4 The Startup Equation - McGraw Hill Education
4 The Startup Equation
The Startup Equation Notes
Learning Outcomes
After reading this chapter, you will be able to
LO 4.1 Describe how to build the foundation LO 4.2 Understand how to craft the equation LO 4.3 Reflect on how to grow the dream LO 4.4 Assess the periodic table for startups
Introduction
Many books try to get you to subscribe to how they think you should start and grow your business. We know that one size doesn't fit all. Just like you, your business has its own personality. However, we believe that it's possible to craft an equation that fits your business perfectly, no matter what type of business you plan to start. Whether it's a SaaS platform or a food truck, there are specific modules or "elements" that every business will have in them. But those elements might look slightly different depending on the type of business. The Startup Equation allows you to plug in the elements that are the most relevant to who you are as an entrepreneur, the type of business you're looking to start, and how you're looking to grow it, if at all.
It's also important to know that even as you grow and change, so will your business. What may work for your business in the first two years may not be relevant in year three. By adopting the equation that matches your business, you'll have an adaptable structure that supports you every step of the way.
To make the equation easier to understand, we've broken it into three parts (Figure 4.1):
1. Building the Foundation
2. Crafting the Experience
3. Growing the Dream
Each section has elements that are vital to every business. Let's get started by breaking down the sections.
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Managing Startups Notes
THE STARTUP EQUATION
((En(Id))+So)x + ((Cu(Te+Ce))Br)x + (((Fn(Sa+Ma))Sc)ln)x)
Foundation
Experience
Growth
The Elements
Build the Foundation
Craft the Experience
Grow the Dream
En
The Entrepreneur
Id
The Idea
So
The Solution
Figure 4.1
Cu
Culture
Te
Team
Ce
Customer Experience
Br
Brand
Fn
Funding
Sa
Sales
Ma
Marketing
Sc
Scale
Xf
X-Factor
In
Innovation
Check Your Progress
1.What are the three primary functions to lay foundation of any business?
2.Which of the primary functions help to determine the personality type fits for an entrepreneur?
Self-Learning 40 Material
Learning Out come 4.1
Building the Foundation
Before you can build a business, you need to lay your foundation. You will note that in this group of equation functions are three primary functions--Entrepreneur (En), Idea (Id) and Solution (So). These next few chapters will dive deep into this part of the equation and their respective elements with the aim of showing you what elements might work for you so you can build the foundation of a custom Startup Equation that works for you.
Foundational Equation Functions
We start with this section of the equation because in order to launch your startup, you first you need to understand who you are, what skills you bring to the table and why you want to start a business (Entrepreneur (En)). Then you multiply that times the concept or vision you have for the business (Idea (Id)). Together they are combined and applied to how you will actually build your startup (Solution (So)).
They each have two sub-groupings that contain the elements for that function of the equation. The first equation function, Entrepreneur (En), helps you understand what Personality Type fits
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you and the Approach you take to it. After getting a feel for yourself as an entrepreneur, you will explore the Idea (Id) for your startup through the various Core elements and refine them with Generation elements. This will lead to defining the Solution (So) that includes the Business Model elements and the Approach elements to build a minimum viable product and refine how your startup will position itself to maximize its chances for success.
The Startup Equation Notes
Learning Outcome 4.2
Crafting the Equation
Now that you have begun to build the foundation, you must craft an amazing experience. You will note that in this group of equation functions are four primary functions--Customer Experience (Ce), Team (Te), Culture (Cu) and Brand (Br). We will explore how it is not only important to build a product and put it out there but also to craft an experience within the company and the way customers perceive and experience the company too.
Crafting the Equation Functions
A business is only as good as the experience. This rule applies to both employees and customers. We look to this section of the equation to find the answers that will help you dig in and craft the experience that you want people to have when they choose your business. First, look inward to find who should be part of the startup's Core and Extended Team (Te) and then explore ways to build company Culture (Cu) through various Core and Additive elements. Then we explore what makes a great Customer Experience (Ce) through first covering the various Programs and Testing elements. All of this is multiplied or rather amplified by building a stellar Brand (Br) experience leveraging the Identity and Senses that communicate the experience that customer and employee should expect from the company.
Learning Outcome 4.3
Growing the Dream
Once you have worked on building the foundation and crafting the experience of your startup, what comes next? The next and what many would consider the toughest phase is growing your dream beyond you and your initial startup phase. For some this could entail automating things better so your lifestyle business can run smoothly while you take some much needed vacation. For others it will be about taking those early adopters of your great product and the team that helped get you there to that billion dollar exit you have always dreamed about.
You will note that in this group of equation functions are six primary functions--Funding (Fn), Marketing (Ma), Sales (Sa), Scaling (Sc), Innovation (In) and X-Factors (Xf). These next few chapters explore how startups grow, scale and innovate as well explore using the intangible "X-Factors" that power the entire equation and truly are those elements that can't be created but must exist in some way for a startup to achieve success.
Growing Equation Functions
A successful business only has value if you can go away from it for a little while and it runs without you. We look to this section of the equation to find the answers that will help you grow and scale your startup to the height of success and maintain that momentum. First, we explore the Core and Model Funding (Fn) elements that are available to startups based on their goals and size. We then look to more operational functions with Marketing (Ma) Programs and Channels to attract customers as well as the Sales (Sa) Channels and Campaigns to close and retain them. Those
Check Your Progress
1.Which factor multiplies the overall experience manifold among crafting the equation functions?
2.How do you grow the dream in the initial phase of the startup?
