A Startup Guy

I’ve been thinking a lot lately about business and product ideas. Probably because I’ve spent a ton of time working on new ones for myself.  I wrote a post recently about how ideas are a dime a dozen. Then a few days ago I heard an episode of a podcast named Entrepreneur Myths in which the podcaster took exception to the concept that ideas aren’t worth anything. He made a valid point that a good idea is definitely worth something. I agree, but try and sell one and you’re probably going to be disappointed. As I said before, it’s the execution of a good idea that pays off.

The hard part isn’t coming up with ideas. I’ve got a friend who keeps all of his ideas in a spreadsheet. He’s literally got hundreds. In the last week, I’ve started filling a page with a good number of ideas myself. But what makes up a good idea? The criteria for a good business idea can be both general and personal. Here are a few.

General:
Your idea should fill a need. There are a lot of product and service ideas that are cool, but they’re a solution in search of a problem. Find a pain point for people and then solve their problem.

The idea must appeal to a sizable audience. There are a few products that you can get rich off of by selling just a handful. But for the rest of us, our products need to appeal to a large group. If I come up with a widget that solves a problem, but only 10 people have this problem, it’s not a good basis for a business.

Your idea must be worth paying (enough) for. Say you’re sick of Twitter’s fail whale and you decide there’s a need for a reliable Twitter-like service. But you decided to actually have a revenue model; you’re going to charge people $5 a month for it. It’s unlikely that you’ll succeed. Most people just aren’t willing to pay for what they can get free, even if it’s a bit more reliable. Or if you develop a new widget that truly solves a problem millions of people have, but the cost of development and production is $45 million and your marketing plan projects you can sell 5 million units, but only if you charge $2.50 each. Bad idea.

Personal:
Your idea should revolve around something you have an interest or passion about. This isn’t a hard-and-fast rule, but it’s a great idea. You’re going to be spending LOTS of time with this idea. Make it something that can hold your attention. I’d have a hard time doing a bank startup. It just doesn’t interest me.

It should be something you have (or can get) the money to start. I think a healthy fast food restaurant is a great business idea. Someone’s going to get rich on this idea some day. However, it won’t be me. The cost of startup is too steep for me to afford and I refuse to borrow the money.

You may have lots of great business ideas. That part is not nearly as hard as getting a few good business ideas that are right for you.

What are your criteria for a good business idea? What are your criteria for a good idea for you?

Recently, I’ve had several people pitch me what they term their “million dollar idea.” Of course, what they mean is their idea is so good that implementing it will make a million bucks. And, of course, being a startup guy, they’re hoping I’ll take the ball and run, make a million, and cut them in on their rightful share. It was their “million dollar idea”, wasn’t it?

The truth of the matter is, there are no million dollar ideas. I can’t think of a single idea I’ve ever heard that was a million dollar idea. There are big ideas, but that’s differnt. Ideas are actually a dime a dozen. Heck, they’re more like a penny for 1,000. Need a business idea? There are tons of websites offering them free. There are even sites like Half Bakery that poke fun at how silly most of the ideas are. There are NO million dollar ideas. There are, however, million dollar (and BILLION dollar) execution of ideas!

It’s how well you execute an idea that pays off (as I recently proved). A well executed bad idea will likely not succeed, but a well-executed big idea can make you (and lots of other people) rich. So, the next time you have a great business idea, remember it’s not worth a hill of beans until you actually do something with it.

Related articles by Zemanta

• Entrepreneurs: Investors Fund People, Not Ideas (startupprofessionals.com)
• Is My Idea Good Enough to Start a Business From? (myventurepad.com)

Going Out of Business courtesy of reinvented via Flickr

I remember several years ago reading an article reporting on the results of a study showing that consumers will put up with poor customer service almost as much as they will good customer service. I was appalled at that assertion. Why in the world would people put up with bad service? Surely good service wins the day every time. Turns out – no, it doesn’t.

After years of watching people in retail settings, I’ve discovered that they actually will put up with bad customer service. We’ve all seen restaurants with terrible service, but doing a booming business because they’re trendy. What people won’t put up with is inconsistent service. Good one time and bad the next will quickly lose you customers. Customers might deal with it for a short while, but not long.

