Updated: Jul 17, 2020
To have a company is really cool. How do you make one yourself?
A startup takes four stages:
Gather resources. Launch. You may fail the first time, but that is OK.
You are experienced. Design a company.
Execute the business concept, run the company through growth, metamorphosis, scaling, and expansion until it reaches ceiling.
We talk about step 3 in this blog.
HOW TO DESIGN A GOOD COMPANY.
A company grow according to the following steps:
Offering and value proposition
Build channel and funnel;
Make the offering or product
Validate the value proposition and establish price
Build cash flow and traction
Get funding and investment
Get sustainable profitability
Establish company culture and mission.
Company go through metamorphosis, scaling, and acquisition, build trust and brand power.
Never tell people "I just want a business I don't care about money", or convince yourself "customers and investors will somehow come to support my idea". These won't happen. A company is only the machine that executes the business. What is the new business? there are following elements. A company designer needs to confidently (not guessing) answer the following questions:
Who do you serve?
How do you make profit? how do you draw new customers in?
What value do you provide and what method you do use?
How do you grow and scale your company so it keeps on growing and everyday is busy and happy?
Who is your buyer/intermediary? who is your provider? who is your competitor? how would someone copy you or compete dirty? how do you fend them off?
How to draw and keep talents?
How to draw and keep customers?
If you are starting a business, that means you probably don't have the offering, don't have the confirmation, don't have the company and good hands, and don't have a good stable income, and perhaps being eyed by incumbents and copycats.
Your offering needs to deliver value. Give value to target audience, they will pay you. Value is a complex word, it means a very unique delivery of enjoyment, convenience, or effectiveness. If you are making a product, it is not only important for the product to be useful, but it must be effective, better yet, uniquely effective and very low cost for the effect. You don't just want to solve a problem, not just satisfy a need, but you want to satisfy a desire of the targeted audience. You need to be enjoyable, cheap, effective, high quality, and guaranteed to work.
Your offering, for example a product, is not enough to just be useful. it needs to have effects, unique magical effects at discounts, and is a game changer. Otherwise the old way is fine. People can wait people can tolerated.
Help with a trust relation. Benefits to core hardwired values with discounts. Game changer so people can make a living with you.
A company design is like a production. The founder is the production director. A design board has the following components:
Recognize timing and PESTEL;
The starting target audience;
The type of business and location in industry/market/supply chain;
Get the financial numbers, you need bullets to attack this market. [Never and dream and project and expect people to invest in your fantasy venture[. You can work for free but your employees won't. Remember time is also money - if ten people team sit and wait for half year, that is solid cost. Identify the cost of development, cost of artifact manufacturing, cost of low volume production, cost of marketing, and possible price range your audience will accept your product; identify the cash flow and growth of cash flow; identify the profit margin. If the product is brand new, identify the customer education cycle and cost. Find the chance your financial situation can last before you give up company equity or attract investment.
What is your skills, experience and reputation;
Starting capital and how long is the ramp;
Design the value proposition including the target audience in the market and ecosystem, and differentiation;
Identify business design which is how to make sales happen sustainably in best and worst cases of competition
Identify business model which relates to scaling, customer lead in, and profit generation
Identify vision and mission, assemble team;
Identify path for growth of business and company, metamorphosis and exit strategy.
Our of all companies launched, perhaps 1/10 of that will find validation - the target audience will actually pay Out of that, 1/10 will find enough revenue stream to make it interesting. Out of that, 1/10 will be able to make profit happen. Many startups fail after 3-4 years. Failure can even come after the company receives VC money, burned all VC money, or even went public.
So let's go to each element of the idea:
If you have some building skills but no capital, you should really start by examining what you can build and try to make it something valuable. You should try the following:
helping people who wants to make money make money; get close to consumers;
Identify the list of industry your product made with your skills can connect to;
identify the biggest trend where people want to make money in that industry;
cater to that crowd.
Presenting things to consumer is not a good option because you don't have money to reach them.
Presenting 2B products is dangerous because they may not have the resources to reach a certain quality standard.
In a good business, you have the following harmonious elements:
focus - population - scaling
market - value - audience harmony
profit - talent - barrier harmony
quality - pricing power - flanker
scaling - > leads to quality -> leads to scaling
Recipe for designing a business concept that makes money
Identify time and PESTEL;
identify one of following
or identify a core Value Relation type;
or identify a business power play;
IDENTIFY a population that can be better served and the VR type that can be remade with time, identify the entire industry supply chain and ecosystem and identify the busiest node that can be monopolized by one organization;
find the biggest crowd and backtrack, through funnel and through its entire supply chain, develop industry nodes that can be accessed, with VR and power play type in play, and identify market/lead expertise availability; Capture the nodes and niche first.
develop strategy that allow metamorphosis (e.g., crossing), scaling (more products or customer numbers, or even types), growth, and frequency. Remember a company spend a lot of money and makes small amount of money for each transaction (called value), hence the register must ring all the time.
use time and location to subdivide the market, supply chain or the audience.
Find a niche that can grow. In this niche, you should have pricing power, especially diffusion from one group of people to another (location, economic status).
Examples benchmarks: Apple, Microsoft, Amazon, Costco, PayPal, Square.
Tech landscape change x VR x Fat Monopoly Node = MSFT, Amazon, APPLE.
Costco: High quality x Low Price
Big industry. Big disruption. Big time. Big node. Big VR relation. Big hardwired value. Power Play. Monopoly.
Big landing niche. Fast to revenue.
Other critical ingredients that are important for the "big company" magic:
business method - lead generating method that is based on disruption;
business method for capture beach heading landing;
business method, for early survival and earning "get out of jail" tickets;
business positive feedback where size brings more value;
the products storage and distribution cost, for example expiration date;
life cycle of a company or product is long
products are consumables and needs to be replenished
business method: dealing with copy cats, rich competitors, and dirty competitors.
Some elements first time company, business or product designer don't appreciate
name of company
brand is what your name becomes after your company is rich
story of company
business frequency and regularity of company
magic of products
a unfair advantage point (business is not entirely fair. If you want to be fair, you should not make any money).
customer lead in methods
your company or products stand for what verb
your contribution to the ecosystem
ideally, a company would grow more and more secure as you age
is there a path from niche to monopoly with scaling operations
can you provide for the people living in sales channel
debt ratio should be low.
location of the company matters
elements of seduction, desirability, magic
metamorphosis and scaling of the operations;
the elements of fun, refreshing, fresh, updates.
Make sure the founder does not become a slave, the startup is not just a lesson, the company does not just become a "cash flow node" with no profit.
the initial crowd and eventual crowd selection.
your message to your potential customer, employees are all different. Positioning statement like "best" "first" do matter. Being authoritative and professional, signature, rememberable is part of the fun and key.
People are drawn in with phrases like "Instant rich with no work", "How I got rich". People like games and interacting with others in isolation. The way you get people's attention and SEO ranking is not the same as your message.
For each individual, the options are:
Work and achieve excellence.
Leave all non-core value products and small audience ideas to other people who has time and money and channel access.
Focus on big audience, deep value, everyday products. In big fat market, your chance of correcting first-timer mistakes is higher.