Now’s The Perfect Time For You to Start a Business Full-Time.
There are essentially five (5) paths that you can take, in order to start a business full-time. These vary based on the degree of control you want to have, the amount of money required to launch, and the need to develop products and services, then determine if their is a market demand for your offerings. These five paths are:
1) Start Your Own Business
2) Buy an Existing One
3) Franchise a Business
4) Inherit a Business
5) Get Hired to Manage a Business
1. Launch your business yourself. The first option for you to start a business is to launch your own business from the ground up. There are many benefits to taking this approach to starting your own business:
• You start with a clean slate. By creating a new business from the start, you get to create the business in your own image, with your vision and to accomplish your stated mission, with your values and moral compass. You don’t inherit any flawed processes, ineffective employees, bad business practices, or a damaged culture created by others.
• Uses the most up-to-date technology. By starting your own business, you can apply the latest technologies, systems, infrastructure, and software in your day to day operations. A few examples include:
– Client Relationship Management Software to track your prospect and customer information like Zoho or SalesForce.com.
– Social Media: Social media tools change constantly. Today’s Pinterest, Instagram, and Tumblrs may give way to Vizify and About.Me. While the technology keeps changing it’s important to understand how social media can be leveraged to build strong relationships with clients, the media, vendors, and other stakeholders online.
– Web 2.0: The collective suite of technology surrounding the latest Internet platform.
– Email Marketing Systems: These service providers offer much feature and functionality beyond simply email, from surveys, to newsletters to greeting cards.
– Online Meeting Services: A suite of offerings that collectively enable distance-based teamwork to be performed regardless of where your workforce is located (ex. Skype, file-sharing vendors, GoToMeeting)
– Inventory Management Systems: from point-of-sale systems to retail worker headsets to bar codes, these technologies enable organizations to keep track of their inventory down to the single unit in real time.
– Performance Management Applications: enable you to effectively manage each worker’s productivity and engagement in your firm.
– Financial Management Tools: accounting and bookkeeping software (ex. Quickbooks, Quicken)
• Offer new products or services. By launching your business yourself you can bring to market new products and services that you have been working on and match ideally your background, experiences, education, training and certifications.
• It can be kept small.
Despite the many benefits that you derive from going out on your own to start your business, there is also a down side to starting your own business that you MUST be aware of. Some of the disadvantages of starting your own business are:
• ZERO brand name recognition. When you start with a clean slate no one knows you exist. You don’t have any awareness in your desired target markets so you have to build a name for yourself before you can get people to buy from you.
• Significant time and effort requirements. It’s NOT easy to start your own business. It never fails to amaze me how few entrepreneurs and start-ups that I work with truly understand and appreciate how much work is required to get their new business off the ground.
• Hard to finance. The traditional banks don’t tend to look to favorably on entrepreneurs. It’s a Catch-22 they come to you after you’ve already proven you can get your business to profitability but you need the financing to be able to grow your business. The flip side is there are more and more non-traditional financing options such as micro-lenders and crowd sourcing (Kickstarter, Indiegogo, etc.)
• Difficult to obtain credit. When you start out your business credit is your personal credit. Make sure you do everything you can to prop up your credit worthiness. Check your credit score before you launch your new business from a free service or one of the three major credit rating agencies (Equifax, Experian or TransUnion.)
• Lacks experienced managers and workers. It is extremely hard to find talent for all the functional areas of your business (HR, Marketing, Sales, Finance, Operations) since you will be barely scraping by at first. Affording top talent to come work for you on a shoe string budget can be a daunting task. You can lower some of the cost in hiring expertise through bartering provide services to others who in turn provide you with services. Such bartering is referred to as “boot-strapping.”
• VERY hard to maintain motivation. When you first start out, you will be riding an emotional roller coaster of success and failure. One of the reasons I urge entrepreneurs to pursue partners is, you can pick each other up when you’re feeling down and provide emotional support to each other.
Part of the challenge in launching your own business is in actually deciding what new business you want to pursue. Following is a pretty important short list of the things you need to consider when deciding what your new business will be:
• Spend a lot of time thinking about what makes your business idea truly unique. If you can’t figure this out, then what you’re proposing creating is nothing more than a “Me Too” business and you will only be able to compete on price.
• Develop a Market Entry Game Plan (call it a “Task List” of required action items you need to complete. Task lists include the following elements:
– Tasks: List all of the required tasks.
