Introducing the next gazillionaire…

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If you are like me, you have ideas that you want to share with the world each and every day.  (OK, sometimes each and every hour…But, I digress.)   The concept of starting a new enterprise is terribly exciting- and daunting. One of the primary ways you (and I) can keep it from being overwhelming is to prepare your business plan.  Wait—don’t rush off.  Before you can do even that, you must determine what it is you plan to do- and if you really are prepared to take the enterprise to a certain level.

Grand Opening
Grand Opening (Photo credit: OldOnliner)

The first and most basic question is to discern your value proposition.  You need to detail why there is a need for this product and service that so excites you.  If you can’t define this need, then what is it you really think you are doing? Part and parcel of this determination is to know that there is a market for your idea?  You need to have some sense of the market demand for this wonderful service/product your dreamed.  You really can’t expect to create demand for a product that no one has expressed.  (And, don’t tell me that Steve Jobs did that- he really didn’t…Moreover, you don’t have Steve’s money and probably not his abilities.)

The next question you need to answer is what makes you different from everyone else? Like the allusion to Steve Jobs above, this means you have to provide additional value (or, if there is no one else that does this [are you really sure?], a definable value) to customers/clients, so they will be inclined to buy from you.  (This is not the same query as “will they trust you to buy from you?”; that can be addressed after you develop your plan.)

How scalable is your business?  Obviously, if what you have planned is a service business, it has different considerations than a manufacturing one.  For service firms, as revenue grows, it typically means so does your need for employees.  If the ratio of demand to employees is 1:1, your business is not scalable.  If you are producing software, once the code is completed, the cost to product each copy is virtually zero; if you are producing widgets, there are some sweet spots in the scale-up you will (or should) easily recognize.

Are you committed?  Really- do you plan to spend 60, 70, 80 hours a week to pull this off?  And, for how long can you keep this up, before your family begins to complain?  (And, do you have visible means of support?)

What are the price points for your product?  This is one of the toughest questions to ask.  (You can jump to read our paper on pricing here.)  Just because there is a need and you have differentiation, it does not follow that customers will be willing to pay what you want to charge.

What is your distribution model?  Are you planning to sell direct? [Selling on the web is selling direct.  And, remember, that within 10 months, there will be sales taxes due on all your web sales.  It’s a done deal- even with this do-nothing Congress.]  Via WalMart?  Via manufacturer’s reps?  Whatever the model, it must coincide with your business strategy.

What are your startup capital requirements?  Don’t rely on that mythical exponential growth curve to make it through the night.  Because that type of growth usually means- unless your gross margin [(total revenue-cost of goods)/total revenue] is 60% or more- your cash needs to get/build/deliver the widgets is going to be a tough nut to crack. You are going to need cash- and make sure you add a cushion, besides.

What’s your exit strategy?  Are you planning to sell out?  Or stay for the long haul?  Or, is this a lifestyle business, where you will make the money you need for the life you want to have?  If you are planning to build a vast enterprise, recognize it’s not just goal setting and finely-tuned execution that will need to develop; you could, indeed,  transform a business segment or even spawn a new one- but it takes intelligence, courage, and luck- as well as hard work.

Now, we need to get personal.  How well do you handle ambiguity?   Once your business has started, you will find yourself wading through conflicting data, or, worse yet, dealing with situations that have no concrete data.  How independently do you operate?  When you first start up your new business, you will be able to operate with impunity- it’s just you and maybe a buddy or two.  But, as you grow- or if you get investors-  that will no longer be the case. You will have to develop consensus, among this diverse group of folks with different interests.   (‘My way or the highway’ rarely works, as the company gets bigger).   Are you process oriented or creativity abounding?  Starting up, you can create your own environment.  But, you will need systems and processes in place to harness you company and grow it.  You are going to have to make some very tough decisions as you grow the firm (unless you stay small).

Now, you have defined your business concept and made sure you know where/how you personally fit in. If you are still committed (no, not that kind), you are ready to write your business plan.

So, what are you waiting for?Roy A. Ackerman, Ph.D., E.A.

 

 

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13 thoughts on “Introducing the next gazillionaire…”

  1. This is me, and it is also me realizing I have a long way to go before I get to the point I need/want to be before I begin. You’ll be one of the first people I tell when I am ready, Roy, because I plan on retaining your services. 🙂 Great post, and the only thing I would add is “If you can be discouraged or talked out of it, then you probably shouldn’t do it.” You have to want it, you really have to want it.
    Lisa Brandel recently posted..Contrasting Detail by Lisa Brandel

  2. This DID hit me at the right time, Roy! For the past month I’ve re-invented my business – and that was NOT my intention, but it’s underway and all the considerations you list are in the mix. Thanks for some important reminders – I’ll share this with the group I’m working with.
    Christine Mann recently posted..test blog post 2

  3. I am not expecting to be a gadzillionaire, but in this economy, I find I have to have multiple sources of income. I am in the process of starting a very small marketing company using outsourcing for any major work clients need and I am helping my sister set up a small business as well. Can I sustain it all and keep doing the job I am doing? I don’t know, but I am shoveling as fast as I can. Thanks for the information on planning, Roy.
    Ann Mullen recently posted..Help for Seniors: What Healthcare Fraud is Costing You

  4. Frugal Science is not meant to be profitable; it’s more like a legacy project, but it could still benefit from your suggestions. What good is a legacy project if it doesn’t have anybody to legate to? I’ll go slowly through all your points tonight and see what happens.

    1. I have the same issues, Gustavo!
      My blog, per se, is not a stand-alone profit center. But, the goal is to demonstrate to folks the kind of breadth and capabilities we do offer (with me, as an example) so they will retain our services to help them with their business issues.

      Roy

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