June 13, 2007
Entrepreneur on Building a New Business and Lessons Learned Along the Way
Every new business is different. Each has its own, unique product, competitors and customers, which require various growth strategies. But when starting a company, there are also a few, universal lessons to be learned.
David Altounian, the founder of Motion Computing and CEO of iTaggit Inc., recently spoke about these key learnings at the McCombs MBA Alumni Network’s Austin Chapter breakfast May 31.
1. Understand the opportunities
Before the idea becomes a product, you need to be clear why there is
an opportunity now, Altounian said.
“You need to figure out if you’re kidding yourself,” he said. “But don’t
let your MBA frameworks get in the way of your opportunity.”
Uncover opportunities by doing a gap analysis. Find out who your
competitors are, who is in the neighboring space and who has the lowest
barriers to entry in the market. Also, talk to suppliers and analysts.
This information will likely become a big part of your roadmap for the
future.
The entrepreneur must also truly believe in the idea, Altounian added.
“A leader has to have the passion that people believe in,” he said. “If
you really don’t believe, stop because people won’t follow.”
2. Find the (right) people
Altounian started Motion with about eight friends who mainly came
from Dell. When starting a company, there’s a tendency to hire people
just for skills, but he said attitude is also important.
“It can only take one bad person to totally crater the organization,” he
said. “If they are difficult when things are good and you have a lot of
customers, they will be horrible if things are bad.”
He said it’s important to be proactive about building a healthy team.
Otherwise, you spend a lot of time chasing and hiring people. In
addition, he suggested investing in employees.
“People who you get in the beginning, believe they should be
executives,” he said.
But Altounian believes his employees need to transition through several
levels: competency (individual skills), coordination (management),
leadership (execution) and innovation (strategy).
“The biggest challenge is getting people to understand where they are on
this scale and how to get them to the next level,” he said.
3. Find the (best) partners
Two other startups don’t make good partners when you’re seeking capital, Altounian said.
“There are different investors for different stages,” he said.
“Partners will pull you through when you’re trying to get supplies or
credit card limits.”
And not only do you need great partners, you’ve also got to tell people
you have them. A lot of people try to keep partners secret, but once his
company Motion told one partner about another partner, the deals kept
getting sweeter.
“The partners we had to pay were less costly and the quality was
better,” he said.
4. Find the (smart) money
Capital structures have implications. “My dad still calls me
asking about daily sales figures,” he joked.
For small, early-stage companies, Altounian recommend seeking angel
investors and boutique firms for funding.
“You need to be clear about how your investors get paid,” he added.
“Everyone—investors, potential employees, partners—wants to know
about an exit strategy.”
5. Build the (achievable) plan
Each business needs a startup plan that outlines how much is needed
to develop and ship the product. Altounian recommended doing a lot of
planning in the early stages, so you can spend the rest of your time
executing.
When setting deadlines, overshoot the dates a few months further than
what you expect it to take to complete. You also want to make sure all
of your goals are feasible.
“Achievable is variable,” Altounian said. “If your business is about
property, aggressive is good. If it is capital intensive, build slow.”
Altounian recommended keeping the internal cost structure low in the
beginning. “It’s a much more efficient way to start a business,” he
said.
Also, you should understand your competition. Altounian found that in
his experience, investor prospects used the company’s competitive
outlook as a reality test for the overall plan.
6. Execute the plan (on time)
Once the executable roadmap is created, keep focused on your
mission. Make sure to reevaluate whether you are maintaining the
company’s core values.
Altounian avoids dictating the company’s mission. Instead, he
recommended having a report card meeting with employees and asking
them to evaluate what’s broken about the mission statement.
“They will own it more,” he said.
Also, Altounian suggested celebrating when you make deadlines.
“When you meet milestones, make a huge deal about it,” he said. “If
you missed a little bit, communicate why.”
In addition, look for areas where you can add value, such as quality
and customer satisfaction.
“Be a value creator, not a value harvester,” he said.
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