– Project Owners & Contributors: Who has ownership in completing the tasks and who can contribute to completing each task on the list.
– Start/End Dates: Helps you to rank the sequential order of when your projects need to be completed and know when things have to get finished.
– Status: Where are you in getting each task completed? Is it open, completed, in-progress, or being planned?
– Priority: One is the most critical action that MUST get done, #2 priorities are also urgent. #3 items should get done but are not nearly as mission critical.
• Define the industries you will serve:
– Develop ideal client profile(s)
– Identify ALL relevant stakeholders
Here’s a useful list of Steps you should go through, to maximize the likelihood of starting a successful business:
• Find a business incubator to work with.
• Consider asking your current employer for help?
• Obtain directly relevant experience in the industry you are looking to start your business in.
• Pursue partners (multiple founders.)
• Start with established clients.
• Enlist coaches/mentors.
• Obtain any/all of the relevant certifications.
• Develop a start-up budget.
• Select a product/service and determine if there is a proven demand for your offering.
• Line up your investors.
• Obtain experience managing small firms.
• Just start SOMETHING fort he experience of creating.
• Select a business that produces HIGH margins.
• Build trust in your personal brand/story.
2. Buy an Existing Business.
This is yet another viable to consider in getting a business. The three primary advantages to buying an existing business are:
• Established customers mean immediate sales and profits.
• Processes and operations are already in place.
• Requires less cash than starting a business from scratch.
There are also disadvantages associated with buying an existing business:
• Finding the right business.
• How do you determine what a business is worth?
• Management and employees may fight you.
• The existing business reputation may be hard to change/overcome.
• Business may be declining.
• Facilities and equipment may be obsolete.
3. Buy a franchise.
• A legal agreement that allows one business to be operated using the name & business procedures of another. There are four types of franchise you can pursue.
1. Trade name franchising: only the right to use the franchise trade name and trademark.
2. Product distribution franchising: provides franchisee with specific brand named products that can be resold by the franchisee in a specific market (examples include Coca-Cola, Goodyear Tires, and John Deere.)
3. Conversion franchising: provides an organization through which independent businesses may combine resources (Ex. Century 21 Real Estate.)
4. Business format franchising: the right to use the company’s trade name, products, business/marketing plans, national advertising support (Ex. McDonald’s)
• Carefully review TWO documents that you receive from the potential franchisor:
– Uniform franchise offering circular (UFOC): standard franchise document outlining a business’s operations, procedures, costs, requirements. Check out the FTC website for guidelines on how to complete the UFOC.
– Franchise agreement.
There are many advantages to starting a business by purchasing a franchise:
• A proven successful business model.
• Training & management support.
• Less risky than starting a business from scratch or buying a business.
The disadvantages in franchising as a new business venture.
• Lose control of your marketing and operations.
• The business can be taken away.
• Your success is tied to the success of the entire organization.
Resources For You to Use in Pursuing a Franchise.
• Business Nation
• International Franchise Assn.
4. Inherit a Business.
• Whether you inherit a business or someone bequeaths it to you, the same issues of passing ownership to successors exist:
– Have a succession plan.
– Hire a professional management team.
– Gain loyalty of the existing family, employees, and managers.
– Have experience leading others.
– Know how to manage/lead.
Inheriting a business: https://www.smartentrepreneur.net/inheriting-a-business.html
How to manage a business you inherit: https://smallbusiness.blogs.cnnmoney.cnn.com/2009/03/03/how-to-manage-an-inherited-business/
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach
Monthly Archives: February 2013
Start a Business Part-Time
Start a Business On a Part-Time Basis.
Following is the first in a two-part series on how you can start a business on a part-time basis.
Today’s blog focuses on the paths that you can pursue to start your own business on a part-time basis. Why focus on how to start a business on a “part-time” basis? Well, there are many significant benefits to starting your own business on a part-time basis such as:
• It allows you to dip your entrepreneurial toe in the shallow end of the new business venture pool without having to commit on a full-time basis.
• You can pursue several opportunities at the same time, as a way of “kicking the tires” to entrepreneurship. This is especially important if you have a number of passions you are considering pursuing in a new business venture.
• Obtain entrepreneurial skills in specific functional areas such as Sales, Marketing, Human Resources, etc. very SLOWLY. It’s NOT a “Sink or Swim” proposition where you have to acquire many skills with the real risk of your full-time business suffering as you move up the learning curve.
