Having an idea for a business and actually executing on that idea to generate sustainable income are two entirely different things. A lot of the time an idea is a slight modification of an existing business that will have to compete with steep competition and thus exponential marketing dollars to get off the ground. Other business ideas are so fresh, and so new, that for only pennies on the dollar, they launch, go viral, and change the world. This article is aimed at assisting you in determining where on this spectrum your idea falls.
Service Oriented Business
A service business is simply that, you offer a service to people instead of a tangible item. This is where many early business owners begin. Why? Because they don’t have to engage in manufacturing processes which can be extremely expensive to begin, or perhaps cooking that magic apple pie that no one has ever tasted that requires state certified kitchens. I started in service, and later migrated to products. It was something I could afford in my early 20s.
So how do you determine if the service you have is worthy of a business? The answer relates directly to the market you’re joining. A good indication would be the chatter around your industry. For example, if you work in internet programming, and a new language hits the market, you may hear or see several indicators that the market is in dire need of engineers in that area of development. At that point you can decide to jump in, learn the language, and solicit yourself to the universe in that area. This strategy has served me extremely well.
On the flip side you may be choosing something that you love, but is either dated, or highly saturated. This is a danger zone for your future. It used to be that companies would pay hundreds of thousands of dollars for HTML programmers. Very few folks understood the language, and even fewer knew how to do anything impressive with it. Nowadays, children in middle school know how to modify code and get some pretty amazing results from this language. In turn, it would not be intelligent to start a business in this line of work, because unless you live in a third world country and can funnel revenue from first world countries, you probably can’t survive off the income.
There are however staple markets where services are always needed, and fortunately, these markets are saturated with extremely irresponsible transient workers that if you are willing to be accountable, you can clean up the clients. These staples are in the area of hands on repair and maintenance. People always need their cars fixed, their homes repaired, the washer and dryer belts replaced, etc. If you have skills in these areas, you simply need to get the word out that you are the right man for the job. There are some multinational corporations that are trying to dominate these markets, but you’ll find that you can often beat their prices, and offer a more personal service in these areas.
Product Based Business
You have a new invention! Great, but you need to be careful about how to proceed in this area. I’ve met individuals from all walks of life who wanted to create light bulbs that save energy, to cookies, to dolls, t-shirts, LED toys, you name it, and they all have failed to get anything off the ground. The reasons are always the same. They had no idea how expensive it is to enter this market. Let’s go through some examples to hopefully help you understand the basics.
The first order of business when you have an idea is creating prototypes of your concept. If you are making a light bulb, you need someone to make it. That costs money. If you’re able to build the prototypes in your garage, then great, but those prototypes need to be tested not only for durability, but for customer acceptance. There is nothing more enlightening, than putting what you think is a slam dunk idea in front of a potential client, and seeing them draw no enthusiasm from the idea. Sometimes we incubate more excitement than anyone else will ever feel. Still, if you believe in your idea, keep refining it until you get that excitement, but be willing to listen to your customer. If they say they wouldn’t be interested regardless of what you do to your idea, then you may want to consider changing plans. If you’re trying an inventor, you’ll make new ideas forever.
The second level, if you’re able to get past prototyping without losing your investment capital in the process is to ensure that your idea complies with all state and federal regulations. In some cases regulations are put in place to keep the public at large safe, say in the area of food. I once met a young lady who had a cookie recipe that was so amazing, she started to put the local competition out of business quick. She wasn’t greedy, kept her prices down, and cleaned up. When the competition felt their pocketbook sag, they called the authorities and discovered that she was making these in her home kitchen, which is illegal in the state of California unless your home is certified to do so. She then explored moving that business into a local restaurant, and now had to add additional costs of renting the kitchen, and scheduling time on off hours which didn’t work out in the long run.
