how-to-start-a-business

The Digital Entrepreneur’s Guide On How To Start A Business

I’ve devoted years of my life, putting together all the materials and resources that have helped me along the way of becoming a digital entrepreneur and head of business development for a tech startup.

I thought it just made sense to document those things along the way so that I could form a more in-depth understanding by writing about it, and you, my reader, could gain insights and expertise, without spending hours and hours of research.

In this post, I’m assembling all the resources you need to get going with a business if you’re ready to leap becoming a digital entrepreneur. I suggest there are four key areas when starting your business, which we’ll group under the acronym of MOVE, standing for:

  • Mindset
  • Operations
  • Velocity (momentum)
  • and Execution

Each of those areas needs to be mastered to design, launch, and iterate a successful business. This isn’t a size fits all model, neither the only one possible. But it is a model that can help you.

Let’s look at each of them.

Mindset

When starting a business, in particular, a digital business, you should have a 10X mindset. The reason is you might be starting a venture in a competitive space; none knows your brand, you might be missing the budget to grow it steadily.

Thus, you need to think and act smart. You can’t rely on conventional wisdom, or already walked paths. While business best practices will be your baseline, you will need to have a growth mindset, where each action you take needs to be measured and deemed successful if it gives you massive traction.

Never run out of ideas

idea-generation

A common belief is that ideas only come to creative people. In reality, we all have a flow of creativity wired in our minds. We just need to develop the right mindset, and for that reason, the guide below can help you achieve just that:

If you heard that ideas are overrated in business, that’s correct. That doesn’t mean ideas are not important.

But just that in business you will never know whether an idea will work in the real world, until you don’t test it. That is why it’s critical to have a framework to test ideas quickly; keep those that work and that have the potential to become your next business!

Find your sweet-spot

how-to-come-up-with-a-business-idea

Starting a successful business is not an easy thing to do, as most startups fail in the first years of operations. For that matter, you need to have the resources to get going the first stage and have things take off as quickly as possible.

However, in many cases, a startup will really take off and become a mature and successful organization in at least 5-10 years from its inception. That requires a huge amount of stamina, passion, and resources to get going.

Therefore, in many cases, to launch a successful business, it is important to balance two dimensions:

  • Personal dimension: are you passionate about the business you’re stating? The problem it is solving? Or about managing the team that will solve that problem?
  • Financial dimension: is there a market ready to respond to your potential product? If not, do you have enough financial resources to get going until there will be a market-ready for your product?

Those two dimensions are critical to launching a successful company. Passion (either for the business or the team that will manage it) is critical to get going for the long-run and even when things seem not to work out.

The financial dimension is critical, either to enable your business to gain traction (if there is a defined, existing market to start with). Or to be able to get going even when the market is not ready yet. Think of the case of a high tech product, based on new technology. You will need funding to make sure you will bring that product to market effectively.

The third dimension, which is about feasibility is less important compared to the two above.

When you do balance those dimensions, you are on the right path.

Look for the blue ocean

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

It’s easy to start a business in a crowded space. It doesn’t take to much searching or tinkering. You just need to look at what others are doing and fo for it. That’s the reason why everyone wants to start her own restaurant, even if it will hardly make any money.

And if you need to start a business as a means to give you the financial resources for you and your family that is fine.

However, if you have the option to build the kind of business you want, you might want to search for your blue ocean. A blue ocean is an uncontested space where you can build your business and become the key player.

Find your niche

niche-marketing

Another common mistake when starting a business is the complete lack of definition of what kind of business you want to build and how you want to be recognized. In short, call it as you like, positioning, targeting, niche, or whatever.

What matters is to find your perspective. Building a successful business is about telling your side of a story, finding your unique perspective. What is that you do that makes you different, why would people both buy from you in the first place?

Pretotype

pretotyping
Pretotyping is a mixture of the words “pretend” and “prototype” and it is a methodology used to validate business ideas to improve the chances of building a product or service that people want.

Another huge, and common mistake many entrepreneurs or aspiring entrepreneurs make when starting a business is to focus on technicalities instead of asking the most important question: do people want this?

In short, idea validation is extremely important. You can use several frameworks for that, as the lean canvas. Or you can use a technique called pretotype, which I covered with Alberto Savoia on the interview on the blog. 

