The Success Start-up Guide

The Success Start-up Guide

Have a great business idea but don’t know what to do next? Take these five steps, and you’ll end up with more than a great idea; you’ll have your own business.

Jack Chen and Fernando Espuelas were willing to risk it all: their high-powered careers, their life’s savings, their future security. They were boyhood friends who wanted to make a name for themselves – and a nice chunk of change – by starting the equivalent of the next America Online. Their idea was to offer Spanish and Portuguese versions of the Internet to all of Latin America.

Fueled by that high-octane dream, Chen quit his hotshot job as a securities analyst at Credit Suisse First Boston in the summer of 1996, and Espuelas kissed his lucrative position as an AT&T; marketing executive good-bye. With $100,000 they’d saved, they launched StarMedia Network on September 1, 1996, out of a dilapidated house they rented for a song in Riverside, Conn. (The house was slated for demolition.)

The gamble paid off, big-time, for the two 32-year-old entrepreneurs. They now run the largest Internet network targeted to Latin America; it has 2.5 million visitors per month from Mexico to Brazil. With the company’s valuation estimated at several hundred million dollars during its most recent round of financing, they’ve attracted prominent investors, including David Rockefeller and Henry Kravis, as well as such strategic partners as Intel, GE Capital, and Morgan Stanley. “If StarMedia continues to be successful, we will make a lot of money both for initial investors and for the Henry Kravises of this world,” says Espuelas.

Espuelas and Chen undoubtedly had impeccable timing, but the real secret to their achievement was their systematic approach to building their business. They had the discipline to follow the five steps that are essential to starting up any successful company; they are analyzing an idea and its potential market, writing a compelling business plan, raising capital to make and distribute the product, putting out a solid service or commodity, and getting the wares to market quickly.

The rules that Espuelas and Chen followed will work just as well for your business. Here’s a crash course in how to make your start-up a success.

Evaluate your idea

Espuelas and Chen knew a lot about Latin America before they started their business. For one thing, Espuelas, a native of Uruguay, had specialized in the region at AT&T; Chen was an investment banker at Goldman Sachs, where he acquired a broad knowledge of world markets. Even with all their expertise, though, they recognized their limitations. They understood that their hunch that use of the Web was about to explode in Latin America was not a strong enough foundation for a business.

So, for two months, the partners pored over demographic figures. They learned that 20 percent of the population in Central and South America – around 100 million people – controlled 65 percent of the wealth. These folks were, naturally, the most likely to try the Web. Bingo! StarMedia Network had found its target customers.

The lesson? If you’re hoping to achieve the kind of success that Chen and Espuelas did, it’s essential to set aside some time to evaluate your idea coolly before you set up shop. Ask yourself these two key questions before you proceed:

IS THERE A MARKET FOR MY PRODUCT?

Jim Lowe and his friend Polly Nelson thought they were onto a profitable idea when they dreamed up Hog’s Head Beer Cellars, a company that would sell its gourmet microbrewed beers through a mail-order club like Beer Across America. But they didn’t know whether there’d be enough customers out there to support a whole company.

Thus, before the two beer-loving engineers from Greensboro, N.C., quit their day jobs, they spent a year taking evening business courses at a local community college, conferring with business associates, reading trade magazines about the beer industry, and talking with the brewmasters at many of the nearly 1,000 specialty breweries across the nation. This research helped them take in the market thoroughly, refine their niche in the industry further, shape their business plan, and provide accurate yearly sales projections for their venture. Their five-year-old company is now one of the leading custom-beverage service providers in the United States.

HOW WILL THIS IDEA MAKE ME MONEY?

“Just because you have a great recipe for butterscotch sauce doesn’t mean you can be successful,” says George Dawson, business consultant and the author of Borrowing to Build Your Business (Dearborn, 1997). “You have to know all the costs involved, the size of the audience, and the right pricing structure to make a profit.” If you can’t address these issues, do not pass “Go” until you can

Posted by on December 9, 1999

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