Advice for starting a business

FrankGrimes

I have an idea for a business that I think could be very successful. It would involve creating a very large and powerful software application to fill a niche in the market and this would then be used by third-party companies who would renumerate us in some way (to be decided for it) for their use of it. I have total faith in the product, and it has been received positively by all friends I’ve mentioned it to (lame as this does sound).

I am a consultant for a large technology/management consultancy firm so I have all the necessary skills to produce business requirements and functional specifications for this product. I have a friend from college who is a senior software developer/architect and would be willing to come on board and together we would create the technical specifications. It would be too large for two people to develop the code for, so at the moment I would perceive that we would need to take people on board (again I have good contacts in this field) at this stage.

At the moment the high-level plan is:

1. Research the market
2. Produce a concept/mission statement document (for explaining it to people)
3. Produce full business requirements document
4. Develop some rapid prototypes (for pitching)
5. Develop functional specs
6. Develop technical specs/detailed design
7. Hire developers and testers to implement and test design
8. Launch product

How does this sound as an outline? I think getting a company on board to be the guinea pig client would be very beneficial, and the earlier their input is gained the better, though obtaining such a client could be challenging.

My problem is where do I start? I have no actual background in business, though in my time in consultancy have been making the transition from IT background to business work, as senior management believe my strengths lie in dealing with people. I am a very quick learner but at this point I need to figure out where to devote my concentration. Once I know what needs to be done I am confident I can work at it to figure out how to do it.

I have found sites giving details of the mechanics of setting up a business but its not the nuts and bolts I need to focus on at this stage: I need to come up with a plan on how to start preparing for leaving my current job and starting the business. Things are complicated by the fact that I am working full time and also carrying out extensive renovations on my house and will be for the next 6 months, but until then I can try get as much preparation done as possible.

So I guess what I’m really looking for is any advice or recommendations of books or courses on the following areas:

-How to research a market (i.e. re-affirm that there is no similar product out there, gather info on the target market, which is a bit of a closed shop)
-How to start-up a business (both mechanics of it and also how to pitch for investment etc.)
-Managing a business (i.e. not the nuts and bolts of how to file tax returns etc, but higher level stuff like deciding strategy, decision making etc)
-Marketing

Many thanks for any help you can offer.

Kinetic^

Well sir, if you need an accountant, give a PM.

madramor

heres some reading
http://www.invent.dcu.ie/general_presentations.shtml

FrankGrimes

madramor wrote:

heres some reading
http://www.invent.dcu.ie/general_presentations.shtml

from the headings that looks like great material - thanks!

mneylon

Get an accountant as early as possible

Kinetic^

blacknight wrote:

Get an accountant as early as possible

Probably a good idea

mneylon

Keyser Soze 69 wrote:

Probably a good idea

You would say that

onedmc

FrankGrimes wrote:

IAt the moment the high-level plan is:

1. Research the market
2. Produce a concept/mission statement document (for explaining it to people)
3. Produce full business requirements document
4. Develop some rapid prototypes (for pitching)
5. Develop functional specs
6. Develop technical specs/detailed design
7. Hire developers and testers to implement and test design
8. Launch product
.

For software products the most important thing to do is get a customer, even if you have to pay them (but dont). There are so many software ideas out there you need to be able to deliver case studies. Not just ROI stuff but real results. I am a firm believer of selling products before you have spent money on buying or making them.

Secondly the bain of software companies is sales, it is time consuming, distracting and alot of it simply dosn't work. So find sales partners, companies that can pitch your product to their customers as an add on. This is the fasterst way to get up and running, when you have your required number of customer then you can drop them.

After you first couple of sales then pick your customers, dont just try to get any customer, you will be pulled in all sorts of directions and end up with unmanable mess.

Obviously be careful, if you products is a good but simple idea, they will steal it. Particullary the large companies that need to justify the existance of the IT development teams. So dont provide free training to saps.


It will probably take you 3 years to get the product off the ground be prepared for it.

