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Your Business Concept

Your Business Concept

Meeting needs is the basis of all business. You can devise a wonderful new machine, but if it doesn’t address some real and important need or desire, people won’t buy it, and your business will fail. Even Thomas Edison recognized this fact when he said, “Anything that won’t sell, I don’t want to invent.”

The success of a concept often hinges on whether it does something newer or better than anything else. Being newer or better can take many forms:

Offering something new. This could be a new product, service, feature, or technology.

Offering something better. This could be an improvement on an existing product or service encompassing more features, lower price, greater reliability, faster speed, increased convenience, or enhanced technology.

Discovering an underserved or new market. This is a market in which there is greater demand than competitors can currently satisfy, an unserved location, or a small part of an overall market—a niche market—that hasn’t yet been dominated by other competitors. Sometimes, markets become underserved when large companies abandon or neglect smaller portions of their current customer base.

Offering a new delivery system or distribution channel. New technologies, particularly the Internet, allow companies to reach customers more efficiently. This has opened up many new opportunities for businesses to provide products or services less expensively, to a wider geographic area, or with far greater choice.

Increasing integration. This occurs when a product is both manufactured and sold by the same company, or when a company offers more services or products in one location.

Your basic business concept should be strong in at least one area. If not, you should ask yourself how your company will be truly competitive.

Discovering Your Business Concept

Have you always wanted to be your own boss but don’t know what kind of business to start? As you begin to evaluate business concepts, begin by examining:

What you really want to do. Maybe you’re one of the lucky ones who knows exactly what business you’d like to start. But just because you’ve got a passion to do something doesn’t mean you should necessarily “follow your bliss.” You may, for instance, dream of opening a restaurant or running a bed and breakfast, both very challenging businesses. Before plunging in, take a good, clear, hard look at the realities.

What you’ve done. If you need income fast, pursuing a business in which you already have experience will generally be the quickest route. It’s also often the most comfortable transition to self-employment. You may already have contacts or potential customers in your address book, know the market and industry well, and have strong referral sources. But look closely at whether you can do this business on your own. And just because you’ve done something for a long time (and are presumably good at it) doesn’t mean you necessarily want to keep doing it any longer.

Your hobbies or interests. Many people dream of turning their hobbies into their profession. Sometimes that works really well. But I’m not always a big proponent of turning your hobby into your full-time occupation. After all, why take something that’s now a source of pleasure and potentially turn it into a source of stress? Remember, doing something to please yourself isn’t necessarily the same as doing it to please customers. You may love photography, but will you love it as much after fifty weddings?

Who you know. Let’s face it, lots of people start their businesses because they have a great contact in an industry or business. Perhaps you know someone who needs an independent sales representative for their company or someone in a big corporation who can outsource work to your new consulting business. Also, many people go into business after a potential partner asks them to join the company. Just be cautious. Make certain you like the kind of work you’re going into, and whenever you enter into a relationship, put the details in writing.

What you’re good at. Why not use your skills? These may be different than your experience or your hobbies. For instance, you may be the person your neighbors turn to for help installing electronic equipment or decorating their homes. Perhaps there’s a business opportunity there if many others in your community need the same type of assistance.

A market opportunity. Look around: what’s missing in your community, industry, or profession that you might be able to provide? There are usually many services or products that still need to be provided. Maybe it’s a service available elsewhere but not locally; perhaps you see a big company neglecting or leaving a line of business that you could serve instead.

What you want to learn. Believe it or not, one good way to learn something is to start a business doing it. Yes, you may need to get some additional training or education, and you won’t be able to charge as much as those who know more than you, but you can learn a lot while you’re on the job. For instance, you may want to learn more about nature and so decide to organize ecology-based tours.

How Good Is Your Business Idea?

Time for a true confession: my first business idea flopped. When I began working for myself, I started as a “Charitable Giving Consultant.” My concept was to assist wealthy individuals and small family foundations with their philanthropic activities. I had the background, I knew people really needed the service, and no one else was doing it. It was a great idea.

