September 8th, 2015
Sometimes your “brilliant” business idea is just a “dumb” idea and the sooner you know that, the less pain you’Il have to go through. This is an area that I’m particularly knowledgeable about as I have had several bad business ideas/start-ups! Every time I put an end to these bloopers I was flabbergasted that I had ever even entertained the idea of doing them. A recent client (short term as it turns out) demonstrated a number of the standard errors and I think it might be useful to review them for all of you who are thinking of starting a business. As usual, names and circumstances have been changed slightly to protect the innocent :-).
His business idea was to start an online, antique business for home owners. Working directly with other dealers and people who had the antiques, he would list the antiques on his site and when people wanted one, they would click on it, order it up and he would get a 30% commission upon delivery. A pretty good gig you would think, until you looked even a bit deeper into the non-existent business model. Here were the bigger mistakes that we all should think about before starting out.
- Lack of experience. With only a bachelors degree in the field and no actual business experience selling antiques, he felt that people would buy from him simply because of his “oustanding taste.” He also had no idea of dealing with other dealers, contracts, liability, etc. All of which would bite him at one point. Indeed, one small sale of improper/illegal merchandise could sink the business completely and perhaps put him in front of the courts.
- No target market. One of the most common mistakes. In this case, the “entire world” was his client base and that is why an online shopping site would be best because “everyone will be able to buy from the site.” Every product/service should have a niche and a tight target market. The tighter that niche, the better you will do.
- No marketing experience/knowledge. Even after I recommended a short book I like (Guerilla Marketing) to help him learn a few concepts, he not only didn’t bother to read it but stated that “he was more of a doer than a reader” and really wanted to get this business going. Marketing is the core of all businesses. If you don’t understand it a bit, you will always be in trouble.
- No business model. I harp on this a lot and while I am not a big fan of business “plans” I do like a simple business model. It can quickly show you areas you haven’t thought about or need working on. One or two pages is fine and everyone should do one.
- No independent input/advice. You don’t necessarily need me or any other business advisor but you really should go ask some folks, who aren’t your wife or kids, what they think of your idea. Ask them to be cruel and inhuman. Better to hear all the possible downsides now as opposed to later. If you don’t have answers for their comments, then you better research the idea a little more.
- No financial back-up plan. Most businesses start-ups fail. Some of them fail only slightly and with lots of adjustments can make it through those first few years. Others just fail outright. If you’re a solopreneur, having a financial Plan B to pay the bills is never a bad idea. In this case, I recommended going at it part-time for the first while and trying to find a job in the industry to learn more. All of this was rejected.
Of course, I was fired after our first two meetings. I think I know the reason why :-). I’m not very good at telling someone their idea is brilliant, taking their money and then “coaching” them to failure. I believe it is important to understand all the possible risks and issues as early as possible. He believed otherwise. However, if you are thinking of starting a business, the list above is not a bad place to start reviewing your idea. It might save a lot of pain later on.
Tags: business model, entrepreneurship, starting up