Two of the most important questions can ask when you start a new venture are:
- What resources do I need?
- How will I acquire them?
Resources include cash, equipment personnel and anything else required for your business.
If you’ve written up a business plan you should already have a good idea about what resources are needed for your enterprise.
The Challenge of Acquiring Stakeholders
Participants (or stakeholders) in your enterprise are at risk by participating in your venture. As a result, bringing stakeholders on-board can be challenging. While you should certainly take measures to reduce stakeholder risks, you can’t make the investment in your venture fully reversible. Financial stakeholders have obvious risks, but your employees, suppliers and customers also take important risks by involving themselves in your venture. For example, if the enterprise fails, suppliers may not be able to collect on their receivables and customers may find that the product they bought can’t be upgraded or repaired.
Select stakeholders who are most willing and able to bear the risk of participating in your venture. All else equal, choose stakeholders that are more diversified, experienced, can afford it, and are risk seeking:
Diversified – Work with a venture capitalist who has a large and diversified portfolio. Another example would be using a distributor who handles many vendors rather than hiring a full time sales person for your startup. If the business fails, a diversified distributor will probably suffer a lot less than a sales representative who lost her full time job.
Experienced – For example, employees who have worked for a failed startup before know that being laid off is not the end of the world.
Can afford it – This perhaps goes without saying but don’t borrow money from family members who don’t have significant excess funds, even if they are eager to lend. Stakeholders risk is reduced if they have excess capacity.
Risk seeking – For example, if your venture is software related, hire a programmer who gets a kick out of working for a cutting edge, “mission impossible” type venture.
Let’s assume you’ve got a solid plan that minimizes stakeholder risks and identifies the most suitable participants for your enterprise. Now, you have to sell your venture – convert interest into commitments.
A reputation for reliability, success and perseverance are important prerequisites for convincing stakeholders to commit to your venture. An equally important requirement, is your own enthusiasm and conviction in your project. If you’re not convinced, you won’t get others to commit.
A potential participants will tend to be more willing commit to your venture if other participants have already committed. But how do you get any kind of commitment so that you can get the ball rolling in the first place? A solution to this is to ask for a small, incremental amount of commitment from a participant, and use that commitment to get a small amount of commitment from the next participant. And then simply continue in that circle as necessary.
When speaking to potential participants, you’ll need to be prepared. Anticipate objections, know what you need and be sure to follow up despite your busy schedule. Vitally, be sure stakeholders understand how they will benefit from their participation.
These tips will hopefully help you secure stakeholders, a critical requirement for any entrepreneur without all the resources needed to pursue a promising opportunity.