I could keep going on about this for days, but dont worrie about the accountant, get a good mentor first, someone who knows what they are talking about and has done it before.

Talk to enterprise Ireland, get support form enerpriise Ireland etc, and they will put you in touch with someone.

onedmc

TempestSabre

Consider a leasing model aswell. I have seen that model work quite well. As part of that spread the cost of the lease over a few years so you have quaranteed income next year and the year after from this years sales.

Also be careful about the software development. Quite a few times I have seen a badly written application become a nightmare to support and extend. It can become so bad that it takes a business down as customers lose all faith and goodwill in the product. Nothing spreads faster than the reputataion for being a bad, buggy product, especially if its a niche market. Then sales get even harder.

Make sure you have the software development locked down, like fort knox. Friend or no friend.

Zynks

I started a company in the IT sector (though in services) and ran it for seven years. I have been in the PAYE sector for five years now and intend to go back rather soon to running my business again.

Your doubts are quite common, and there isn't necessarily a direct answer to many of them, but here are some pointers you may want to consider:

1- Start getting your business plan together, and update it as your research progresses. This document is essential to talk to banks, investors, sources of grants and as a tool to help you understand where your business stands and how to drive it forward - even for a one man operation. Essential information includes: Product, Market, financial projections (cash flow, P&L, balance sheet), SWOT analysis, marketing plan, and the executive summary (many key readers will not be bothered to go beyond this section, either you get them there, or loose them forever)

2- Funding: Top of the list for any startup. How will the business be funded until it becomes self sufficient? Do not underestimate the importance of this, and as much as possible stir away from funding it by remortgaging your house. If the concept is good, get investors in, Venture capitalists are a good route because they inject good money and they are likely to add a member to the board of directors, who could become a mentor or a good reference point when the big decisions have to be made. (by the way, track the time you are putting into the business. This is capital that you are putting into it, and it will be recognised by investors and government agencies as such, even if the company is not registered yet). By the way, whatever figure you figure out you need, multiply it by 2 or three. Enterpreneurs are a sadly optimistic bunch, and here is where they regularly pay the price by underestimating costs and how long it takes till money flows in.

Enterprise Ireland can be very helpful, but as a source of funding, you may find that the amount of paperwork it takes to get grants approved, plus the claiming process to be excessive (by the way, most grants require you to spend the money before you can claim it). In my next venture I am likely to talk to them, but not necessarily for money.

About getting an accountant, it is important and many of them will assist you in putting your business plan together and look into sources of funding. You also want an accountant that will have time for you and that will come with good ideas.

About your specific questions:

-How to research a market (i.e. re-affirm that there is no similar product out there, gather info on the target market, which is a bit of a closed shop)
From what you say, this is a product targeted at corporate customers, so they are the ones that will tell you if there really is a niche (do they need it? would they buy it? How much would they pay for it?). This kind of research can be hard, it takes dedication and the volume of responses may not reach one for every ten questionnaires sent. Cold calling is not much better either, so you need to put a good list of targets and work on it.

By the way, friends are not the most reliable source of market intelligence. NEVER mention them in your business plan or in meetings with potential investors.

-How to start-up a business (both mechanics of it and also how to pitch for investment etc.)

They are unrelated matters. To register a company, all it takes is a phone call, around €300 and you have an off-the-shelf company up and running. The hard part is to ensure that the shareholding is setup properly to ensure there won't be damaging conflicts later on.

Pitching for investment, read below (from http://www.morebusiness.com):

Does my company qualify for venture capital?

Provided your company is in one of the industry segments attractive to venture capitalists, most evaluation criteria deployed are under management's control. Consequently, the due diligence process will focus on assessing management's strengths and weaknesses.

A demonstrable track record of success by the existing managers, preferably as a team, is essential. Experience in the same or a related industry is an advantage. Management will be graded on their maturity, creativity, commitment, leadership skills and communication skills. The ability of top management to attract, develop and retain new talent is imperative. Senior management should have an objective view of their own weaknesses.

