Q. I’ve got a great idea for a new business and I can’t wait to get started. What’s my first step?
A. The fortunes of any firm are determined by its lead entrepreneur’s ability to focus his or her proprietary energies in the areas of activity that will produce the greatest results. In the case of a new business, this means that a “wanna be” entrepreneur’s time and talents are best spent creating an adequate “top line” — the “Sales” at the top of the cash flow and P&L statements. Without an adequate flow of income, even the most able, MBA-bedecked manager will never be able to push enough “black ink” from the top line to the bottom line to make the firm profitable.
In the embryonic stages of building a new business you must be sure to address the following Brass Tacks elements of new venture creation:
• Find a need: This is the most time consuming phase of the entire process. This requires a great deal of study and first hand inspection. This doesn’t mean that you have to be an ingenious inventor. Indeed, not even Henry Ford is considered an inventor. He “simply” figured out how to use standardized parts and logically divided labor and the assembly line to create an automobile at a price that the masses could afford. Innovation doesn’t always come down to product design. Look for innovative ways to market, price, package, deliver or service, too.
You have to thoroughly understand the industry in which you’ll function and the most successful competitors within it. Get a handle on why some contenders have succeeded and why others failed. Read the trade journals and attend industry conferences, if possible. Get to know some of the players personally and pump them for information. Always be on the lookout for a way of doing better that which is presently being done.
And don’t try to pursue two business concepts at once. You might be a prolific genius, but you’ll never be a champion if you don’t focus on mastering one “game” at a time.
• Keep it simple: Focus on the essence of your new offering. Your potential customers aren’t willing to devote a lot of time getting to know you and understanding the new “thingamajig” you’re touting. While it’s possible that you might have to educate your prospective customers to a need they don’t even realize they have, if you can’t describe your venture in twenty-five words or less, you don’t have a business that’s ready to fly.
• Design a utility to satisfy the unique need you eventually discover. Figure out where you are going to get the resources and talents that you will need to generate, on a sustained basis, the innovation you have designed. Are the goods and services you’ll require available? Make sure that you can muster the “stuff” that will be needed to produce the value you envision.
• Know that you can price it right. If your prospective customers won’t pay what you must charge, stick to your day job. Once you know all of your costs and have a handle on what competitors charge — or might charge once you arrive on the scene — figure out your pricing with enough left over to afford you a salary and eventually bless you with profit.
• Make sure that you’ll be able to sell enough of “it.” You must be able to market your wares in sufficient volume and frequently enough to the same customers to make your venture worthwhile. Before you try to take your new gizmo to market, make a list of the first 25 people that you are going to call on. These must be people that you confidently believe will have a sincere interest in giving you money after five minutes of conversation.
• Repeat step one. This is the most important step in the entire adventure of venture creation, so take the time to get it right.
The proper, practical conceptualization of your envisioned opportunity is the most important step in the entire process of building your business.
Paul Willax is a professor of entrepreneurship and chairman of the Center for Business Ownership Inc., Amherst, N.Y. He is also the author of the book, “Brass Tacks Tips for Business Owners,” available at barnersandnoble.com. If you have a question or suggestion for his column, or to receive a free, weekly e-mail newsletter, “Brass Tacks Brainfood,” write to Willax@TheBrassTacks.com.