I used to be a manager at a fast food restaurant. I remember once deciding that I wanted to deliver service so good for customers that they would want to tip our workers (voluntarily), just as they do at a full-service restaurant. For weeks I busted my tail, delivering great service at the counters and even going to table offering to get refills and take trays. People were impressed with the service, but I didn’t see them coming back more than usual. Now, I’m older and wiser and realize that what I was doing was terrible. I was probably inadvertantly hurting the restaurant. Why? Customers weren’t getting consistent service. They were used to a certain level of service, and I was confusing them with something different. Worse yet, a customer could come get great service from me one evening, then come that for lunch the next day and get mediocre service. They couldn’t know what to expect.

I still believe that good service is better and than bad service. All things being equal, I think good service wins the day. However, inconsistent service will kill your business faster than either.

It may surprise some people, but even seemingly small things can affect how people see your business. A good example I see often is FedEx. At least once every other month, I see a FedEx delivery truck being towed off for repair. Alternately, I don’t recall ever seeing a UPS truck being towed. Guess which service I perceive as being more reliable? If I went back and compared delivery reliability for all of the packages I’ve shipped using both services over the years, they are probably fairly comparable. But I can’t get that towed truck image and the impression it makes on me.

What small things in your company are sending the wrong messsage to your customers?

Here’s a funny irony. I believe technology is forcing businesses to come full circle with regards to service and interaction with the customer. Way back when, the way to address prospects and customers was generally on a one-to-one basis. You had to interact with people individually to sell them your products and then again for any follow-up customer service. Technological revolutions began changing that system so that we could address more people at a time. Newspapers would let you tell groups of readers about your products through ads. Then radio let you address larger audiences, then TV came along and you could reach millions. Cable TV let you reach audiences internationally and e-mail and the Internet let you do for pennies what used to cost dollars. Automated phone systems let you receive and route the increasing number of incoming calls without having to hire a bank of receptionists. Fax blasts and e-mail newsletters let you address tons of people at the press of a few buttons. Amazing!

But something has happened. These same technological wonders have enabled massive fracturing of your audience. No longer can you run your TV ad during the CBS News and reach 10s of millions of viewers. TV networks are ecstatic to pull in 6-8 million viewers now. More than a third of US households with a TV have digital cable, meaning they have hundreds of channels to choose from. You’ve got to be selective about where your ad dollars go to gain the most effect.

Fax blasts? They just end up in the trash. E-mail newsletters? Gone are the days when you could just add filler materials around your ads. You have to invest in time (and people) to really put together good information or readers will simply delete or unsubscribe you. That takes more team members.

Automated phone systems have become so convoluted and frustrating that many companies are abandoning them and going back to good old human receptionists to answer the phones. The Internet may draw in lots of visitors to your website, but these days, they expect personal treatment when you respond to them. And online social media services like Twiiter are all the rage in reaching out to customers, but they also require a highly personalized interaction.

So, it seems we’ve gone from one-to-one interactions through one-to-many (broadcast) and now we’re heading back to more one-to-one interactions. Have you noticed the same thing?

Oh, yeah, one more quick question. Are you interacting personally with your customers or are you just pushing information to the masses in hopes of making a connection?

Bonus: Here’s a link to David Armano’s post which got me thinking about this. Thanks, David. If you don’t read his blog, start now.

Despite a virtual flood of blogs on the Internet, there are a lot of businesses that still don’t have a blog. Is that good or bad? The answer is an unmitigated YES!

Most businesses, if not all, could benefit from a blog. It’s a great way to communicate with the outside world, establish yourself as an expert on your subject matter and build a community. However, there are hurdles to implementing a good blog. You need to have time to write and to engage your visitors. You also need to have something to say. That sounds easier than it really is. If you post 3-6 times a week, that’s 150-300 posts in a year. It’s easy to start running out of things to say after a year or two. You need to be passionate about your subject matter and honest in what you’re writing.

So, what if you own a business, but you don’t want to blog. Is it OK to have someone else blog for you? Absolutely, under certain conditions. Anyone officially blogging for your company needs to be honest about who they are and why they’re blogging. Never let your PR folks blog in your name or, for that matter, let anyone blog as someone they’re not. Readers WILL find out and it will bust any credibility you have. One thing that’s worked well for many are team blogs. For instance, my friend Nicholas Holland has his team blog for his company centre{source}. Among the cool things about team blogs are: no one person has to write all the time; readers get to experience different ideas and writing styles from different people; and customers and prospects get a good chance to get familiar with your team. It can be very personalizing.

Does your business have a blog? What has it done for you?

Do you not have a blog? Why not?

Leave a comment and share with us.

