November 12, 2013
4 Reality Checks For Entrepreneurs With “Can’t-Miss” Business Ideas
As a mentor and advisor to many small business owners and aspiring entrepreneurs, a judge of business plan and elevator pitch competitions, and a full-out geek about the nuts and bolts of building a profitable enterprise, I’m always meeting people with “can’t miss” business concepts and start-ups with billion-dollar (yes, they actually say billion) revenue potential. You wouldn’t believe how many times I’ve been pitched “THE NEXT FACEBOOK!” in the past year alone.
Believe me, I take no glee in bursting bubbles or throwing water on anyone’s raging passion and unbridled enthusiasm for their ideas (although a number of entrepreneurs, including a few who’ve left judging rounds I’ve been a part of in tears, may believe otherwise). However, I do it, because any entrepreneur who can’t deal with her business model being tested will not succeed, even if her business idea is viable. I try to be compassionate, but direct, especially in the face of the stubborn optimism that is often necessary for intrepid entrepreneurship, but too often blinds new entrepreneurs to the practical realities of building and running a business. A business cannot survive on faith and passion alone, especially if you refuse to get out of your own way.
The idea is not to dampen or douse the enthusiasm, but to balance it out with real entrepreneurial education, of the quality that I and other small business experts share via our Small Biz section of BlackEnterprise.com and Black Enterprise magazine, as well as our annual Entrepreneurs Summit. Reject, delay or ignore this education at your own risk. As I am always saying: Your earning potential cannot exceed your learning potential. So, in that spirit, here are a few reality checks for new and aspiring entrepreneurs, to get you over the high of neophyte fever and grounded into the reality of building a successful business as soon as possible.
Most of the time, if there’s no competition, it’s because there is no demand. There is no such thing as a viable business with no competition, even if the competition is a different product or service being used as a substitute for what you intend to bring to market. If there is truly no competition for what you’re selling, it’s more likely because no one wants it, than it is because you are the very first one to think of it. As an entrepreneur, your job is to either prove or uncover real demand for what you’re selling, or to create it. Then, you must create a profitable sales and operating model to bring it to market. None of this will happen by you just wishing it so.
Don’t rely on research that does not test willingness to buy. My point about identifying real demand is often glossed over by what entrepreneurs pass off as “research”: census figures showing that there are millions of single fathers as proof that a business marketing products or services to them makes sense. Or worse, the dreaded survey asking people if they would buy such products or services if it were offered. People will always tell you they love you, until you ask them to actually spend money. (Especially your friends and relatives.) My advice: You need to test whatever you plan to bring to market by actually offering it for purchase, even if on a small-scale, limited basis. In business, the only surveys that count are actual sales, people voting with their dollars. Done right, you can get insights into everything from pricing, to defining your best target customer, to which locations (including online) are best for your customers.
What you think is not nearly as important as what your customers, or potential customers think. So you just love your product or service. That’s nice, but not important. What’s important is what the marketplace thinks is valuable about what you offer. If you’re so in love with your own ideas that you ignore and refuse to respond to consumers, you could end up serving a customer base of one: just you. That’s not a business. So if, for example, you designed your product for 20-something fashionistas (because that’s who you are), but it’s Baby Boomer grandmothers who really love what you’re offering, don’t be too stubborn to change your business model. You can still floss with your fashion diva peers, but as an entrepreneur, you need to understand and serve the needs of the elderly customers who are actually buying what you’re selling. Don’t be so caught up in yourself that you can’t follow the money.
Is your product really better? Or just different? To compete, a business must offer a truly beneficial distinction to customers, not just a difference. And once that distinction is proven, you’d better have a plan to defend it from competitors who will either duplicate it (while undercutting your prices), or offer new products or services to lure your customers to something better. The real work of entrepreneurship doesn’t end when you prove market demand; that’s when it’s just getting started. You’d better be ready.
I’ll end by paraphrasing some great advice from fellow small business expert Jim Beach, host of the School for Start-ups Radio Show: “To be a successful entrepreneur, you don’t need to have a passion for your business. You need a passion for successfully running a business.”
When an entrepreneur tries to overwhelm me with his absolute certainty that his business will succeed by virtue of the purity of his faith, commitment to hard work and the sheer force of his will alone, in response to any and every effort to point out faulty assumptions and the flaws in his business model, that’s a problem. (These kinds of entrepreneurs have me literally shouting at my flat screen when I’m watching Shark Tank.) It’s those entrepreneurs who will not do the basic blocking and tackling of managing cash flow, reading and responding to customer trends and other keys to operating a successful business, for fear that doing so will show that what they’re trying to do cannot work, at least not the way they’re trying to do it. If this is you, you’re only fooling yourself.
These are just a few reality checks; there are plenty of others that I’ve addressed in the past (check out 4 Signs You’re Not In It For The Money) or will likely visit in future posts. Suffice to say that if your mind and heart are telling you that your business can’t lose, but your cash flow and the marketplace say otherwise, you can’t win.
Black Enterprise Executive Editor-At-Large Alfred Edmond Jr. is an award-winning business and financial journalist, media executive, entrepreneurship expert, Â personal growth/relationships coach, and co-founder ofÂ Grown Zone,Â a multimedia initiative focused on personalÂ growth and healthy decision-making. This blog is dedicated to his thoughts about money, entrepreneurship, leadership and mentorship. Follow him on Twitter atÂ @AlfredEdmondJr.