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Managing Startups
Notes
Check Your Progress
1.What is an X-factor in growing equation functions?
2.What is meant by the startup alchemy?
3.What is the startup equation?
elements are then multiplied by Core and Measurement Scaling (Sc) elements which all are in turn multiplied by the Method and Engine elements to drive continuous Innovation (In) in your startup. Finally, the entire equation with all of the functions is amplified by our "eXponent" or X-Factors (Xf) through the Core and Additive elements which underlie and drive the startup to success.
Learning Outcome 4.4
The Periodic Table for Startups
When we reviewed all the elements needed for the Startup Equation, it was clear that we needed a structure that would let you see all the elements at once and in relation to each other. What better way to show that relationship than in a periodic table. You'll note that the elements grouped by specific codes correspond to the major functions in the equation. Each element will be described in the upcoming chapters.
This is a Living Diagram
It is important to note that this periodic table of startup elements is a living, breathing thing. Does it account for every single thing you'll encounter as an entrepreneur? Have we discovered every element? Nope. Consider this a guide. This is the bare bones of what you'll encounter as you start and grow your business. As the world changes organically, so will these elements. But for today, they represent a great start.
This is Startup Alchemy
When you have the right startup elements, you can create magic. The beauty of this equation's fluidity is that it allows you to play with the elements until you can build an equation that fits you. It will fit who you are and what you want your business to become. Will it change? Of course, because you'll change and because businesses grow and evolve in ways that are hard to imagine. But this equation will help you keep that alchemy balanced as things pivot so that no matter what, you never lose the magic. The chapters ahead will dive in further to each element group and it is important to remember that this book should become an old friend, one that you continually turn to for advice on this wild adventure.
Key Terms
Additive element: An element that in a given mathematical system leaves unchanged another element to which it is added Exponent: A number or sign that shows how many times another number is to be multiplied by itself Model: Something used as an example to follow or imitate Scaling: Changing in size or magnitude
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In Review
Before you can build a business, you need to lay your foundation. You will note that in this group of equation functions there are three primary functions--Entrepreneur (En), Idea (Id) and
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((En(Id))+So)x + ((Cu(Te+Ce))Br)x + (((Fn(Sa+Ma))Sc)ln)x
Foundation
Experience
Growth
Sa Ce
Lnd
En Pe
Per
Ma Pe Ma Ce Sa Ce
Grw Eml Ecm
En Pe
Giv
Fn Ce Fn Ce Ma Pe Ma Ce Sa Ce
Fff Vcs Prt Drm Ret
En Pe En Ae Id Ce So Me So Me So Me Cu Ce Cu Ce Te Ce Te Ee Ce Pe Br Ie Fn Ce Fn Pe Ma Pe Ma Ce Sa Ca
Pef Ess Sim Psm Csg Rev Val Cre Mar Adv Cxm Lgo Bts Gra Loy Tem Bun
En Pe En Ae Id Ce So Me So Me So Me Cu Ce Cu Ce Te Ce Te Ee Ce Pe Br Ie Fn Ce Fn Pe Ma Pe Ma Ce Sa Ca
Rom Dgd Ned Vap Rel Cos Bal Sto Eng Bod Cei Tag Cwd Lns Evt Som Ttr
En Pe En Ae Id Ce Id Ge So Me So Ae Cu Ce Cu Ce Te Ce Ce Pe Ce Te
Ie Fn Ce Fn Pe Ma Pe Ma Ce Sa Ca
Obs Exp Opp Brn Chn Fix Sym Spc Bzd Per Bch Fnt Ang Cfl Prs Mer Usl
En Pe En Ae Id Ce Id Ge So Me So Ae So Ae Cu Ce Te Ce Ce Pe Ce Te Br Ie Br Te Fn Pe Ma Pe Ma Ce Sa Ca
Tro Art Unq Atk Cad Pop Web Prk Dex Map Ust Pos Snd Inc Wom Web Pmt
En Pe En Ae Id Ce Id Ge So Me So Ae So Ae Cu Ce Te Ce Ce Pe Ce Te Br Ie Br Te Fn Pe Ma Pe Ma Ce Sa Ca
Epi Frc Vis Int Cac Prd App Edu Cre Mdp Beh Clr Tou Acc Spn Brd Smp
En Pe En Ae Id Ce Id Ge So Me So Ae So Ae Cu Ce Te Ee Ce Pe Br Ie Br Te Br Te
Ma Pe Ma Ce Sa Ca
Bos Bld Foc Skc Mvp Fra Ecm Tec Mnt Pro Nam Voc Tas In Ppc Pri Ins
En Pe En Ae Id Ge Id Ge Sc Pe Sc Pe Sc Pe Sc Pe Sc Pe Sc Pe Sc Me Sc Me Sc Me
Ma Ce Sa Ce Sa Ca
Med Lif Res Col Ras Rei Div Str Epn Rec Dsh Kpi Ana Xf Seo Dsl Abt
En Pe
Per
ELEMENT GROUP ELEMENT SUB-GROUP ELEMENT NAME
In Me In Me In Me In Me In Ee In Ee In Ee In Ee In Ee In Ee
Oin Thk Mip Str Sce Coa Ins Rea Imp Sta
Xf Ce Xf Ce Xf Ce Xf Ce Xf Ce Xf Ce Xf Ve Xf Ve Xf Ve Xf Ve
Xdr Xpa Xre Xag Xim Xch Xcu Xpl Xti Xst
Figure 4.2 The Startup Table of Elements
The Startup Equation Notes
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