P.S. These same principles apply for other social media such as Twitter, YouTube, Jaiku, Plurk and Facebook.

Related articles by Zemanta

• Do You Have To Touch Every Conversation
• 10 things to think about in Social media

Image via Wikipedia

What do you call your peeps? i mean the ones who work with you and for you? Most companies call them employees. I have a long time dislike of that word. Employees are people who show up to a job to do work and collect a paycheck. I want a TEAM! Team members buy into the shared mission of your group. They show up to build something great. The paycheck is a result of the work they do to accomplish the mission. It’s not the reason they show up.

I actually listen to companies and how they talk about (and to) the people who work for them. Large companies usually address their people as “employees” because, in truth, that’s what they have. They have worker bees who show up to do tasks. The entrepreneurs I admire most generally have team members. Their team buys into the vision of the business and they’re on a mission together. Sometimes, you’ll find entrepreneurial people within an “employee” company who consider and work with their people as a team. They’ve defined a vision within their own group and everyone has caught fire for making that vision come true.

What’s most entertaining is there is a noticeable difference in the environment of the two types of companies. “Employee” companies expect and get worker drones. They turn out good products and services. But “team” companies get people on fire for the mission. They frequently turn out remarkable stuff.

So, does your company have employees or a team?

I know it seems like common sense, but don’t make it hard for your customers to give you money. There are few things more frustrating than wanting to give your cash to a business and they put up roadblocks. The other day, I was trying to pay a utility bill over the phone. I usually pay online, but wasn’t near a computer. I waited nearly 10 minutes on the phone to pay. I guess they figured I had to pay them so I wouldn’t have up, though I was sorely tempted.

But paying utilities aren’t the only place I’ve had this happen. I’m sure we’ve all had to stand in the store waiting to give them our hard-earned money while employees stood around talking to each other, talking to outside friends or talking on the phone. Most of us have tried to buy products online and had trouble simply completing the process. Too many unnecessary fields to complete or you simply can’t find the button to buy.

As a business owner, you’ve worked so hard to get customers in the door, build their interest in your product and finally gotten them to pull out their cash to hand to you. Don’t turn your back on them. Don’t make them reconsider while they’re sitting on hold. No matter how many times you’re recording tells them that their call is important to you, actions speak louder than words. Make them wait and they don’t feel important.

Take a look at your business from the customer’s point of view. Look at your sales process. If you’re removed from the sales process, be a customer. Make a purchase on your website as if you had never seen it before. Do you have roadblocks? If so, knock ‘em down and pave a smooth road for those valuable people trying to give your their money.

Setting a price for your products or services can be a real challenge for entrepreneurs. What’s a good price that will attract customers, but still deliver an attractive profit for the business?

In past decades it wasn’t quite as much of a struggle. Businesses would frequently just use simple formulas. Cost plus x% for profit margin gives you a price. Want to be the cheapest? Just price your product x% lower than your competitors (without taking a loss). Formulas can still be extremely helpful, but we have a myriad of additional options, features, prices, sizes, colors, flavors and even peer pressures to consider that weren’t as much of a factor in the past.

This is the challenge I’m facing right now. I’ve got a product I designed a year ago and put on the shelf, ironically enough, because of pricing issues. My profit margins appeared to be just pennies if I was going to price my product competitively. However, it’s such a fun product that I’m revisitng the business model again. Has anything changed? Yes, me! I’ve come to realize that I’m offering something different, so I don’t necessarily have to reflect the pricing structure of the big, established brands. In fact, not doing so will help to differentiate my product even further.

Another option would be to find a way to bundle my new product with some other product(s) that are inexpensive for me to buy, but carry a higher perceived value. We used to do this all the time at another company I worked for. We could package our products with cassettes or CDs that we bought for less than $1, but carried a list price of $9.99 & $14.99. Suddenly, our $20 product was worth $40 or $50 as a package, but our cost was only a couple dollars more than the single product alone.

So, with a couple more hurdles to leap, it looks like I may be able to finally roll out this fun product. So, what’s my pricing strategy going to be? I’ll be using both of the above strategies – x% markup initially and find items to bundle to improve value and profitability. Wish me luck!

One more thought, I’d rather price a bit to high initially than too low. Why? It’s harder to increase your pricing without a good reason for your customers – especially if your product is fairly new (see iPhone). Permanent price reductions (not temporary discounts) are always welcome by customers.

Do you have a set pricing strategy? Feel free to add a comment and share it with us.