When entrepreneurs ask me about the potential of an idea for a new business, I invariably ask some probing questions. I am trying to determine the following:
Mo Siegel, founder of Celestial Seasonings, expresses a similar view: "Ideas have got to be very simple. People don't understand complex things. Generally, an idea that is good can be said in two or three sentences. It doesn't require a whole long-winded, multipage document to explain an area. There is either an idea or there is not."
If the owner of a pizza store or even a college student came to me with that idea, I would have been much more optimistic about its chances for success. The pizza store owner would likely know other store owners and could assess their willingness to contract for such a service and at what price. The college student would know how his or her fellow students might feel about such a service and would be in a position to research it further and perhaps try it out inexpensively.
On the other hand, if the physician had come to me with an idea for a new kind of outpatient health care facility or therapy treatment for an illness, I might have been more optimistic about his chances of success. Then he would likely have been able to answer basic questions about the feelings of prospective patients, start-up costs, and similar issues.
Most new businesses require an intimate knowledge of the industry in which you will be starting. Otherwise, you spend too much time reinventing the wheel on such topics as pricing, distribution, overhead costs, and similar matters. Each industry has established norms that can guide the newcomer. Knowing the industry, of course, doesn't mean you have to do things the way they have always been done in that industry. But knowing the industry enables you to make intelligent decisions about what you might do differently so as to create a competitive advantage for your new business. For Mo Siegel, that something different was selling a noncaffeinated tea in an industry that knew only caffeinated ones.
If you don't know the industry from personal or professional experience, you have to go and get it, Siegel suggests. "There is information on any kind of business you want to go into. For example, if you are going into the clothing store business, there are trade shows that deal specifically with that industry, there are magazines that deal with that industry, there is abundant information. Getting into a trade association is smart. Celestial Seasonings has been in a number of trade associations -- one for the supermarkets, one for the gourmet stores. We go to some of the restaurant shows, we go where part of the natural foods movement assembles. You can sit in on the retail seminars and learn a lot about how to conduct your business properly. When I started Celestial Seasonings, one of the ways I got the knowledge base I needed was that I picked people's brains. I asked the suppliers long series of questions constantly. If you ask a lot of questions and do a lot of listening, you are going to learn in time, and fast."
This material was excerpted from Chapter 2 of How to Really Start Your Own Business, by David E. Gumpert.
Copyright © 1996 Goldhirsh Group Inc.