Iterate up to market-fit

running-lean-ash-maurya

When you get into the process of quickly validating your ideas, to get passed the most difficult stage; where you need to find that moment when customers finally get what you’re offering them, at the point that you need to barely explain what you’re selling, as they will buy with limited friction.

Businesspeople calls this product-market fit. Once again, the definition is not important. What matters is that you pass that stage to build a valuable business, quickly.

Operations

In a digital business, setting up the operations doesn’t necessarily mean to build up physical facilities. Instead, that is about drafting a business model that will allow you to be competitive in the marketplace.

This process isn’t a one-time thing. Indeed, before your business model would take off, you’ll need to iterate it over and over again.

When will your business model be competitive? Primarily when it has reached:

In short, the right business model will be able to have a built-in monetization strategy that generates income, based on repeatable processes, that are sustainable in the long run.

Also, your business model will need to leverage on a flywheel effect, where monetization powers up your brand, rather than diluting it. In other words, when you start making money, that monetization needs to reinforce your brand, so that more people will want to deal with your company.

As your brand gains momentum, you can leverage it to enjoy higher and higher margins. When you enjoy fat margins (there isn’t a fixed percentage, but it depends on the industry and competition), that’s when you’ve mastered the operational part.

In general, the more the gap between revenues and costs increases (revenues grow faster than costs), the more you’re on the right path to building a long-term competitive advantage.

Stay lean

lean-startup-vs-corporation

Unless you got enormous funding for your business, you want to follow a lean methodology approach. This will help you to stay in business for as long as possible while tuning your business for the market.

Stay focused

what-is-okr
Back in the 1970s, Intel was among the most respected and admired companies in Silicon Valley. During that time Intel’s CEO, Andy Grove, was the man who managed to drive organizational change.
Andy Grove did that via a goal-setting process called OKRs or objectives and key results. Where the objective is the direction, toward which the organization needs to be in the medium term.
And the key results are milestones, things that allow the company to get there. Those key results need to be easily trackable, understandable and shared across the company.

While you will be tempted to test many things out, and you do want to test many of them. You still want to keep a focus on 2-3 key objectives that can have a massive impact on your business.

Stay fast and frugal

Speed is critical in business and you need to be very quick, especially when you’re starting things out because in order for them to gain traction it will initially take a lot of push.

This business plan will help you to come up with a business model to test in the marketplace:

Velocity and Momentum

At this stage, before you go to the execution stage, it is crucial you know what distribution channels you can tap into. For that matter, you need to prioritize on the acquisition or growth channel that might work best, based on the strategy you picked.

Instead of trying to tap into all the possible distribution channels, mastering one, in the short run is probably the most effective strategy in many cases.

For that matter, you need to understand whether you might want to leverage business development, growth marketing, traditional sales, and marketing or else.

Switch on the engines of growth

engines-of-growth
In the Lean Startup, Eric Ries defined the engine of growth as “the mechanism that startups use to achieve sustainable growth.” He described sustainable growth as following a simple rule, “new customers come from the actions of past customers.” The three engines of growth are the sticky engine, the viral engine, and the paid engine. Each of those can be measured and tracked by a few key metrics.

Once all the conditions above are met, you need to push on growth. Eric Ries points out that you have, usually, three engines of growth you can leverage on.

Growth framework

growth-hacking
Growth hacking is a process of rapid experimentation, coupled with the understanding of the whole funnel, where marketing, product, data analysis, and engineering work together to achieve rapid growth. The growth hacking process goes through four key stages of analyzing, ideating, prioritizing and testing.

It’s very important that at this stage, you have a growth framework in place to pass the several stages of growth you need to build a sustainable company.

Execution

When you start executing, that is when you will be able to gather critical feedback to understand whether or not you’re moving in the right direction. This is the essential part of the MOVE model.

In this phase, you need to gather feedback on several areas:

  • Is the business gaining momentum? Remember, momentum will be judged on unconventional, two-fold, or 10X growth basis
  • Does the market like my business model? You can decide that by growth or profitability or both
  • How effective is my strategy? Is the real world validating it or do I need to go back and tweak my business model?
  • What distribution channel is working so far? You need to double down on what’s working
  • Am I spending too much time theorizing? If so, go back to the execution phase to gather more feedback from the marketplace!