• You can build a rolodex of contacts, resources, leads, and clients on a slow and steady basis.
• Grow your savings in advance of formally launching the business. Part-time business pursuits enable you to save up while you determine the start-up costs required to launch your business.
There are many paths to part-time new business ownership that you can explore. The primary ones are:
• Stand Retail: Start out small by running a booth, stand, or a kiosk in a retail center such as a shopping mall.
• Home-based: Conduct sales events in other people’s homes who invite you in to pitch present your products and services to people in their social circles. Some examples include Avon, Pampered Chef, Lia Sophia, certain multilevel marketing/networking pursuits (ex. Acai Juice, anti-oxidant chocolates, etc.) The benefit is you have other people inviting their networks. You have a captive audience predisposed to purchase in an intimate setting. A draw-back is you may experience a VERY finite number of people willing to invite you in to their inner circle and that lead pipeline will dry up fast.
• Consignment: Give your product to stores to sell for you. On the one hand this is ideal to get your creations into existing businesses. The draw-back is they white label your products so there is no way of building your brand. Plus you have little control over how your products are displayed in their store.
• Mail Order: You place the advertising yourself, and make sales on your time by fulfilling orders on your schedule. The challenge with utilizing mail order is finding an advertising channel that provides a steady stream of qualified leads.
• Online: eBay and others. The upside is, there is a VERY large market and ubiquitous 24/7/365 “up” time. The down side is it can be very easy to get lost in the online world. This means that your needle in the haystack may be hard to find if you lack an established brand that people are aware of.
There are quite a few factors that will ultimately determine how successful you are in launching a new business as a part-time endeavor. Some of these include:
• It starts as a passion/hobby COMBINED with your CORE COMPETENCIES. Think of the things that you have always loves to do, and are most passionate about. The point at which those passions overlap with your skills and expertise create a sweet spot of a narrow set of possible new business ideas.
• Balance business and home life. Those entrepreneurs that I find are most successful use part-time business pursuits as a learning tool to manage their 168 hour a week finite resource. They are consummate prioritizers. They know how to delegate and are VERY flexible.
• Time management skills are CRITICAL! Even on a part-time basis running a business combined with a day job and a life of family and friend commitments fills up those 168 hours quickly. It is a constant juggling act.
• Have a To-Do list of To-Do lists. Most of my clients fail in managing time when they let their to-do lists take over by NOT having ANY lists. They are unstructured, hop from crisis to crisis in a reactive fashion so they simply lose sight of any planning we develop together. This happens time and time and time again.
• Delegate and outsourcing. None of us are expects in EVERYTHING. What you can’t do well, or don’t know how to do, find others in your network who CAN and WILL help you. Start by creating a list of people close to you and their skill sets. This is your SECRET weapon in getting everything done.
• Bootstrapping: a term used to define bartering (trading) services you need others to perform for you in lieu of you paying them. You get their help, and instead of paying them you offer services as compensation. It’s an entrepreneur’s win-win.
• Seek advisers like coaches and mentors: This one’s an absolute MUST. There are people in your social and professional networks who can and will help you. Identify a short list of 2-4, then begin having a discussion with them about your plans to go out on your own, on a part-time basis.
You are going to have to aggressively manage all the things you need to get done, to launch this new business start-up on a part-time basis. Here is a short list of essential things you need to begin working on NOW:
• Identify passions and interests. What do you love to do, what are your lifelong hobbies, passions, interests, the things you’ve done as a volunteer or outside of work that fulfill you?
• What are your hobbies? Write these all down.
• Register your business with the state. In order to register your business you will need to know which legal structure you prefer, either solo practitioner, Limited Liability Corporation partnership, S-corporation or C-corporation. Understand the tax, legal, and ownership considerations of each of these. Once you register your business you will receive your federal taxpayer / employer identification number. Then you are OFFICIALLY a new business owner. Congratulations! You can even go out and get yourself a nine digit numeric D&B DUNS number.
• Talk to everyone in your social & professional networks about this new side business. Spreads the word. Build a market for your products and services by going viral! Leverage social media. Start a blog. Build your brand as a subject matter expert. Get published, reach out to bloggers who cover your industry.
• Pick their collective “GREY” matter. Ask the people in your network who are most like your ideal customer as many questions as you can about how they use such products and services, what they like most/least, discuss their shopping experiences. You AREN’T selling your offerings. Rather, you ARE asking them about themselves, so you can fine tune how you will sell and market your goods.
