Want to start a business? This is where you start.
How do you start a business of your own? How do you come up with an idea, and how do you bring it to life?
To start us off on the right foot, let me introduce you to what I call the Founders’ Five. If the Founders are my entrepreneurship students at Lorenzo Walker, then these five questions are what they all have in common.
Displayed prominently in several places in our classroom - the Innovation Lab - is the following:
The Founders’ Five
1. Is it legal?
2. Is it ethical?
3. Is it profitable?
4. Is it scalable?
5. Does it make the world a better place?
My Founders have to be able to answer “yes” to all five of these, and they have to be able to explain “how” for the last three.
By the way: they are listed like this on purpose, from most basic to most difficult/complicated.
Let’s go through the Founders’ Five as we do on the first day of class each August.
Is it legal? This one should be really easy. If you want to start a business that is against the law, too bad. I’m not going to help my 16-year-old students become highly effective criminals, and I’m not going to help you with that, either.
Besides, most criminals probably work harder, with less to show for it, than legitimate businesspeople. Keep it legal.
Is it ethical? Hopefully, you don’t need much convincing to realize that “legal” is a very low bar indeed. For instance, it’s legal for an adult to open a store or some such to start selling cigarettes. I’m sure you need state and local licenses for that kind of business, depending on where you are, but it’s legal. Is it ethical to sell cancer sticks to your fellow human? Hardly.
Ethical standards are harder to live up to than merely legal ones, but that is the price I demand for teaching you. If you can’t run an ethical business, then please, find yourself another newsletter.
Is it profitable? This one isn’t always an easy yes. Sometimes you’ll start a business without figuring out the business model – the “how does it make money?” part. They do that in Silicon Valley all the time; some tech founders are actually proud of their early disregard for making money.
That’s all well and good. But here’s my deal, and I want it to be your deal, too: if your business isn’t making a sustainable profit, then at some point you have to admit it isn’t a business, it’s a hobby. Hobbies are awesome. Just… don’t be confused. Businesses make money for the people who run them, and for the people who work for them, and for the people who invest in them. Make a profit. That’s a non-negotiable part of my definition of a business.
You will probably spend months, even years, fiddling with the products you sell, the prices you charge, the profit margins you earn. That’s what you’re supposed to do – it’s a big part of the fun of founding a business. Just never get confused. Profits are good. They keep you in business.
As my reader or my student, you need to be able to explain how your company does or will make a profit, and you’ll have to be able to tell anyone who asks, in excruciating detail, exactly how much you make/will make and what that looks like. Money means numbers, and most of us are intimidated by math. Don’t worry. If this philosophy major can do it, then you certainly can, too.
Is it scalable? This one’s a little jargon-y. Sorry. In business, the term “scale” means, can you take it from small-scale and make it grow to any size without coming apart in your lap? Can you make it large-scale? In short, can you “scale” it?
This isn’t necessary for you to do: many people don’t want their company to become some giant global corporation, and why should they? But my students all have to be able to describe the steps they would take to go from idea to huge and global, at least as a thought-exercise. Being able to do this will help you, too. You’ll see.
Does it make the world a better place? Time was, our class followed the Founders’ Four. This one wasn’t a part of it. Then I realized, I was holding my students to an unnecessarily low expectation. I was also in danger of training a whole host of sociopaths in all these ninja business skills we learn in class, and I really don’t ever want to help a sociopath to become successful at hurting people.
Thus, the “better place” question was born. Now, you may be thinking to yourself, “Screw you, Coiné. I don’t want to make the world a better place. I just want to get rich.” Well, that’s your prerogative. Just please, log off and find someone else to help you.
Next Up: Why doing the right thing pays.