Finally, management's goals and objectives must be consistent with the investor's. Chemistry between the venture capitalist and management should not be underrated, as both parties will be entering into a long term and professionally intimate relationship.

Other factors which will be evaluated by prospective investors include the following:

* How compelling is the competitive advantage of the company's product or service?
* What investment level is required to sustain this advantage?
* How is the company's market positioning unique and differentiated?
* Is competition well established or entrenched and what is their philosophy.?
* Does your company have adequate access to existing distribution channels?
* Does the economic model generate sufficient operating leverage?
* How does employee productivity, re-investment rate and capital intensity compare to similar companies?
* What is price and valuation relative to comparable private companies?
* Are existing customers satisfied and committed to your product or service?
* Is sales momentum building?

Managing a business (i.e. not the nuts and bolts of how to file tax returns etc, but higher level stuff like deciding strategy, decision making etc)
Consider of the following:

- look for a partner with business knowledge
- Study
- Look for a business incubator

Last, but definitely not least: Get ready to work harder than you ever did before. It is seriously hard and demanding to run a business. If you have a family, make sure they are ready to support you and handle your absence, stress and tiredness. Without this, you will either not succeed, or worst, damage your relationship with your family.

I wish you very good luck. Starting a business is a great adventure that can be very rewarding and even in the very worst case, will provide you with knowledge and experience that no business school or job will ever give you.

/Zynks

netwhizkid

I'm no Business person or Capitalist (rather a troublesome lefty) but my advice to you is first of all for Jesus sake don't tell no-one or even give them a smell of your idea. First of all get a patent and copyright for the thing to stop Mega-Bucks Corp $$$$ stealing your idea and leaving you penniless. Once you get it going you could become a millionaire, Don't risk your home or equity if you can get away with it though. Getting a business partner can be risky but if there are clearly defined rules and legal contracts drawn up then you should be OK. When you get rich from it, please make a freeware version available for those of us who hate paying for software and applications.

Best of Luck, Just don't catch a million volt live wire like your namesake, he had similar ideas as you took. Good old grimey.

FrankGrimes

Really appreciate all the advice. Some very interesting points raised and definitely enough food for thought for the moment. I especially now understand the need to nail the business plan and make sure it fully explains the concept but in a concise manner.

The problem is my idea is a software package and I'm not sure you can patent or copyright that. Let's pretend noone has ever created a payroll application, and my idea is for a payroll application. How can I protect that idea, cos if I'm pitching it to an investor they will then know the idea and be able to go off and do it themselves?

I know that once the application is actually written noone can just yoink the code off me, though they could easily write their own applicaiton that does the exact same thing, but at least I would have the headstart by that point.

So where can I find out more about protecting my idea for this software package?

Zynks

I am not an expert in copyright/patent, but as far as I know, what you could protect (copyright) is the code you write (if any), or (patent) a concept for new methods & systems. It may be worth it looking into it. Talk to a patent consultant - most of them offer a first free session, and make sure you do not talk to anybody about it unless they are under a non-disclosure agreement - otherwise any patent will be worthless because legally one person knowing it makes it "public knowledge".

More information here: http://www.patentsoffice.ie/en/homepage.aspx and http://www.enterprise-ireland.com/ResearchInnovate/Research+Commercialisation/Intellectual+Property+Rights+(IPR).htm

As you say, you will be mostly banking on your first player advantage, and that is a great start. You also will need to spend to ensure your business becomes well known in the sector you are targeting to play this advantage well.

On another note, have you checked http://sourceforge.net to check what else is going on in the world of open source in this sector?

onedmc

Patenting - been there

You can patent a technique in software, but its really difficult and you would need to employ an expert. And its even more difficult to proved that someone is using your idea.

Basically if it's a software application idea then forget it if its an orignal technique then u can. I just dont think it's worth the hassle unless you about to IPO and need somthing to prove to investors that your products are unique.