This is a recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.
*Finding Your Next Gig In Your Garage by Marc Compeau
“Recessions have birthed myriad entrepreneurs.” This article features three entrepreneurs from New York.
The first owns a coffee business. “I didn’t follow my business plan and purchased too much coffee,” he admits. “I thought having more would help me sell more.”
Nor did he properly account for the costs of packaging, utilities and his own time–all of which made pricing his coffee that much harder: “I more or less made up prices with no real basis to start from,” he admits.
“The best part of self-employment is not having to fix problems caused by others’ poor decisions. I can work when I want, try things that I want and learn from my own screw-ups.”
While the company isn’t churning out enough to live on, it is growing and self-sustaining. For now, Gardner quips, “as long as I am willing to work for free, I get good coffee out of it.”
*Is Your Great Idea A Real Business? by Melanie Lindner
Toby Stuart, professor of entrepreneurial management at the Harvard Business School, warns would-be small-business owners not to “overestimate their originality.” In other words: If you’ve thought of it, chances are someone else has too.
Before you liquidate what’s left of your 401(k) or hit up friends and family for start-up capital, step back and figure whether your “great idea” is viable business concept.
The first question you should always ask yourself is “do I have a compelling value proposition?” A great idea is only a great business idea if it has an obvious and compelling value proposition–meaning that enough people are willing to pay for your product or service at a price above your cost to deliver it.
Next question: “Is there a viable market for your product or service?” Even if your business is likely to turn a profit, professional investors won’t line up to fund an operation with limited growth potential. Also, don’t expect to create a new market–if one doesn’t already exist, there’s probably a reason.
Markets come in different shapes and sizes, and your strategy should coincide with the opportunity. For example, rather than trying to capture 1% to 2% of a giant global market, maybe it’s better to aim for 25% to 40% of a niche market. “Define and dominate,”
Your business won’t last without a sustainable competitive advantage. If it’s technology, can you patent it? If you’re selling a commodity, can you brand it?
One last question: How hard are you willing to work? Between 1998 and 2005, just two-thirds of new small businesses survived their first two years, while only 44% made it past the four-year mark, according to the Bureau of Labor Statistics–and that’s just survival, not success.
*Recession Start-Up Snags And Solutions by Melanie Lindner
Advice from a variety of entrepreneurs interviewed for the article.
During 1998 to 2005, just two-thirds of new small businesses survived their first two years, while only 44% made it past the four-year mark, according to the Bureau of Labor Statistics. Scary odds over a generally prosperous stretch, save for the tech meltdown in 2001-2002.
As layoffs mount (the U.S. unemployment rate is at 8.5% and climbing), the number of start-ups is on the rise too.
“Everything costs twice as much and takes twice as long as you plan for,” says Brown. “No one else will be as invested in your business as you are, so don’t expect everyone to follow through when they claim they can help you.”
Don’t rush the process. “It might take a little longer to get your business going, but be persistent,” says Reuveni. “Take small steps.”
Show your face. “E-mails might seem like a great and easy way to promote your business, but nothing works as well as face-to-face contact,” says Foote. “You have to get out there and build real relationships with potential clients.”
Be prepared for long hours and little pay. “I’m a marathoner, so I know about hard work,” says Jones, “but this is above and beyond.”
“Be sure to have some money in the bank as a cushion,” says Spellman. “If you’re not willing to go into debt, this probably isn’t the right time to start your own business.”
*How To Make A Million Before You Graduate by Melanie Lindner
Stories about very young entrepreneurs who made big bucks while still in school.
The boys employed a classic pyramid strategy to spread the service. Users who managed to refer Surfingprizes.com to a new customer would nab 10% of that new person’s hourly revenue. Johnson and company didn’t just sell software–they wanted a piece of that juicy ad revenue too.
Their solution: partnering with companies such as DoubleClick, L90 and Advertising.com that could sell the ads for them. Under the agreements, the middlemen would collect 30% of any ad revenue sold, while the three boys split the remaining 70%, out of which they paid those referral fees.
“I was 15 years old and receiving checks between $300,000 and $400,000 per month,” says Johnson. At 19, he sold the company name and software (but not the customer database) to an undisclosed buyer. Says Johnson, “Before my high school graduation, my combined assets were worth more than $1 million.”
“Put yourself out there,” he advises. “Don’t be afraid of rejection. Don’t be afraid to ask anything.”
*Growth Doesn’t Just Happen–You Plan For It by Marc Compeau
Taking your business to the next level isn’t just about hard work, persistence and a dash of serendipity. It’s about vision and planning.
First step in this exercise: Be sure what you write down is SMART–that is, Specific, Measurable, Assignable, Realistic and Time-bound. Start by answering some fundamental questions, such as:
- What unique products or services do you/should you offer?
- What do customers expect from you?
- What is happening in the industry that might force you to change?
- How does the community perceive your operation?
- What are the most important performance metrics in your business?
- How big do you want to be?
- How long will it take to get there?
The most important thing they can do is to ask customers what they want. While you’re at it, why not ask them for feedback on your vision for the future and how it might affect them? Your customers might give you some useful guidance; they might even feel a sense of ownership (translation: loyalty) in your business.
*Technology Isn’t Just For Big Boys by Marc Compeau
Forget about keeping up with the Joneses. To determine if a technology is worth your precious cash (and many aren’t), ask yourself a very basic question: Will it help me compete? That could mean anything from making you more efficient to opening new markets.
