Book notes: The Startup Checklist by David Rose

The Startup Checklist: 25 Steps to a Scalable, High-Growth Business by David S. Rose

Synopsis: “The Startup Checklist is the entrepreneur’s essential companion. While most entrepreneurship books focus on strategy, this invaluable guide provides the concrete steps that will get your new business off to a strong start. You’ll learn the ins and outs of startup execution, management, legal issues, and practical processes throughout the launch and growth phases and how to avoid the critical missteps that threaten the foundation of your business. If you’re ready to do big things, this book has you covered from the first business card to the eventual exit.

The typical American startup costs over $30,000 and requires working with over two dozen professionals and service providers before it even opens for business – and the process is so complex that few founders do it correctly. Their startups’ errors often go unnoticed until the founder tries to seek outside capital, at which point they can cost thousands of dollars to fix…or even completely derail an investment. The Startup Checklist helps you avoid these problems and lay a strong foundation, so you can focus on building your business.” -Amazon

Opening Thoughts:

I picked up this book mostly to help give me an idea of how to start my own startup, which is currently in the works. I was looking to have this book balance out the others I had selected for the month because it seemed more tactical and step-by-step compared to Born a Crime and Linchpin.

Key Notes:

• Chinese proverb: to open a business is easy, to keep it open is an art
• 25 Steps:
  1. Translate your idea into a compelling business model
     • It is crucial to distinguish the business concept from the product concept
     • Articulating what you’re doing and why is your business concept
     • It’s possible to copy a successful business model
     • 3 characteristics that make a startup business model truly scalable:
       1. You have to be able to start small
       2. Your marginal cost must drop overtime so that each additional dollar of revenue costs less than the previous dollar
       3. Your scalability needs to be built into your business model rather than relying on any special exogenous factors
  2. Craft a lean business plan to serve as your plan A roadmap
     • Principles of lean business planning:
       1. Do only what you’ll use
       2. It is a continuous process, not just a plan
       3. It assumes constant change
       4. It empowers accountability
       5. It’s planning, not accounting
          • Transactions are two accounting as projections are to a business plan
     • How to make a lean business plan:
       1. Set your strategy
       2. Plan your tactics to implement the strategy
       3. The concrete specifics
     • The single most important component of any business plan is a review schedule
       • There is no real plan without milestones
  3. Find and know your competitors, and analyze the strategic landscape
     • Counterintuitively, experience has shown that a business arena with no competitors is considerably difficult to conquer then one in which other people have paved the way for you
     • Study the competition and rival firms in your industry
     • Saying you have no competition will devalue your position
     • Keep in mind that in addition to direct competitors, you will be competing with other companies that are meeting the same underlying need or providing the same kind of value by other methods
     • Knowing what your rivals are doing is essential to competing with them
  4. Draft your founding dream team
     • The entrepreneurial function can be combined. In the same package as a tech person, a sales guy, a user interaction person, or a financial person
     • Answer the question: which pieces do you have? Which pieces do you lack?
     • Are you the entrepreneur? In reality, only a tiny percentage of people actually are
       • The crucial thing is being honest with yourself because answering this question will let you know the type of cofounder you are seeking
     • You need to ask me specific questions to set expectations from the beginning with all co-founding parties
     • Even in an equal partnership, one member of the founding team must have the ultimate decision-making authority otherwise the company risks being locked into indecision
       • That is the one thing it cannot afford
  5. Allocate the equity in your start up
     • The founders need to decide and split of equity relative to the value that everyone is bringing to the table
     • You can measured by the amount of value added for the amount of time
     • Another option is the cost to replace the person with someone else
  6. Build a minimum viable product and validate your plan with customers
  7. Establish your brand with online public profiles
  8. Network effectively within the entrepreneurial ecosystem
  9. Incorporate as a Delaware C-Corp for protection and investment
     • Incorporate when you have any one of the following:
       • A partner, an employee, and investor, customer, Grant, bank accounts, any intellectual property, any potential liability, or any assets
     • Benefits of incorporating: limited liability, and ownership is divided into shares
     • Most companies are incorporated in Delaware even if they don’t reside or have customers in Delaware as it is more attractive to investors
  10. Lawyer up the right way
      • Choosing the right lawyers
        • The combination of integrity, competence, and deal closing is what sets apart The great start up lawyers from those who are merely good
  11. Recruit your Board of Directors and advisors
      • Great advisers and mentors are worth their weight in gold
      • Your board members should be able to deliver one or more of the following: wealth, work, or wisdom
      • Board of advisors, a group of people who have a more informal roll
      • Mentorship: A personal developmental relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person. It is a learning and development partnership between someone a vast experience and someone who wants to learn
        • When the student is ready, the guru appears
  12. Select an accountant and an accounting system
      • The tool to keep track of all the company’s financial transactions it’s called the general ledger
        • The process of maintaining the general ledger by recording financial transactions is referred to as bookkeeping
        • The general ledger reflects five categories of items: assets, liabilities, owners equity, revenue, and expenses
      • The income statement lists your businesses revenues and expenses for a given period of time. It is also called the profit and loss statement
      • The balance sheet shows the assets and liabilities of the business at a given moment in time
      • Assets minus liabilities equals its net worth
  13. Establish and manage your credit profile
  14. Open bank, Credit card, and merchant accounts
      • Where a business account is primarily used to manage your funds and pay vendors, merchant accounts are used primarily to except credit card payments from customers
      • Payment processing services:
        • Braintree, Stripe, and Square
  15. Choose your key Technologies, platforms, and vendors
  16. Measure your business with data analytics
  17. Round out your team with employees and freelancers
  18. Establish a stock option plan to incentivize your team
      • Preferred stock is good if the company tanks, common stock is good if the company is a hit
      • Convertible stock is what the founder owners usually get and can be converted to either
  19. Understand the funding process and what investors want to see
  20. Nurture your investor pipeline
  21. Fund raise with online platforms
  22. Understand term sheets and prepare for do diligence
  23. Get the most from your investors now and in the future
  24. Determine what your company is really worth
  25. Keep your eye on the exit and reap the benefits of success

Closing Thoughts:

After listening to the first chapter, I felt like I’ve listened to enough and wanted to be done with it. I didn’t want to not complete the book so I decided to just take down the key notes (basically just the chapter outlines in the first chapter) with whatever I found interesting. Aside from that, I was just passively listening to the book.

The main reason why I sped through the book was because it wasn’t applicable to me at all. I could tell from that first chapter that this book was going to go way down the wrong rabbit hole. It’s definitely geared towards someone who seriously plans on making the next Facebook, Snapchat, or Instagram, and plans to eventually sell the company for 8-10 figures or plan for an IPO. In that sense, this wasn’t the right book for me at this point in my life. I still wanted to take notes because when I get to that point, at least I know this book will be a good reference.

Nutshell: 25 steps to take your business idea from startup to exit.

Rating: 3/5

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