Great, but too new. Every time I met with a prospective client, I had to make two sales: first I had to sell them on the concept, then I had to sell them on me.

To my surprise, I discovered I enjoyed doing something entirely different. Even before I got my first charitable giving client (and I got a big one), I met someone who needed a business plan written. Though I had little background in business plan development, I took to it immediately and realized I could make a good living.

That’s why I advise people starting a business not to be completely obsessed by devising just the right business idea. It’s likely to change anyway. If you’re trying to figure out what kind of business to start, keep in mind:

An idea isn’t enough. I’ve met hundreds of would-be entrepreneurs who are afraid to tell anyone their idea because they fear someone will steal it, and even more who are bitter because they think someone “stole” their idea. Ideas aren’t businesses—they’re just ideas. I have ideas for dozens of books every year, but that doesn’t mean I’m going to be able to write them all, or even that all of them deserve to be written. The key is execution.

Businesses take hard work, persistence, and efficient cash management. Solid business operations beat great business ideas every day of the week. Nobody pays the rent just by coming up with ideas.

You don’t need a new idea to be successful. In fact, most good, profitable businesses are developed from rather mundane ideas. Yes, it may have taken a Levi Strauss to invent blue jeans, but you can have a money-making retail store selling jeans without coming up with anything particularly new or exciting. Most of us don’t want huge multinational businesses, we just want solid, profitable companies.

A great new idea can be a handicap. Here’s one of Rhonda’s Rules: “It’s easier to get a piece of an existing market than to create a new one.” Creating a new market is difficult, time-consuming, and expensive. A lot of Internet companies learned that lesson the hard way when they realized customers weren’t yet ready to buy online.

It’s usually better to be a follower. Remember, the person or company who first invents a new product or service spends a lot of time and money figuring it all out. They work out the kinks, find suppliers, build a market. You can take advantage of their experience by coming in after them, especially if you offer improvements. Of course, in order to operate legally, outright copying cannot be done. You’ll find it much easier and cheaper to get established if there’s already an “infrastructure”—such as suppliers, distributors, and trade organizations.

Old ideas work. In fact, some of the best ideas for new businesses are things that have been done before—often for a long, long time. As industries age, big companies come to dominate, and as they do, they often neglect some of their smaller—but still very profitable—customers or market niches. This gives you an opportunity to snap those customers up.

Of course, a really bad idea is deadly. Who thought up the idea of selling furniture over the Internet? Don’t people want to see and feel the furniture they’re purchasing? No matter how well you run a business, you can’t make money selling something people don’t want to buy. (But, then again, green ketchup is a big hit. Go figure.)

There’s an old saying, “Success is 90% perspiration and only 10% inspiration.” I’d say that’s giving inspiration too much credit. By the way, does anyone want to buy a stack of old business cards that say: “Rhonda Abrams, Charitable Giving Consultant”?

Choosing the Right Business

Many people dream about starting a business one day but haven’t yet taken the plunge. One thing holding them back is that they don’t know how to decide if a business is right for them. If you’re one of those people, read on.

Over the years, you may have had hundreds of ideas for businesses—or perhaps you’ve had very few.

Sure, you know there are plenty of possible businesses you could start. After all, family and friends keep suggesting ideas: your sister says you should sell real estate, your exercise partner wants you to open a gym, and your neighbor swears you can make a fortune selling herbal supplements.

But now that you’re actually going to put your toe in the entrepreneurial waters, you’re stymied. How do you evaluate whether it’s a good idea or just so-so? How do you know if it will make money?

Some people think choosing a business is just a matter of trusting gut instinct. But that’s not always the best way to judge. After all, you’ve got a lot at stake. This is a big decision—a much bigger decision than accepting a job. After all, if you take the wrong job, you can always quit and look for another. But starting a business is a huge commitment—it takes a lot of time and determination, and you risk your own money.