*How To Beat The Big Boxes by Marc Compeau
Your store is more than a store; it’s even more than a solution to a customer’s problem. It’s an experience. And who better to deliver that experience than mom-and-pop shops?
Fact is, customer service is your one tried and true weapon against those behemoth retailers locally owned businesses outperform their “big-box” competition–both in outright profitability and in terms of the value they bring to consumers, workers and communities.
Simple math: better customer service, more revenue.
*Five Tips On Giving Superior Customer Service by Marc Compeau
Wal-Mart has you beat on price, Whole Foods on selection and Starbucks on … well, sheer force of habit at this point. A small fry’s best weapon: customer service.
Here are some seemingly small, yet essential tips for keeping customers coming back for more.
- Addressing customers by name is so easy and powerful it’s a wonder (and a shame) it doesn’t happen more often.
- Empower Your Employees
- Follow Up. A big difference between decent and great service is all about what happens after customers leave your store. Don’t just nod your head when someone makes a request or a suggestion; show them that you heard it, even if your hunt yielded squat.
The Answer Is Always “Yes” (Even If It Might Be “No”)
- Bottom line: People want hassle-free solutions to their problems, so make doing business with you as easy as possible.
*The Biggest Risks To Your Business by Chavon Sutton and Brett Nelson
The trick to managing risk is not seeing the thunderheads gathering this week or even this month, but anticipating all the nasty weather one, three or even five years from now.
The first step is bothering to look for trouble in the first place. While no one can consistently predict where the overall economy is going, understanding the drivers (interest rates, inflation, unemployment, consumer indebtedness, currency values) goes a long way toward making sound decisions about how manage your business.
Just because you’re given credit doesn’t mean you should gorge on it. “Hold on to it like it’s your last dollar,”
Establish standards and protocols for everything from manufacturing to record keeping, and bone up on the necessary technology. If you can afford a consultant, hire one.
Regulatory Risk. Set up news feeds via Google ( GOOG – news – people ) or your favorite news source, using keywords tailored to your industry and the regulatory bodies that govern it.
Operational Hiccups. These in-the-trenches risks include inventory gluts and shortages, poor quality, unattractive product mix, ballooning overhead, culture clashes, overaggressive expansion, data breaches and fraud.
Prescription: Savvy managers and sound systems are the best defense here, but even the vigilant inevitably miss a few cracks.
Acknowledge and understand the worse-case scenario and prepare for it.
*An Entrepreneurs’ Guide To Public Resources: The help you need in a brutal economy by Maureen Farrell
There are myriad affordable resources–facilitating everything from raising money to finding talented help–and many are just a few mouse-clicks away. The key is knowing where to look.
The Small Business Administration offers a host of services, though many entrepreneurs don’t know what’s on the menu. Most importantly, the SBA guarantees loans under its 7(a) loan program, allowing entrepreneurs to borrow at friendlier rates, and its so-called 504 loans help fund real estate and machinery purchases.
It provides business counseling via 63 small-business development centers, 112 women’s business centers and a SCORE program that includes about 10,000 retired executives organized into nearly 400 groups around the country. While often free, the counseling services are hit and miss, and some entrepreneurs lament long delays in setting up appointments.
You can also tap the SBA’s Office of the Ombudsman if you have a run-in with another government entity that, perhaps, has been slow to pay.
Many chambers provide helpful networking opportunities, in the form of lunch seminars and other events where small-business owners can mingle. Some negotiate group deals on everything from office supplies to health insurance.
The Angel Capital Association counts 330 angel groups across the U.S. (and plenty more throughout the globe). “When we started CommonAngels in 1999, people were saying ‘Don’t put up a Web site because people might know who we are,’ ” says James Geshwiler, managing partner of the Boston angel fund and former chairman of the ACA. “High net worth individuals are averse to being hounded, but now any entrepreneur anywhere can see a list of groups all over the U.S. and Canada.”
Like VCs, angels typically seek companies with high-growth potential, but slow-and-steady outfits can still troll these groups for new contacts. “Capital is always connected to complementary resources,”
Cities and states offer a flurry of quirky grants and tax incentives for small businesses, and your local development council can provide the details.
If all else fails, you can always build your own support group.
What I Think
The Growth Doesn’t Just Happen article lists a number of good questions. If you can’t write down an answer to one of these, or at least a ballpark answer right now, you’re not ready to start.
Asking your customers what they think can help you in many ways aside from how you’re doing in meeting their needs. Customers can also give you great ideas on new services and products, as well as how to deliver them more efficiently. Working through this process can also help retain customers by empowering them, which helps build loyalty.
Giving superior service is one way to beat the “big guys.” Providing a hassle free solution to your customers, as well as giving them a good experience and following up afterwards where possible will help you build your customer base and your business. Make it as easy to do business with you as possible.
Do you have a compelling value proposition? This means that enough people are willing to pay for your product or service at a price above your cost to deliver it.
Is there a viable market for your product or service?
Dont expect to create a new market if one doesn’t exist. There is probably a good reason why it doesn’t exist.
For your business to last, you must have a sustainable competitive advantage, such as an innovation you can patent or a commodity you can brand. You must find it and be able to protect it.
If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.