The Small Business Toolkit

The Business Toolkit is designed to help entrepreneurs through the early stages of development. It is recommended that all entrepreneurs be able to deliver on the following before seeking out later stage resources. This list is not a comprehensive list, but is a solid way to work on your business. It ultimately will take you through a process to providing stronger assumptions for creating business assets like business plans, financials, and other analysis needed for raising resources or dealing with professional service providers like CPAs, funders, etc.

There are no shortcuts here. There are many who have been working for their business for years, yet have not worked in an organized and deliberate fashion in shaping their business and advancing it to certain goals and milestones. It is not uncommon for entrepreneurs to come to us and realize that they must revisit these methods in order to give them the best chance for success. Entrepreneurs spend months, even years, working through this structure. It is recommended to work through this toolkit, which provides a construct for building and strengthening your business.

The Second D: Customer Discovery

With entrepreneurs and the leaders of the business addressing knowledge, potential future conflicts, and other macro issues, it is time to focus on product market fit by testing their business with real customers to ensure the fundamental hypotheses of the business are facts and not false visions. There are tools for this and how to digest and compile this data. If your business has never gone through a discovery process or it has been more than a year, you should consider engaging in the below steps for customer discovery.

Basic Resources:

• In order to get to meetings and find resources you must be skilled in Making A Great Verbal Elevator Pitch (.doc)
• Here is a video on building your Elevator Pitch too.
• If you need to ask someone else to to make a connection via email we provide these tips on Making a Great Written Elevator Pitch (.doc)
• For those in hot industries or that have relevant news we recommend these Quick Tips for PR & Media (.doc)

Customer Discovery In Depth

• First off it is important to know which hypotheses need to be verified hence the introduction to The 4 Hypothesis of Customer Discovery
• These three videos will walk you through the process of customer discovery in greater detail.  Even for those that have already launched their product or service and have significant revenue should revisit these videos especially if you never engaged in a formal discovery process:
  • Customer Discovery: Part 1
  • Customer Discovery: Part 2
  • Customer Discovery: Part 3
• After starting the customer discovery process or revisiting it we recommend re-examining your business with the Business Model Canvas and the Business Model Canvas Podcast. You can download a PDF version of the Business Model Canvas here.  Breaking your business down into 9 building blocks makes it easier to quickly see strengths and weaknesses in the business.

When you build your business and conduct customer discovery you will want to track your interactions with customers.

The Third D: Delivery
Once the four hypotheses have been defined into a solid and narrow plan for building your business, the team needs to shift some of its effort toward developing and building the product or service. For startup businesses this is best accomplished by moving from early prototypes and proofs of concept into a minimum viable product and then into a form where customers are willing to pay. For existing businesses this is accomplished by revisiting the design of the product or service because many, even if in business for years, are working with a minimal viable product or less. This method is iteration based.

Iteration Trumps Perfection

Many entrepreneurs are prone to believe they can deliver a perfect product or service without interim versions or prototypes. The process they use consists of building out a specification for what the end product or service will look like, how it will function or deliver, and even the messaging surrounding the offering.

After the specification has been set, then work begins in earnest for several weeks or several months, or maybe even years. At the end of the build phase these entrepreneurs will emerge with the golden key, the magic formula, the secret sauce, or the silver bullet.  Much to the surprise of these entrepreneurs the customer will not pay for the product or service.

Even if entrepreneurs conduct superior customer and market discovery work, they should continue to engage the customer in shaping the future of the product or service. Market conditions can change rapidly along with customer needs. Furthermore, through actual interaction with the interim versions or prototypes the customers could uncover that a key feature was missing or needed to be changed to support adoption. Finally, the entrepreneur will uncover difficulties or complexities in delivering value to the customer with each version/prototype.

Perfection is difficult to attain. Iteration however will get the founding team as close to perfection as possible in the least amount of time. There are truly no shortcuts.

Customer Feedback and Phases of Delivery

There are key reasons why proof of concept work is important to the entrepreneur, startup, and existing firm.

Proof of concepts are used:

1) To verify a given principle behind the product or service or to gauge the design appeal.

2) To provide confidence that the startup can in fact deliver value to the customer.

3) To provide confidence to investors and key partners that the startup can deliver value to the customer.

4) To help with articulating the value to others (i.e. showing is bettering than telling).

5) To aid in the process of protecting intellectual property through patents or other means.

To determine if the business is on the right track in delivering value to the customer, the entrepreneurs need to take the existing product/service or build a prototype of the product or service and take it to the customers for feedback immediately before building the next version. The customers or business friends that are contacted during customer discovery are likely very willing to give feedback on the prototypes. Reach out to groups of them at a time to learn as much as possible.

