver it.
Having answered the questions above, you most likely found that one way or another your idea already exists. It does not mean you have to drop it. It just means you have to make it different. The uniqueness comes not from an idea itself, but from the way it will be executed.
Building a business is somewhat similar to building a house. All houses have the same elements such as living room, bedroom, kitchen, bathroom, etc. What makes them unique is how these elements are located, how you use them and how you decorate them. For example, is the kitchen part of the living room or is it kept away from sight of guests? Are you working at the coffee table or there is a study room? Are there wallpapers or whitewash on the walls? You get the gist, right? It works exactly the same when building a business.
Do you have know-how or insights from your previous experience that can help you achieve the uniqueness? Are there new methods you will be using? It can be on a side of logistics, manufacturing, marketing channels, customer relations, and many other elements that you will be building.
Find WHO is going to help you do it.
One of the most commonly used and taught framework to look at building blocks of the business nowadays is the Business Model Canvas. There you will find a question about your key partners. The tendency is to answer it superficially, just to write anything. But when you are executing your idea, it might become one of the major pitfalls if not done well.
The hardest part of the Business Model Canvas is to translate what is on the paper into reality. So once you answer questions about your customers, channels, resources, partnerships, etc., you need to test and validate your written assumptions. Prototyping is key here - try to do on a small scale what you wrote on paper. If you plan to work in sustainable clothing, don't wait until you get the funding to go and talk to people and companies you plan to involve in making and selling these clothes.
Entrepreneurship is not about being a loner. On the contrary, it is about your ability to build partnerships to strengthen each other's businesses. So the key success element for your new idea would be to find somebody who believes in it enough to put their name next to yours.
To sum up, if you want to start a business to become a millionaire, prepare that it will take from three to ten years of really hard work to simply get it started and break even. But if you are a true entrepreneur you will enjoy the journey!