A recent article in the Wall Street Journal stated that, “With the economy tanking, lots of people are striking out on their own… now launching a start-up seems like a better bet than taking on an endless job hunt”.
There are many reasons why people get into business. Not the least is because they want to be their own boss or they are tired of the boss they are working for and decide it is time to do their own thing. Others inherited the business, and yet others are led by passion for the product or service.
A lot of these businesses are started without giving much thought to whether there is a market for their product or service. The driving force in many cases is the great “new” idea.
One thing is for sure the world is full of great ideas and yet there are not that many ideas that make it to the market. Of the ones that do government statistics show that 95% of them will fail within the first five years.
Michael Gerber author of the landmark book “E-Myth” stated that many times people who start businesses are at times managers or technicians suffering from an entrepreneurial seizure. What Gerber was referring to is a an assumption that the technical knowhow is all that is necessary to make a business successful. In other words the fact that you can make the best widget, and know everything there is to know about a widget will make the business successful.
Unfortunately, the world is full of a lot of successful widget makers who’s businesses completely failed.
So what do you need to have a successful business?
The first element is a crowd of people who want or need your product. Many first time entrepreneurs begin by thinking first of a product or service that they are absolutely in love with. Then a fraction of these folks actually sit down and either write a business plan or purchase one. The common belief is that having a road map coupled with the great idea will surely result in success. What is missing from this equation is the market research to determine if anyone is even interested in the product of service.
So here is where the concept of the “starving crowd comes into play. Years ago, a famous marketer was on stage presenting to a group of restaurant owners. He asked the crowd , “what is the most important thing you need to make a restaurant profitable and successful. As you can imagine the crowd began to throw out comments like: good service, great tasting food, a good location, and the like. However, all these comments were dismissed by the speaker. The answer was a starving crowd. All the other suggestions would add to the restaurants success, but it all begins with having a crowd that wants what you are offering.
These days, market research is easily accessible to most of the population. Through both free and paid online sites any entrepreneur has access to information in just about any market. Years ago only major corporations could afford to obtain this same information that is now only a click away. Now this is true for both online and offline businesses. Yes, the same type of information that online marketers use to understand their target market can be used by brick and mortar businesses. Seriously, there is no reason that anyone can not fully understand the market potential of their chosen idea before jumping into a business.
In Part two we will examine the second important element that every business must have to be successful in any economy.