Wednesday, May 29, 2013

What Business Should You Start?

          At the beginning of the course I teach about starting a successful business, I ask businesspeople to pose the single most important question each one wants to answer. I pay close attention to what they ask for two reasons:

1. I know that for helping learners feel that they are making progress, providing answers to such questions is much more important than anything else I might cover.

2. The questions tell me how well each person already understands about what entrepreneurs must do to succeed.

Within moments I adjust the course curriculum to reflect these questions and what the businesspeople don’t yet know. Before the first class ends I also provide an answer for each question, promising to expand on what I say in future classes after sharing more background information.

The questions vary a great deal in their scope and specificity. For instance, some people will invariably just want the answer to some sliver of technical information, such how to best organize paying sales taxes. Typically, such questions don’t have much potential impact on the person’s future success. Rather, these questions show a lack of research skills and relationships with knowledgeable professionals.

At the other end of the spectrum, some people will pose the most fundamental and broad questions. My favorite of such queries is: “Should I start any new business?” I appreciate that question because the role of being a successful entrepreneur is often quite different from what a certain individual would like to do. It would be a shame for such a person to spend many years working hard at something that always feels unrewarding while accomplishing less than those who have a more natural bent to take the right actions.

Once people have understood what they want to accomplish through starting a business and what’s required of them to succeed in the new business, they usually ask another important question: “What business should I start?”

Even taking into account differences among individuals who ask this question, experts still widely vary in the advice they provide. If you doubt me on this point, just read a few of the many autobiographies where entrepreneurs extol the unique benefits that only their kind of business provides, why everyone else should want those benefits, and what’s needed to gain them.

Wiser, more humble, heads keep more open minds on the point. While I could certainly share my own views based on teaching many successful students as well as being an entrepreneur, I think you will learn more by hearing from one of my students, Dr. David Penn. His entrepreneurial successes span the globe and impress all those who know him. Unlike many other entrepreneurs David’s personal life is also world-class. I think of him as a world leader in having it all together as an entrepreneur, as well as a human being.

His accomplishments are all the more impressive when you consider that he encountered more difficulties than advantages as a youngster. I won’t go into all those circumstances here. If you are interested, I recommend that you read my 2008 article, “A Bullied Child, Abandoned at Birth, Becomes a Global Leader in Dental Health Innovation and Education,” which can be found on many Internet sites.

David proposes five principles for which business an entrepreneur should choose to start:

1. Requirements for performing the business well should closely match your education, experience, knowledge, and skills.

2. Invest abundantly in your own time and efforts at first while spending as little money as possible.

3. Build huge competitive advantages that can be scaled to make a much larger enterprise.

4. Start a new market, or at least a new submarket, where you will be the sole provider.

5. Avoid all businesses that need lots of little-utilized assets (such as slow-moving inventory).

To better appreciate the value of these five principles, here are my own explanations of Dr. Penn’s observations. Matching what you know how to do well with what the business needs seems like an obvious point, doesn’t it? However, consider how often you’ve been “served” by a business that made a mess while trying to provide you with goods or services. I fear that this principle is more often ignored than closely followed.

If you want to do a somewhat different business and can wait while you acquire the ideal education, experience, knowledge, and skills, making such preparations will expand your choices.

I’ve never seen an initial business idea that was very well developed. Success usually requires lots of experiments, mistakes, and hard-earned lessons. If you spend all your money before you have shaken out the “bugs,” you won’t get very far. David also observes that such efforts should be focused on developing unique intellectual property that benefits customers.

Many entrepreneurs only focus on competitive advantage or being able to scale up the business quite rapidly. Do only the former, and you may well build a nice small business. Do the latter and you are likely to build a business that eventually collapses due to competitive vulnerabilities. Do both, and the world can be your playground for inventive success.

Does a market really need a fourteenth competitor? Of course not! By establishing a new market that serves an unmet need, you create a reason for people to be interested in your fledgling enterprise. Otherwise, you’ll just be ignored by almost everyone.

Little-used assets tie you down. You’ll spend too much of your time figuring out what to do about them, rather than being free to innovate in a direction that may well require leaving all your old investments behind. With few such assets, it’s easier to head off to where you should be going.

Are you ready? If not, start getting ready!

What are you waiting for?

Copyright 2013 Donald W. Mitchell, All Rights Reserved.