Building a Business in Indiana Planning, People and Capital Are ‘Big Three’
By Jeff Kirk
Congratulations on finally deciding to pursue that breakthrough idea stewing in your head. Now what?
Over the past several years, I have been fortunate to learn from and assist entrepreneurs as they start new ventures. Admittedly, I have yet to stake my claim as an entrepreneur. However, in working through certain issues confronted by entrepreneurs and in seeking their insights into the start-up process, there are a few steps I would follow if I ever choose to take the entrepreneurial leap.
Prepare a thoughtful business plan
Forget the notion that you need a business plan because people expect you to have one. If you go into the business-planning process with this mindset, your plan will likely be superficial and regrettably forgettable. Instead, develop a plan for you and your team. Personally, I think the business-planning process is fascinating because, if done well, it forces you to thoroughly think through and flesh out your ideas, recognize the holes in your thinking, unify your company’s vision, establish milestones to overcome, identify your competition and how you stack up against them, and so on.
As you explore, opportunity will present itself. Interestingly, it may not be the opportunity you initially thought, but it will likely be in the general area for which you have developed an expertise. One of my clients explained this concept to me when I commented in amazement how different his focus was today than when we first started out. He noted that the key to the process is to fully explore the area you want to pursue (for him it involved maturing baby boomers) and to be able to adapt when opportunity presents itself. Initially, he wanted to build and manage assisted living facilities, but while exploring this model he recognized there was a growing demand for institutional pharmacy services for these facilities.
Other entrepreneurs reiterate the same concept. In fact, I have been told the most important thing is to be focused but also adaptable because you do not know what is going to present itself in the fast-paced world of start-up ventures.
Build a team of complementary skills and personalities
Critique your own strengths and weaknesses in order to build a well-rounded team. Examine your skills, background and your personality. When I have posed the question “what would you do differently?” to first-time entrepreneurs, I have been surprised to hear their desire to spend more time selecting the right partners who provide not only different expertise but also personality types. If you are visionary, find a detail-oriented person that will do the little things necessary to implement your vision.
Create a board of advisors of high repute. It will not only establish credibility but will also indicate you have something good because successful leaders have elected to join your team.
Find good legal counsel and engage them early in the business-planning process. The better they understand where you are and where you want to go, the more they will proactively find ways for you to take advantage of opportunities such as tax planning and incentives, business organization, capitalization and fundraising strategies, intellectual property and employment matters. The key is to lay a carefully planned foundation up front, so you do not waste time and expense cleaning things up down the road.
Never run out of cash
If you are not fortunate to have personal reserves, you will need to find outside support to survive. People initially invest in you, not your idea; therefore, in the beginning find a rich friend or family member who believes in you and is willing to finance you as you chase your dream. Ask for at least twice as much as you need because it always goes faster than expected.
Once you receive capital, tightly manage your operating cash flow cycle. If possible, develop a plan to generate cash as soon as possible. As one venture capitalist put it, land a customer; better yet, land 10. This signals possible demand for your idea and generates working capital. You may not initially sell the home run, but sell something, preferably something that builds toward your ultimate vision.
These represent just a few nuggets of information I have gathered over the years from entrepreneurs much smarter and more courageous than me. Opinions will vary on starting a successful venture. However, by laying a strong foundation through due diligence, a well-rounded, highly-respected team and sustainable working capital, you should be off to a good start.
Resources: Jeff Kirk is an associate in the business services and sci-tech practice groups at Bose McKinney & Evans LLP, where he assists clients with corporate governance, corporate finance, mergers and acquisitions, and other matters relating to new business start-ups and venture capital finance. He can be contacted at (317) 684-5420 or www.boselaw.com.
A late 2006 addition to the Indiana Chamber’s publication library is Building a Business in Indiana. It thoroughly covers subject areas introduced in this article and much more. Call (800) 824-6885 to order your copy or learn more under the Finance header in the Publications section of www.indianachamber.com.
Building a Business in Indiana