Real World MBA: 20 Entrepreneurial Lessons
Part 1: Preparation
This article is adapted from a talk given by Lextech CEO and Chief Geek Alex Bratton at a Rev3 event.
If you’re thinking about jumping off the entrepreneurial cliff, what are the things you need to be prepared to handle? What’s the correct mindset about business, particularly if you’re starting a business in Illinois?
Step 1: Develop a business plan
In Illinois—as opposed to the west coast where many shiny startups without business plans get funded—you need to have a business model. If you get something funded here, and whether it’s you selling it to a customer or you’re raising investment money, I think the idea is a tier above many things that otherwise get funded. One example: In 1996, I started a business called Web RPG. This was my one foray into the consumer development world. I started an online gaming company. It was for those of us who are old enough to remember the old school Dungeons and Dragons. It was the online community for playing that genre of games and it was great. We had a chance to explore all kinds of business models. We were pioneering banner investments, sponsorships, and more. None of this existed in 1996. We pushed through all of this, but I was easily working 100 hours a week. That was my real world MBA lesson learning what being a workaholic was, and it was necessary. It’s really hard to start a business that’s going to continue to thrive 10 hours a week. Starting something on the side to get a feel for it, to nail your first customer—it requires a serious time commitment.
Step 2: Write it down
An entrepreneur needs to learn about the legal aspects of a business as well as the written, professional way to do things. And this isn’t just about the legal minutiae. It’s about getting it in writing. I don’t mean that you need to have contracts for everything. You do, however, need to write expectations, goals, and practices down. In the act of writing it down, you and another party have to crystallize what it is that you’re saying and make sure you agree. Just the act of writing it down solves 99 percent of the problems. Frequently you’ll realize you had different expectations about what certain words or phrases meant or misunderstood what was happening. Whatever is coming up in your conversations and plans, just write it down. It could be email, an outline, or notes. Whatever format it is, make sure somebody reads it. That’s why I recommend a document in some cases and suggest you sign it. I love letters of intent where you include six bullet points and agree on what the team or your partners are doing. As you grow that doesn’t work in the same way, but while you’re getting started, it works. An example could be working with an outside contractor. The types of things you’d write down include: pay rate, who owns the intellectual property, who’s supplying the materials (computer, office, etc.), and possibly deadlines. Whatever those terms are, just get it in writing and make it simple.
Step 3: Get connected
Another big lesson on the preparation front: get connected. Be part of groups and associations. I’ve done this since high school, when I was a Junior Achievement member. That’s actually how I met my wife! It goes to show you never know what kind of partnerships you’ll develop. Find technical groups, business groups, and industry specific groups. Online networking is great, but make sure you do it in person, too. You don’t know where a brief meeting will lead in terms of collaboration. Things will be excruciating at times, and having someone to talk through things with will be a tremendous tool for perseverance and success.
Step 4: Fundraising—avoid it if you can
Preparation includes fundraising for some entrepreneurs. It’s a hard job, no doubt about it. The fundraiser on your team will talk to anywhere from 20 to 40 different organizations. They’re going to spend a ton of time putting together business plans and financials that they’re then going to refresh every six weeks because they’re always out of date when you’re talking to the next group of people. This involves a huge amount of time and effort. I recommend the exact opposite approach if at all possible. Go sell a product and get your customers to fund it for you. If a customer pays you for something, they’ve just proven the value of it and you know you have a good idea. If a customer gives you money you know you’ve got an idea that flies. If you can get three customers to chip in 10 to 15 thousand dollars, put the first version together, and you’re off to the races. I’ve seen this work. Having to go raise money to create your product or service can be a big waste of time. This doesn’t mean don’t build anything, but build a demo. Figure out what the minimal viable product is. Start with something small that allows you to demonstrate your idea without including 100 features. There are some businesses that require you seek investments and funding, which is particularly challenging in the Midwest unless you have connections. Most fundraising efforts are not terribly successful. The way it can work is through persistence and aggressive networking.
Step 5: Get used to change
As you’re growing your business, things are going to be evolving constantly. And this is something you have to be okay with. Your product’s going to change. Your office location is going to change. Your team is going to change. Your role in the company is going to change. If you’re looking to start a business and hoping to do the exact same thing for the next ten years, you won’t. Accept change as part of the process. How well you and your team adapt determines if you succeed. If you can’t adapt, somebody else is going to come out with a product that’s just 30 degrees different, and they’re going to get the customer because you weren’t willing to make the change. So it’s going to change; you just have to expect it. In summary, entrepreneurship is about changing lives. The really good news about becoming an entrepreneur: you can get through it. The highs from running your own business are absolutely amazing.
The kind of things that you can do changing the world and seeing the customer tell you how much they love your product or what you’re doing for them, that’s why I do what I do. At Lextech, we’re changing people’s lives through technology. Seeing that makes it all worth it.