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Business Start-Up
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The Seven Roller Coaster Stages of a Start UpBy Rob Spiegel Ready for the carnival ride of your life? Launching and building a business is a nerve-wracking journey that will change your personality and alter your very essence. You may succeed and you may fail, but the wild turns and gut-wrenching drops along the way are as predictable as they are frightening. Here’s a quick sketch of the emotional ride of a business start-up. 1. Planning dreams. This is a glorious period, the time when you get to study the market and work out your competitive advantage and fantasize the life of a business owner. This precious time of promise and hope is as sweet as a warm spring breeze and with young love in the air. At this point you’re not even aware you are about to step on the wildest ride of your life. 2. Raising cash. Much like the creaky ride up the first hill of a roller coaster, the stage of raising cash begins to hint that everything isn’t going to fall into place as easily as your planning suggested. After your get turned down by banks and venture capitalists, you start the unpleasant calls to relatives and friends. Finally you resort to your savings and bolster it was the second mortgage on your house. It comes to about 40 percent of what you planned for launch capital, but what the heck. 3. Early spending and a promising beginning. Now you’re buying office and communications equipment. You’re still fresh from life as an employee, so you get nice equipment. It’s a tad pricier than expected, but you can’t do decent work without decent tools, right? In these early days, you gain some clients or customers and you’re moving. It’s not quite enough, but it’s a start.
4. Slow pay and more spending. Hmm. You have a trickle of cash coming in now, but it’s not nearly enough to cover your meager overhead. Time for more marketing. You’re surprised to find that advertising is considerably more expensive than you thought during planning. And it’s not nearly as productive as you had thought. During this stage you begin to experience strange and unpleasant sensations in your stomach. 5. A growing cash crunch. Now you’re well into your first big freefall, and you have no idea where bottom is or when you’ll begin to stabilize. This period can be excruciatingly long. Receipts come in slow as your pile of bills keeps growing larger. The gap between sales and expenses just won’t close. Each month your sales increase, but they grow in slow motion. Meanwhile, your household bills are also falling behind, and the idea of paying yourself even a tiny salary is ludicrous. 6. The desperate search for more cash. Your small trickle of sales is just enough to fortify your belief in the eventual success of the business. All you need is more money. You’re at the wall now. The weak-hearted fold here. But with all of the crazy spins and quick drops, you’ve lost all perspective. You spouse asks how on earth you’ll ever get the ends to meet, while you insist your new marketing ideas and product twists will make the difference. You’re convinced of your eventual success. After all, sales were up seven percent last month, and expenses only rose six percent. Time to max out the credit cards. 7. Breaking into new markets and fiscal discipline. If your business doesn’t die during stage six, you may actually learn how to run a business. You tweak your product or service, experiment with marketing, gain some confidence with new customers. You count every paper clip and use both sides of copy paper. You learn how to small capital sources from two towns away and discover how to push the right buttons with bankers. You now know the rough truth of business ownership: you don’t learn how to run a company until you run out of money. The majority of start-ups don’t make the cut. But like the kid who rides the roller coaster over and over, if you can hold on, you come to enjoy the rarified air you can taste at the top of the climb, that sweet, sweet tang that lifts your spirit just before you roar crashing back toward the ground. Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring Entrepreneur’s Guide to Internet Start-ups (St. Martin's Press). You can reach Rob at robspiegel@comcast.net.
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