Another friend of mine wanted to create an energy efficient light bulb, so he setup shop in China, and worked for two years to come up with an invention that met all the standards and financial numbers. Unfortunately, he had no clients, and so the venture ran aground. He also learned that shipping products from China to America needs six month lead times, and could result in a container falling overboard, being damaged, and with a shipment not being made, he would most certainly lose his first clients forever.
The bottom-line is that product based business models need to be dealt with extreme caution. If you are made of money, you will be able to endure the setbacks and financial pain of the process, but in the end you are responsible for creating a profit, so you should refuse to lose money unless you’re in it to win over the long-term like a major corporation does it.
Assessing Your Competition
This area might seem trivial, “Of course I’m going to check my competition.” However, few folks know how to do this in any level of detail. When one comes up with a business idea, it’s like a drug, and what I mean by that is that one tends to refuse bad information or negative indicators. I will tell you that if you have a normal family and normal friends, you will hear plenty of negativity. Some of this comes from people who would rather not see you succeed, because it will force them to deal with their lack of motivation and or success. True friends will cheer you on for life, and do whatever it takes to help you reach your goals. Examining your competition is a surgical multi-layered process that you need to take serious or risk losing everything.
I’m going to prove to you that this isn’t easy, by giving you one example. A novice will buy magazines, or cruise the internet, or read a newspaper to discover what’s going in their realm of business. This can work, but you need to be careful. What is published today as the “trend” to be in is always yesterdays news. Anyone rushing out to compete in today’s peak is investing in old hats. Given that a business takes 18 to 24 months of hard work to get off the ground, regardless if you make a product or offer a service, you need to be so intimately versed that you can predict safely what the future is going to want in 18 to 24 months if not further. One reason why Apple, Inc. did so well, is that Steve Jobs never looked at today to determine what product he was going to have Apple make. He dialed into the universe, and determined what “should” be happening in a particular industry, and put all his forces into creating the future.
My recommendation to you is to study the market extremely close for at least 18 months prior to jumping in. If you can, procure experts in that market to shortcut this timetable, but don’t go in it blind unless you like throwing darts into a dark room. The good news is that a lot of you are feeling the spark of creating a business, because you have been in the industry of choice for a long time, and you feel the next thing that hasn’t been done. You are the best candidate for a new business. I urge you to read everything I have to offer to ensure you hone your craft and approach to the best of your ability.
Avoiding Screw Ups!
Let’s say you’ve read every single word on my site regarding the precautions of starting a business, you’ve also read a few books, talked to successful friends, and you’re ready to go. Everything is perfect! Now, you need to plan for the worst. You need what is called a “contingency plan” to mitigate everything that could go wrong.
There are two things that will happen if you do this right. One, you won’t live in a ball of stress. This is critical for a new business owner, for even if everything goes right, you will have pressures you’ve never felt before. You may do well with these pressures, but if anything goes wrong, the error will act as a multiplier for your emotional distress. So plan to make no errors.
Secondly, if you have plan in place in case people don’t perform, people don’t show up, shipments get lost, power gets cut, internet connections go down, your client will never find out. The client won’t care if you have to replace an individual or drive clear across the state to get their part, etc. As long as the quality of your service or product is on time, and on budget, you’ll still get that accolade and hopefully referral.
So what do you do if you do screw up? Plan for that too. Be extremely apologetic, and genuine. Whatever you do, don’t disappear on the client. This is one of the most routine and rookie moves I see in business. Something goes wrong, and you think you can avoid it for a day, then two, then a week, then perhaps a month. This is the kiss of death. A client can hear bad news. Just be honest with them, and avoid transferring panic to them. The best way to do this is not to panic yourself. Delays happen all the time, and even though you didn’t envision it happening to you, it did, so just relax, and deal with it. Be careful not to minimize it too much, and if you can roll it into other scheduled events to make it a non-issue for the project, do it. I will write another article on risk mitigation, so for now, just be careful.
I hope this helps you understand some of the factors in starting your own business. My goal is to empower you to gain that level of success by hearing many of the unspoken issues that plague new business owners.