You have a terrific idea for a new business. But before rushing ahead to implement it, consider the following:
Have you seen the idea used elsewhere? Generally speaking, ideas based on existing businesses are more realistic than those that are unique. David Liederman points out that before starting David's Cookies, he launched a business known as Sauciert, which produced gourmet sauce bases for consumers.
"You can go into business like Sauciert, a novel business. We had absolutely no competition. It was a unique product. That was the good news. The bad news was overcoming the educational process of saying to Mr. and Mrs. Consumer, 'This is a wonderful sauce base,' and explaining what a sauce base is. It was much more costly than I had anticipated. While I was running around the country doing publicity for Sauciert and going broke, I ran into a cookie store in Berkeley, Calif., and it was like finding religion. Here was something I could market that people would understand. There was lots of competition, but at least I didn't have to explain to the consumer what a cookie was."
As Gordon Segal, founder of Crate & Barrel, put it, the best ideas often involve taking an existing business and doing it better -- in his case, unusual home furnishings at affordable prices. There's an old saying among experienced entrepreneurs that seemingly good ideas that have never been implemented have probably not been implemented for a reason.
That is not to say that ideas for unique products and services can't be started successfully. Products as important as the light bulb, telephone, television, and automobile, among many others, wouldn't be around if we were completely skeptical of new products. From the viewpoint of the start-up entrepreneur, though, the new and unique product is invariably a much tougher item to sell to investors and customers.
What will you do better? Assuming that your idea is based on a type of business that already exists, a key part of your idea should be particulars about what you will do better than existing companies. Too many ideas have more to do with fulfilling some long-held dream to have a business exactly like other businesses. Because the businesses that people have the most contact with are retail ones, the ideas are usually in the retail area. I don't want to appear sexist, but in the case of women, the idea often has to do with opening some kind of boutique -- for selling women's clothing, children's books, or upscale imported items. Men more commonly consider hardware stores, building supply stores, and restaurants.
Rarely have the would-be entrepreneurs considered just how their business will differ from the many others in existence. A key part of Gordon Segal's idea was that Crate & Barrel would offer high-quality imported home furnishings at reasonable prices, which other Chicago stores weren't doing.
Nor have would-be entrepreneurs usually taken into account that retailing has become even tougher than in the past, as people increasingly shop by catalog or electronic mail.
Has your idea passed the "time test"? A would-be entrepreneur is typically most excited about an idea at the time he or she actually thinks it up. Whether it's an idea for a new boutique, pet food, or day-care center, it seems so promising, so infallible, so brilliant.
But how does that same idea look a week, a month, or even six months later? Having thought more about implementation of the idea, the start-up costs, and the kinds of profits it might yield, does it still seem so exciting? Or has some new, totally different idea replaced it?
If the original idea, perhaps with some modifications, still seems attractive some weeks or months later, then there may be something to it. But if you begin to see significant problems, such as a saturated market or higher-than-expected start-up costs, and the idea begins to pale and excite you less, then you should question whether it's the right one.
This material was excerpted from Chapter 2 of How to Really Start Your Own Business, by David E. Gumpert.