• Set pricing guidelines. Have a complete set of pricing to reflect special discounts, offers, pricing for company clients, non-profits, academic institutions, Government agencies, one time versus repeat purchases, referral and client reward offerings…everything!
• Develop collateral: your sales flyers, brochures, product specifications, your professional bio, business cards, print advertisements. You’ll need a complete set of professional looking sales aides to sell your business.
• Build Your Personal Brand. Branding is all about making a promise to your clients that you will consistently deliver value to them by being unique, memorable, and invaluable. That is the single most important point to understand when you start out as a new business owner. Following are a few strategies to build a compelling brand:
– Develop your success stories
– Become a subject matter expert
– Get published
– Create a Linked In Profile
– Join Linked In Groups, start discussions
– Become active in the industries you will target
– Participate on panels
– Give lectures anywhere & everywhere
Avoid the many traps and pitfalls that come from trying to start a new business on a part-time basis:
• Moonlighting: Working on the side which adversely affects your ability to serve your current employer in the way they need from you.
• Conflicts of Interest: you may not be able to represent competitors or serve a client on your side business that you serve through your employer.
• Cannibalizing: taking business away from your employer and funneling it to your own business. Just flat-out unethical.
• Maintain highest ethical standards
• Aggrandizing: making yourself seem bigger than you are. It’s the deceptive practice of false advertising of your skills, background, experiences or the size of your business.
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach
Do You Work in a Learning Organization?
Only learning organizations are equipped to succeed in today’s brutally competitive business environment.
Organizations that create cultures of continuous learning for their employees are referred to as “learning organizations.” These organizations facilitate the learning of their people and are able to continuously transform themselves.
But learning organizations don’t just happen. They evolve as a result of the MANY pressures facing today’s organizations. Challenges such as social media, the 24x7x365 new cycle, constantly advancing technology, global competition, internet-based business models constantly pose threats to an organization’s survival.
For example, the average age of a company that appeared on the Fortune 500 list of the world’s most successful businesses used to be 50 years. Now, the average age of a member of that illustrious list is a mere FIVE years. Further, companies once deemed “too big to fail” are doing so with scary regularity. Examples such as Bear Stearns, Circuit City, Lehman Brothers, Borders, Blockbuster, Meryl Lynch abound.
In order to adapt to these constant challenges, companies that transform themselves into learning organizations (learning society) are able to remain competitive. The concept of the learning organization was first developed through the research and work done by Peter Senge and his associates in 1994. Further contributions came from Donald Schon in his writing about the “learning society.”
Organizations need to become more like “COMMUNITIES” that their employees feel a sense of commitment towards. Many companies have destroyed employee trust and loyalty by tearing up the employer-employee contract beginning in the 1980s, when they began sending jobs overseas to lower cost labor markets. Words like off-shoring, outsourcing, re-engineering, right-sizing, downsizing have become all too familiar vernacular for Management’s destruction of the American worker’s long-term work prospects.
Usually, an organization becomes a learning organization as an outcome of that company becoming far too structured. As companies grow they expand, adding on layer after layer of bureaucracy which always leads to organizational inefficiency and ineffectiveness.
When that happens, some leaders are wise enough to identify an overwhelming need to restructure/downsize in order to become more lean and efficient. What they end up facing is a need to have their remaining workforce become more productive on a per-employee basis due to the smaller number of remaining workers they have.
That then demands you create a new environment, in which people can openly share learning without their sharing becoming devalued or ignored completely. This is an absolute necessity for the remaining workers to all benefit from the sharing of knowledge and experiences, which in turn empowers the employee who shares their knowledge. This is at the heart of the learning organization.
I have unfortunately spent over 20 years working in many industries for many organizations that did not understand this central tenet. Workers who feel that their experience, knowledge, training, and education are valued want to share their expertise for the greater good of the organization. But many managers and business owners still manage their people like they were purely assets (a cost to be maintained/controlled) like we were still in a manufacturing-based economy. WE’RE NOT! We work in the 21st Century technology/service-based economy. Knowledge is the single greatest assert to be leveraged, for true lasting competitive advantage. And many organizations simply refuse to embrace this fact.
Don’t believe me? Here’s a VERY simple test you can conduct, in order to (dis)prove how poorly prepared your own organization is to take advantage of its people’s talents.
