To Do Before Company Formation

Launching a new venture new revenue stream or startup is a serious undertaking.

Before you incorporate you need to perform the following tasks, not necessarily in this order.  The important point is that you perform tasks similar to these before you commit to your startup in serious ways; such as quitting your day job or spending serious money.

What To Do Before Company Formation?

  • Create a written list of core strengths for you, your co-founders and any unique assets that you control.  Patents are one potential example of an asset.
  • Recruit co-founders who share your vision and are willing to commit two-three years of time without salaries (no, you can not accrue unpaid salaries or other debt and expect investors to pay for it).  You need to agree on an equity split that reflects the relative value and effort to be delivered by each.  Everybody needs to understand vesting, cliffs, and dilution.
  • Identify your key offering and why it is mission critical to a target market that has the money to afford to purchase it.  Be sure that it is feasible within the constraints of the ecosystem where you will build your startup.  This includes:
    • The ability to learn what you need to know about the startup life cycle and how you will plan and manage it
    • The ability to raise required funding
    • Understanding the history of prior startup attempts in your sector, in your city.  If you do not live in an entrepreneurial hub which has the ability to support your chosen sector, is your plan practical?
  • Interview prospective customers and understand why they truly need your offering
  • Prepare a rough sizing of the revenue opportunity for your offering.  Will potential revenues in year 5 be 1 million or 10 or 50 or 90 million?
  • Prepare a PowerPoint simulation of an end user experience using your offering and use it to interview 100 more prospective customers to understand why they truly need your offering, why they think it is better than their current solution and the cost of their current solution
  • Prepare a Vision Statement
  • Think through the key success factors to get your offering to having first paying customers.  Determine what you can learn now, before you start spending money, to minimize the unknowns.  FYI some say that underestimating the cost of customer acquisition by a factor of 10 is what caused the bursting of the Internet Bubble in 2000.
  • Learn all about the Lean Startup approach to startups

Please See Also

The page on this website titled Business Plans

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