Entrepreneurs tend to get caught up in the maze of "shiny objects", and as a result, steer their business off-course. Look, I get it. For many first-time entrepreneurs, the biggest concern is running out of money. So they will try pretty much everything and anything to turn a profit. But at the same time, it's important to focus on the fundamentals, instead of getting distracted.
Recently, I interviewed a seasoned entrepreneur who understands exactly that on my Home Service Expert podcast. His name is Terry Nicholson, and among other things, he's been the national trainer of a NYSE-listed home services company. Now, as the President of Praxis S-10, he's on a mission to help other home service contractors succeed.
Terry shared with me three questions that he and his partner Jim Abrams (who co-founded Inc. 5000 franchise Fyzical) would ask before they start a new business opportunity. These three questions will really help you evaluate whether your business idea is worth bringing to the market... and predict whether a business will succeed or fail:
1. How can we bring to the consumer a unique product/service?
The only way to make a huge margin in business is to have a Unique Selling Proposition (USP) that brings 10 times more value than anyone else in the market.
I know most people will go "duh, Tommy"... but trust me, I cringe so badly at the number of businesses which claim that they are different, when all they've done is just to tweak a product or service in a non-meaningful way. To make up for their lack of USP, these companies tend to play the "variety" game, and offer a ton of different products or services. But take it from me: this doesn't work.
If you want to build a sustainable business, here's what you do instead: focus on one thing, and do it incredibly well. For example, my company sells high-end garage doors, and we offer quality which is unbeatable. People simply can't get this level of quality from our competitors -- which is why our company is still growing, after 12 years.
2. How can we bring this product/service to the consumer more economically?
Now, to be clear, this is different from just simply slashing your profit margins just to beat your competitors. It's about doing what you can to give your customer the best deal.
Many companies do this is through research and development -- they explore new technologies, and find ways to reduce their cost of production without affecting the quality. But what if you're a young business, and you have no money to invest into research and development? Don't sweat it -- there are other ways to push your costs down. One example: you can create a checklist that your employees follow every single time when working with customers, which will make the work they do immediately more efficient.
One last thing: it's also possible to give your customers more value without revising your prices. While my company doesn't compete based on price, we offer lifetime warranties on our garage door springs. Our customers love knowing that their garage door springs will last a lifetime -- and that's why they leave us 5-star reviews on Yelp, and recommend their friends to us.
3. How can we bring this product/service to the marketplace more conveniently?
You don't need to invent something completely revolutionary and game changing, such as Uber. All you need to do is observe the pain points of your customers and eliminate them - that's all it takes to build a successful business.
For example: we know our customers hate it when the fixtures in their home fall apart, one at a time. First, their gate doesn't close properly. Next, their garage door roller breaks. They have to burn multiple weeks fixing these problems, and it's a pain in the ass. So here's what we do: we try to diagnose and solve all our customers' problems in one visit, so that they save time and money upfront. Then, we upsell them at the right time. We get a bigger sale done, and they get a few problems fixed at once. It's a win-win!
Everyone can start a business, but if you want to build a successful business, you'll need to look at your business model critically before you even begin. So before you jump into that new venture you're so excited about, ask yourself these three questions -- everything else can wait.