Ask your Human Resources folks to take a random sample of any five (5) employees in your organization. Have them write down each person’s job requirements, those functions they are tasked with performing on a daily basis. Then, write down the top 5-8 core competencies that each of those people possess. Now, compare the list of job requirements with their greatest talents for each of those people. I GUARANTEE you that for each person, there is a significant disconnect/disparity between their talents and the work they are tasked with performing. This holds true in ANY organization and people at any level of your organization. This is why most organizations are NOT a learning organization.
How then can you spot a learning organization? Following are a few key characteristics of true learning organizations. See if any can be found in YOUR company:
* They provide CONTINUOUS learning opportunities for all employees;
* They apply learning to achieve all their personal, team, and organizational goals;
* They link each individual’s performance to the organization’s performance;
* They truly ENCOURAGE personal inquiry and open dialog;
* They make it safe for people to both share openly and take risks WITHOUT fear of punishment for failure (In fact, failing GREATLY as a continuous learning tool is actively encouraged); and
* They are continuously aware of, and interact constantly with, their external environment (Kerka 1995). You define an organization’s external environment as the markets they compete in, their employees, clients, partners,vendors, suppliers, and competitors.
So, let’s say you are now a convert to the learning organization and want to know HOW to create a learning organization in your own organization. Great! First, you should know that people don’t learn by formal training. They learn by rolling up their sleeves and learning “ON THE JOB.” Therefore, you MUST create an informal learning environment by creating a mentor/coaching programs. Develop a program of employee job rotations, so people can learn the entire organization by working in various Departments. you will also need to begin having constant discussions with your peers in an open, sharing environment. It is also critical that your organization begin to disseminate/distribute information all across the organization including top-down, bottom-up, between functional areas, and inside/out the organization by sharing information with all your stakeholders.
As noted in a recent Korn/Ferry Institute white paper titled Using Learning Agility to Identify High Potentials Around The Worldd, studies have repeatedly shown that the ability to learn from experience is what differentiates successful executives (and organizations) from unsuccessful ones. Learning agility is used to describe those with openness, willingness to learn, curiosity about the world, a willingness to experience new things, good people skills and a high tolerance for ambiguity. (Jan/Feb 2013 HR Executive, p. 17)
People who are learning agile usually exhibit the following six characteristics, according to a recent white paper titled: “Learning About Learning Agility” from the Center for Creative Leadership and Columbia University’s Teachers College:
1) They’re unafraid to challenge the status quo;
2) They remain calm in the face of difficulty;
3) They take time to reflect on their experiences;
4) They purposefully put themselves in challenging situations;
5) They are open to learning; and
6) They resist the temptation to become defensive in the face of adversity.
Your organization also needs to begin offering “on-demand training” where you customize the training to fit the specific needs of a skill set, particular project, or specific task. Then you need to deliver your people performance support tools (software and systems) that help them achieve their work-related tasks. In order to remain competitive, your organization MUST create a culture that embraces learning. Call me if you’d like to discuss how his can be done.
Some Great Resources to Explore.
* Building the Learning Organization, by Michael Marquardt.
* 5 Keys to building a learning organization.
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach
Build Your Brand In an Online World
Build a Compelling Personal Brand to Form Lasting Relationships Online…and Offline.
We live in an age in which we gauge our connectedness by the number of relationships we form online. It is critically important that we build a brand that is compelling and lasting in order to achieve a more polished professional image.
As a practitioner of online branding to grow my own business, I face an ongoing challenge of leveraging social media to extend the brand I create with people that I interact with in person.
In the great digital age, I also teach social media, branding, and interactive marketing. So I understand and appreciate most people struggle to establish and maintain consistent messaging both online and offline. Here are some practical guidelines we can all follow for our personal and professional branding success.
Understand what branding is…and isn’t.
Your brand is a promise that you will consistently deliver in a unique, invaluable, and memorable way.
Identify Your Core Values & Beliefs.
You build your brand by beginning with self-exploration. Spend time thinking through the following questions:
* What principles do I choose as a foundation for my life?
* What would I like to accomplish and contribute?
* What would I like to be?
* How do I fit into my family and community?
* What are my strengths?
* What are my passions?