The more often the entrepreneurs can receive feedback, make needed changes, and take it back to the customers the faster the product or service will take shape.

If you are in the early stages, prototyping can involve rough models, lacking even functionality. They could be wireframes on paper, videos, animations, cardboard models, or diagrams.

At the intermediate stages of development, the product or service should be minimally functional. It should demonstrate in a limited or basic way how a customer would make use of the offering but still lack refinements and the design of a final version.

Once the product has been developed sufficiently, the transition to a useable version often takes into account user experience. User experience can involve design on every level including-visual, audio, tactile, linguistic, and ease of use. It is important that the product appeals to the target customer in this phase.

Eventually, as the business continues to iterate over the product or service and give it to the customer for feedback, the entrepreneur will notice a change in the perception that the customer has toward the business. Instead of providing feedback they will likely begin asking about when it will be finished for their use. They will also likely begin to tell friends and colleagues about the business. It is at this point that the team knows they have something valuable and something the customer is willing to pay to use. This means the founders need to move into the next phase of development – the Dollars phase.

Never Ending

Much as customer and market discovery work never truly ends, the same is true for the delivery phase. Development doesn’t stop at the final version. Periodically, even as frequently as every one to two weeks, a new version should be released to allow for additional customer feedback, which will be useful in tweaking for even later versions. Over time, the customers should notice careful alterations based on their needs. This will grow a loyal customer base, which will help build a scalable business.

Resources:

• For those building a service here is a methodology for prototyping a service and here is another method.
• Other small businesses can prototype using a system like this.
• For more information on prototyping quickly we recommend you head here to Rapid Prototyping (startup phase)
• To learn more about how to organize your delivery phase for greater success head to this blog post of a Prototyping Design Sprint Example

The Fourth D: Dollars

Once entrepreneurs are developing themselves, customers have proven that the business is viable, and a product or service can actually be produced, then it is time to formalize and codify the business for growth and financing.

Sell. Sell. Sell.

First we need to focus on sales and business development. The cliche is true: in order to get more money to grow, you must first prove you don’t need it. That is to say that the best way to get financial resources is to show you can grow your business without them. Learn more about business development with this document: Business Development Tips (.docx). Those businesses that are not showing consistent growth will not be candidates for future financing.

Considering taking on debt or equity financing you may want to first explore what they both are by heading to this article.

Debt Based Financing

Most businesses will be financed using debt sources which include loans and credit cards. There is a lot to learn on this front and we have assembled a separate in depth guide to debt based financing, the materials needed to pitch it to banks, and other tips on securing it. Read about all that by going to our Debt Financing Tips (.docx).

Equity Based Financing

For those that are thinking that equity based financing is possible (remember that only 6% of all businesses will receive equity based financing and most of that money will come from friends and family) you will want to take a look at this:

• This is an outline of what equity based investors will want to see: Introduction to Investor Pitching
• And this template can help you build your investor pitch in PowerPoint: Investor Presentation Template (.ppt)
• If you are looking to understand business valuation then this document will be helpful: Valuation Document

Assessments in the Dollars Phase

Regardless of the type of financing that you are going after you should thoroughly assess your business on other dimensions.

• Business is all about managing and mitigation of risk.  Read more about that here: Mitigating Risk
• Branding & Marketing position should also be reviewed and modified periodically
  • Here is one way to examine your Branding & Marketing (.doc)
  • We also recommend your team fill in this Brand Strategy Canvas (developed by our partners at Archer Malmo)
  • Throughout the process we want to highlight the Stickiness Factor (.doc). It is our hope that you build products and services that are sticky.
• Competition must be analyzed and presented in a clear context both to internal and external stakeholders.
  • Check out this Guide to Creating a Competitive Analysis (.doc)
  • For those that want to dive in deeper, particularly in existing industries we recommend using Porters Five Forces (.doc)
• If you are looking for clarity on your unique selling proposition this Competitive Advantage Checklist (.doc) can help.
• Financials will always be the foundation of you business. If you have not built a financial model for the future of your business, it is time to build that now. Here are two forms of financial model
  • Many businesses have carry forward and residual revenue that comes in over time. For that you will need a financial model that accommodates a “Waterfall” approach. This one does that and while it is an internet based business it can be adapted to other industries.
    • Spartina Internet Business Model Instructions (.pdf)
    • Spartina Internet Business Model Worksheet (.xls)
  • For those businesses that are more transactional we recommend starting with this Sample Financial Worksheet (.xls)
  • One area that is usually overlooked when building financials is the Sales Cycle and the Temporal elements of it. For that we recommend that you examine yours with this tool conveniently called the Sales Process & Cycle (.docx)