Consider these five criteria when evaluating a business idea.

1. Can succeed as a business. You probably enjoy doing many things. They might suit your talents and interests; they might even give you a great sense of satisfaction and accomplishment. But if you can’t make money doing them, there’s a word for these kinds of activities—hobbies. In fact, the Internal Revenue Service refers to businesses that consistently fail to make money as “hobby businesses.” (And you don’t get to deduct expenses with a hobby business, so watch out!)

2. Can meet your financial needs and goals. Different people have different financial situations. One would-be entrepreneur may need to support a family, while another would be happy to make some extra money to supplement existing income. Keep your financial needs in mind when choosing a business regardless of your area of interest.

3. Can meet your personal needs and goals. Just as different people have very different financial needs, they also have different personal requirements. One person may be raising children and need a flexible work schedule; another may be able and ready to work twenty-four hours a day, seven days a week to make their dreams a reality. When considering a business, examine how much time you will need to put in to be successful in that endeavor, and make certain it fits with the other demands in your life.

How do you evaluate whether your business idea is a good one? How do you know if it will make money?

4. Fits your interests and abilities. What interests you? Animals, accounting, art, architecture? Naturally, you want to find a business that holds your interest. Of course, it’s not enough to just be interested in something, you also have to have the skills to be successful. Just be sure to keep your ideas and expectations realistic. I like driving fast, and I’m a good driver, but that doesn’t mean I can become a professional race car driver.

5. You can get started on it. When I say “get started,” I don’t necessarily mean you should go out and get your first customer or ship your first product tomorrow. I’m talking about taking some real steps to put the process of starting your business in motion. This might mean taking some classes to learn essential skills, getting a job in a related business so you can learn about the industry, or starting to develop your business plan. It means doing something with all those thoughts and ideas swirling around in your head.

Remember, millions of Americans own their own businesses. If you’re dreaming of one day joining them, take heart in knowing there’s a business concept out there that’s right for you.

Follow Your Passion?

Ever dream about starting a business where you could pursue your hobby all day? You’re not alone. Many books urge career-seekers to “Do What You Love and the Money Will Follow” or “Follow Your Bliss.” While this may (or may not) be good advice for people looking for a job, is it a sound idea if you’re starting a business?

I don’t need to tell you that running a business is different than being an employee. When you own a business, you can never quite escape its problems, payroll, and accounts payable. Do you want to turn your passion into the source of those problems?

Of course, it makes sense to start a business that interests you. No one wants to spend all day doing something completely boring. I’m not advocating for anyone to start a business they dislike. This question is different: should you turn something you already love—fishing, gardening, antique shopping—into a full-time enterprise?

First, examine the pros and cons of turning your hobby into a business:

Advantages

You’re more motivated.

You already know you enjoy it.

You build on your existing base of knowledge.

You may already have contacts.

You may get to be in an environment you like (outdoors, auctions, etc.).

Disadvantages

You turn your hobby into work.

You lose your source of relaxation and distraction.

It may not be a realistic business.

Your skills may be insufficient as a professional.

Decisions are based on pleasing the customer instead of yourself.

Having to earn money at something inevitably changes the way you feel about it. It’s one thing to go fishing or work in your garden to take your mind off your daily life and another thing altogether to take a customer on a fishing trip or design a client’s garden. The focus shifts; it’s no longer about where you like to fish or what plants you like—it’s about keeping the customer happy, on their schedule, and doing it in such a way that you still make money. Remember, even if it’s fishing, there’s a reason they call it “work.”

Before jumping into a hobby-related business, be certain to realistically assess the income potential. Hobby- and recreation-related fields tend to attract lots of competitors—many of whom don’t need to make a full-time income. When a field contains many people who aren’t financially sensitive it tends to reduce the income for all. You may be able to make far more money in a less attractive business. Freelance newspaper writers, for example, generally earn a pittance, because so many people want to see their name in print. Those who write far-less-glamorous technical manuals can actually earn a living.