Steps to Match your Brand to Ideal Employers (for job seekers)
* Take an Online Self Assessment Tool:
– Myers-Briggs Type Indicator (MBTI)
– The Birkman Method
– Keirsey Temperament Sorter
* Understand Your Values
* Match Your Values To Ideal Employer Cultures (Differentiate the Formal & Informal)
* Identify Your Preferred Working Environment
Social Media is NOT Internet Marketing.
SOCIAL MEDIA is all about building and maintaining social experiences ONLINE! You build a brand online by engaging in social media platforms (places where people connect and communicate) in order to promote a product or service.
In order to build a strong personal brand that resonates with others DON’T ask: “How many followers can I blast my message to?” Ask: “How many people can I engage in a dialog with?” Dave Taylor
According to Nancy Marmolejo: “visibility and credibility equals social media success.”
Here are ways that you can begin to practice the art of self-promotion:
* Become a Subject Matter Expert
* Get Published
* Identify Your USP
* Your Product Features & Benefits
* Build a Rolodex of References/Testimonials:
* Professors, Advisers, Bosses, Peers
* Define 4-5 Success Stories
* Actively Promote Yourself AT ALL TIMES
* Defend Your Brand (Name) Against ALL Attacks
Guidelines on how you can leverage social media to your professional advantage:
* Social media is where all the people are.
* Trust in advertising is disappearing.
* People are already talking about you.
* Respect other people online.
* Efforts to control/manipulate will backfire.
* Don’t chase everything new under the sun.
* Traffic is good but not the ONLY goal. Think QUALITY over QUANTITY
* Use your real name.
* You have to be proactive.
Manage your brand offline in the REAL world.
Ask a small group of the people who know you best what words they would use to describe you. If their words match how you would describe yourself then your understanding of your own brand coincides what others think of you. If not, you need to re-assess what messages you have been sending out about the kind of brand you represent.
Develop the key messaging that you use over and over, in every networking event, and meeting you have to build your brand and promote yourself. What are the key elements that you want to promote about yourself. Apply all of those key points into each and every one of your social media accounts.
Keep it simple. Maintain a base foundation of FOUR accounts: Twitter, LinkedIn, Facebook and MeetUp.
GREAT RESOURCES TO BUILD YOUR BRAND ONLINE
* www.likeable.com
* Social CRM Insider
* Linked working
* 14 Best Practices for Social Media Success
* Facebook Guide to Social Media Best Practices.
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach
How to Choose a New Business Idea
There is a science (process) to determining if you have a viable new business idea.
We are living in the era of the great American Entrepreneurial Society. We live in an age when more and more Americans are leaving Corporate America to pursue the great American dream of starting their very own new business venture. To support these start-up initiatives, networks are popping up everywhere to facilitate the needs of entrepreneurs and start-ups. You can see this trend continuing to evolve in the massive proliferation of support resources such as: business incubators, expanded course offerings in colleges for such new business topics as entrepreneurship, leadership, business funding, venture capitalism and angel investing, in addition to a spike in new franchises openings.
Organizations funded by city, state and Federal Government agencies to support new business start-ups are everywhere and include: Economic Development Centers, Small Business Development Centers, SCORE, the Small Business Administration, WIBO, the Marion Ewing Kaufman Foundation, the Levin Institute, New York City Business Solutions Center, micro-lenders. crowd-based funding sources (like Kick Starter and IndieGogo) etc.
How can you decide if a business idea or new product/service idea you have can be developed into a new business? Here’s how…
Create a New Business Framework.
In step one of Customer Discovery, you’ll first summarize (and then develop a one- or two-page brief about each of the following:
1. Value Proposition: the product/service, its features and benefits or uniqueness versus the competition; size of the market opportunity; and the minimum viable product that best illustrates the product as quickly as possible, to elicit customer feedback early.
2. Customer Segments: who your customer is, and what problems the product solves. You want to define your ideal customer in as much detail as possible.
3. Channels: how you’ll distribute and sell your product. Are you going to sell direct to your consumer, or sell through an e-commerce website. Will you employ a direct sales force? Will you sell your products at street fairs, bazaars, or flea markets?
4. Customer Relationships: how will you create demand? Through traditional advertising, personal parties where you demo your product, other?
5. Cost Structure: you need to determine what all of the fixed and variable costs are that are required to operate your business.
6. Key Activities: what tasks must your company perform, in order to succeed?
7. Key Resources: suppliers, commodities, or other essential elements of the business.
8. Key Partners: other enterprises essential to success of the business.
9. Revenue Streams: revenue and profit sources and size.
In the earliest stages of business model development, it’s often most helpful to start with the first four elements at the heart of most businesses.