Key takeaways

When you start moving, you also need to make sure you’re going in the right direction. That is why, in the execution phase, you need to reconsider whether what you’re doing is helping you achieve the 10X growth you were looking for at the beginning of the MOVE model.

Or whether your business model generates growing margins. Or yet, whether you need to leverage network effects to enhance growth. Moving back and forth in the MOVE model might help you gain traction to generate a long-term competitive advantage!

Tools, frameworks and additional resources

It is always important to highlight that tools and frameworks are things that need to help us in moving toward our goal. What tool and framework we might want to use is also based on the kind of business we want to build.

The power of the brand and your brand identity

fourweekmba-business-model-framework
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.

In the business world, it is getting more and more prevalent the approach of testing all it’s possible to make your business successful and prioritize the things that work.

However, building up a successful business is also, and especially a matter of choice and identify. In short, if you’re building a company that might well be the representation of your ideas and belief applied to business.

As such, it is fundamental to have in mind what kind of business you don’t want to build. Therefore, you will need to set some boundaries in building up your company.

What’s your essence?

business-model-essence
A Business Model Essence according to FourWeekMBA is a way to find the critical characteristics of any business to have a clear understanding of that business in a few sentences. That can be used to analyze existing businesses. Or to draft your Business Model and keep a strategic and execution focus on the key elements to be implemented in the short-medium term.

While business models are complex abstractions, when you start a business, that is the best time to define its essence. What are the core and critical characteristics you want to build your business around?

Master the problem

customer-problem quadrant

Leaner Canvas by Ash Maurya of LEANSTACK

If you’re building a business, you need to master your customers, or being clear about the kind of customers you want. That might sound counterintuitive, yet from the way you design your business model, it will also depend on the kind of customers you’ll attract.

And the most important aspect you need to focus on is to understand what problems they have and solve them. That is the simplest route. Two things to highlight. First, solving a problem is not about functionality alone. Solving an emotional problem is as important as solving a functional problem in certain industries.

If you think about luxury items, a purse is not an object where a woman can deposit her stuff. A purse represents a woman’s status. In short, that woman will feel special, act as such by wearing that purse. This is the whole logic of brand building and demand generation.

Thus, as an entrepreneur, if you’re thinking about a bag as a functional object you’re missing the main point. Instead, you need to start from the psychology of your ideal customers and understand what problems and desires they have, which connects to the second point.

Second, from the encounter of functionality and demand generation, that is how you build a successful business. There are certain industries where functionality matters more than perception. And other industries where instead perception and the ability to generate demand can be very powerful.

Understanding when to leverage functionality and when to leverage on perception is a key element of your business strategy. For instance, in the digital world, we might think that most of the value is driven by algorithms that objectively score and rank things out.

However, that is not the case. Algorithms are driven by business logic, and perception is shaped to drive and incentivize users to act in a certain way.  For instance, in 2019, Twitter redesigned the whole platform.

In a story by WIRED about the Twitter platform redesign, Stone, Twitter’s co-founder highlighted, referring to the past years,  “we were just working as fast as we could…we weren’t trying to make it look good at all.”

Yet when Twitter understood the importance of changing the perception on its platform beyond growth metrics, that is also when it started to invest massive resources on its redesign, to nudge people to act on the platform in a certain way. This is extremely important to understand.

Because a redesign is not just a piece of new code added to the platform, but it represents the essence of the business. How you want your business to be perceived and how ideally you want people to act in the context of the boundaries you defined with your core values. 

When you build a business you get your chance to build a context. Would you live in a context that you don’t like or agree with?

Design your business model

business-model-canvas
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.

Blitzscale (if needed)

blitzscaling-business-model-innovation-canvas
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

In certain scenarios, the business might look like a war. In those scenarios of threat, where your business might not make it to the next day, a tactic like Blitzscale might work.

Key resources:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, professionals, and entrepreneurs in 2019 alone | Gennaro is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate and become profitable | Gennaro is an International MBA with emphasis on Corporate Finance | Subscribe to the FourWeekMBA Newsletter | Or Get in touch with Gennaro here

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