Having to earn money at something inevitably changes the way you feel about it.

There are two times in your life when following your passion—whether in business or otherwise—is most advised: when you’re young and when you’re older. If you dream of a life near the slopes, be a ski instructor in your twenties. That’s when you typically have the greatest physical capability, the fewest financial responsibilities, and the most years ahead to do something more “serious.”

Likewise, when you’re a little older—your kids are out of college, you have some money saved, and you’re not totally dependent on income for your livelihood—then you’re better able to deal with the financial reality of a business that follows your passion.

Of course, for some people—those who are truly passionate about something, truly skilled, or just lucky—doing what you love can lead to an extremely satisfying life. Last summer, our guide on a river in the Australian rain forest said he had given up his day job, bought a boat, and decided to lead tours. For years, he was on the same river, answering the same questions from tourists, but he still loved every minute of it.

Can you turn your passion into a business? Perhaps. But don’t forget the other side: you can become passionate about your business. I’ve met many entrepreneurs who would never have imagined that one day they’d care deeply about granite or dental hygiene or employee recruitment. And they go fishing on the weekend.

Yes, but Is It a Business?

A friend took me to dinner to pick my brain about her new business. She was excited: she had a great idea, had lined up a strategic partner, and was raring to go. She had visions of raising millions of dollars and going on the Internet. I felt terrible telling her that while, indeed, it was a great idea, it was nevertheless a lousy business.

What were the problems—and there were many of them—with my friend’s idea?

First, like many novice entrepreneurs, her idea was too grandiose. She had too many services, serving too diverse a market, to be able to develop any one aspect successfully. The single biggest problem facing entrepreneurs is a lack of focus. It’s a big enough challenge to stay focused on even a narrowly defined market with a clearly delineated product; when you take on too much, especially in the early days of a company, you almost guarantee defeat. My friend’s business could have easily, and better, been broken up into two or three businesses, any one of which might have succeeded, but she was committed to serving the whole market.

Many entrepreneurs, of course, fall to the other extreme: their business idea is so narrowly defined that it’s actually the basis for just one product or even one feature of a product rather than a whole business. This is particularly true in two categories: consumer products and technology. Let’s say, for example, that you have a great recipe for a new kind of sauce. One sauce, no matter how terrific, might not be enough to build a whole company around; you might need to come up with a line of sauces.

When your business idea is too limited, you may not be able to grow big enough to survive. Even if you are successful, you’re vulnerable if a larger company later decides to mimic your idea. The good news—and this is particularly true in technology or if you can develop a cult-like following of customers—is that your company can become an excellent candidate to be acquired by another that wants to include your product as part of their offerings. You won’t be your own boss, but you might get a pile of cash.

The single biggest problem facing entrepreneurs is lack of focus.

The next biggest problem in my friend’s business plan was she hadn’t considered the real costs of delivering her proposed services. One of Rhonda’s Rules is “Things take longer and cost more than planned.” To be successful, my friend’s company depended on achieving lower costs than her competitors. She thought she could do this just because she was operating on the Internet. Get real! Internet businesses are just like landbased companies: you still need customer service, employees, and substantial marketing efforts. If you’re depending on cost savings for a competitive advantage, thoroughly research and prove that such savings can actually be achieved and sustained.

Finally, my friend’s biggest problem was my friend. She’s stubborn, unwilling to listen, insistent on getting and keeping control. (So why is she my friend? I’ll have to discuss that another time….) It’s not enough to have a great idea, or even great operations; a company needs leadership and management. You can’t build a business without building a team. You have to work with people, not just have them work for you.

It’s not always easy to scale back your vision or your need to be in charge. But if you want to grow a company, not just make yourself a job, you’ve got to consider whether your good idea can really be a good business.