Where Great Ideas for New Businesses Come From

How four companies came into being.

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Forget focus groups, market surveys, and business plans. What really count in spotting -- and capitalizing on -- great business opportunities are serendipity, ingenuity, street smarts, and fast footwork

A pivotal difference between our economic system and the rest of the world's is that here, when you get an odd idea for making money and someone asks, "If it's so good, why don't you try it?" you actually can. Indeed, the roster of businesses begun more with panache than with prowess implies that the chances of any idea's succeeding ipso facto are relatively good. On a par, anyway, with such finicky enterprises as airlines, computer making, and biotechnology.

In an economy of surplus such as ours, the marketplace delivers many a surprise, even to the marketers themselves. The inventors of the Mambosok couldn't have anticipated the $3-million clothing business that would grow out of their whimsical prank -- cutting off the lower portion of a pants leg and donning it as a floppy cap. Like many other accidental entrepreneurs, the Mambosok "designers" didn't intend to go into business. They couldn't help it: the market made them do it.

In the pages that follow, you'll read about several growing companies whose markets made them do it. More often than not, they're doing it on a shoestring, too. Many of the most accidental entrepreneurs derive capital from the "eureka" factor -- the excited belief that a product or service they just thought of can actually sell. That factor was at work in the 1950s when a serendipitously burr-covered hiker recognized that if nature's fuzz stuck to clothing so tenaciously, you could make artificial fuzz that would stick with equal tenacity. Thus: Velcro.

And the eureka factor was at work in 1945, when a torsion spring fell off a workshop table and kept tumbling before a tool worker's astonished eyes. On the spot, it became the Slinky -- fabrication and business details to be worked out later. The first production run was a tentative 400 units. The toy coils sold out in less than an hour for $1 each in Gimbel's store in Philadelphia. "We knew then that we were in business," recalls Betty James, cofounder, with her husband, of Slinky-making James Industries. The problem was, neither knew anything about business -- an apparent prerequisite for serendipitous entrepreneurship. "We didn't even know how to draw up an order blank. We had no packaging, just a sheet with instructions that I'd roll up and stuff into the end. Then I'd take the invoice and run over with it to get paid so we'd have enough money for the next day."

The need to get paid dictates that even the most reluctant entrepreneur display some native business acumen (or acquire some, ASAP). A novice can be undone by hidden costs -- packaging, returns, distribution, and so on. But those bold enough to bring an out-of-the-blue product to market are often also astute enough to figure out what to do with it once it gets there. That savvy surfaced at Pacific Fabric Reels, when actress-turned-entrepreneur Remy O'Neill figured that her varied "life skills" could be just the thing to turn the ailing fabric-spool maker around.

Instant smarts served Whammo Corp. founder Richard Knerr, a gifted marketer but business tyro, when he had to come up with a pricing formula for his product, the Frisbee. His formula was inflexibly simple: retail price = 5 x cost of (manufacturing + promotion). The margins proved ample enough to finance Whammo's next project, the Hula Hoop.

Serendipitous business only seems effortless. More often, it hides a flexibility that was well demonstrated by Dorothy Noe, founder of Dorothy's Ruffled Originals, whose customers clamored not for the antiques she had for sale but for the frilly curtains that decorated her store. Not one to ignore the knock of opportunity, Noe took her best shot at appropriate pricing for the handmade draperies, exhibiting an innate arithmetical sense that expanded the new line of business into a $10-million concern within 15 years.

Business-school traditionalists would be shocked, but no accidental entrepreneur ever starts out with a business plan. For one thing, given the multiple directions such inchoate start-ups can and do take, plans lasting longer than a few days prove infeasible; therefore, less focus is often better. For another thing, these businesses can't be financed through conventional channels anyway, so who cares? To an accidental entrepreneur, the rhythm of commerce is more meaningful than the numbers of commerce. The test of success is not when sales begin meeting monthly projections, but when UPS drivers begin making daily calls -- a milestone that defies measurement by any financial ratio. The best measure of all: when there's enough money left at the end of the week for the founders to take home a bit of it.

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