So you are finally ready to take that leap of faith and make the surest best you can – on yourself, by starting your own new venture! Congratulations, because for many, this is a huge step and making the decision itself, often, is the biggest hurdle to overcome! It takes courage, determination, and most importantly, reconditioning your vocabulary and altering your definition of success.
So, with all the ideas that you have, or are presented to you, what process will you go through to filter what you believe is the right next (ad)venture for you?
Thanks to some new friends of mine (Zafar, Fuchs, and Star) at the Haas School of Business at U.C. Berkeley, below you will find some key questions to consider before embarking on your journey.
Burning Need: Is there a burning need in the market to solve this problem today? If not, can you foresee this being a problem that needs to be solved? Remember – pain points make money and people (including yourself), by their own divine design, do whatever they can to avoid pain (i.e. spend money to avoid pain).
Market Size: Is there a large enough market that is willing to use your product or service (regardless of whether the product costs money to use or not – e.g. Facebook, Twitter, etc). If not, are you focusing on the right market? Now, keep one thing in mind, market share doesn’t necessarily correlate to profitability! I know this may sound counter-intuitive but trust me it’s not. With even a relatively decent size target market, your organization can be highly profitable. So, focus on the right market and not just a large market!
Positioning: How are you going to separate your product or service from every other product on the market? How are you going to provide a sustainable competitive advantage? This question is not really any different than the, “Why should I hire you?” question that people use on the interview? While the “me too” concept may work for a little while, it will not provide you long-term success. Be different!
Business Model: Can your business model scale? When a business model has the potential to generate growth in revenues significantly faster than its cost base, the business model is scalable. As growing revenues increases the operating margin, scalable business models have the potential for earning very high profits. The key to scalable business models is to have small Costs Of Goods Sold (COGS), and to get a demand driving revenues up.
To provide some perspective, a less scalable business model could include selling services per hour and growth in revenues totally rely on personal output of staff, and there is a linear relationship between revenues and cost base. Growth is dependent on the acquisition and retention of highly qualified people delivering the services, and those types of people are not always that easy to find, even though there might be a high demand for the services.
Timing: “Timing is everything!” You can create the greatest product or service in the world but if the market isn’t ready – your business is dead!
Team: Let’s clarify – team can be in the form or partners and / or people supporting you. Oddly enough – this criteria, depending on whom you speak with, has completely different positions.
First, “If partners were such a good idea, even God would have one!”
Second, “There are only 5 questions a new CEO must ask. What is the market that I am going after? Who are the 4 people I need to help me?”
By the way, if you didn’t get the math in the second question, maybe you do need a partner to help you out. 🙂
To your continued success…