Testing the Model
Customer Discovery involves testing your above list of hypotheses with customers, preferably in face-to-face interviews. At least once a week, update the canvas to reflect any pivots or iterations, highlighting in red the changes from the last week. After you and your partners agree on the changes to your business model, integrate them into what becomes your new canvas for the week (with accepted changes then shown in black). During the next week, note any new changes again in red. Then repeat, repeat, repeat.
Don’t expect every customer or channel prospect you interview to have a valid opinion on every aspect of the business model. Some users will know a great deal about the features they’d like to see, and perhaps about competition. Others will know more about how the company buys products, some will know about how much the company might pay, or how serious the problem actually is. Most will offer good feedback about the way they learn about new products in their industry.
Your job as the entrepreneur pursuing this new business idea is to get as much feedback as possible using the Customer Discovery method to assemble a credible, validated “mosaic” that over time will affirm or validate all nine sets of business model hypotheses.
Define Your New Business/Identify a New Market in SIX (6) Easy Steps:
Following is a six-step “cheat sheet” of actions you should employ, in order to determine if you have an idea for a new product, service, or business that can be pursued as a viable new business venture:
1. Investigate opportunities in an existing or new value system: Begin by assessing the the value chain (a.k.a the playing field) to consider all of the key stakeholders. That will enable you to determine where your new company will compete. Find a space, niche, or opening. Think about the opportunities that exist for you to add value to potential customers, either by unlocking value by creating more efficient ways of doing things. You can also deliver “New to the world” value by creating new benefits. Lastly, opportunities may exist for you to customize offerings. You do this by allowing your potential customers to personalize your products/services or remove unwanted features (think Yahoo! News, for example.) You can also build community by developing chat rooms, user forums, or closed community websites like MyFamily.com. Lastly, you can introduce new functionality/user experiences. Since communications, computing, and entertainment keep converging, there are continuously new customer experiences to offer.
2. Identify unmet or under-served needs: You can reveal unmet or under-represented needs by mapping the entire customer decision-making process like Amazon uses personal recommendations. Ask yourself what steps the customer goes through? Where does the customer obtain their information? Where does their decision-making process take place? What opportunities exist online for customers to enhance or entirely transform the customer’s experience. These are all valid steps to find customer needs not being met in the marketplace.
3. Determine your target segments: A market is the set of all actual and potential buyers who have sufficient interest in, income for, and access to your products/services.
Market segmentation divides your market into distinct groups of homogenous consumers who all have similar needs and consumer behavior, and thus require similar marketing mixes. Segmentation strategies that can be applied for both Business-to-consumer & Business-to-business markets include the following:
* Behavioral
* Demographic
* Psychographic
* Geographic
* Occasion
* Benefits
* Nature of good or service
* Buying condition of the consumer
* Demographic details
Descriptive or consumer-based markets are related to what kind of person or organization the customer is. Behavioral or product-oriented target markets are related to how the customer thinks of or uses the brand, product, or service. Behavioral segmentation bases are often most valuable in understanding branding issues, because they have clearer strategic implications.
You can find your ideal target market / segment by determining who you want to sell your products to. Actionable segmentation is when your ideal segments are easy to identify. Segments can be easily reached by defining in terms of their growth, size, profile, and attractiveness. Meaningful segmentation is when you can explain why customers act the way they do. This can be accomplished because customers in a segment behave in similar ways. Sheds light into customer motivations, and correlates to differences in profitability or cost to serve these segments.
4. Assess resource requirements to deliver the offering: Begin by asking what capabilities you are going to need, in order to deliver a new offering. You are going to have to determine what experience and benefits the product will provide your customers. Define the capabilities and technology that will be required to deliver the benefits of your product/service offering. You’ll need to develop a resource system, the collection of individual and organizational activities and assets you and any of your employees will have to bring to the table. For online marketing, shift the focus from activities and capabilities in the “physical” world to a mix of marketplace and virtual assets you’ll need, like social media, blogging, web development video capabilities, email surveys, etc.
5. Assess the attractiveness of the opportunity: This is no easy task. You’re going have to gauge what the competitive landscape is like? Who are the key players. Then tackle your potential customer dynamics, by assessing the level / amount of unmet need, any interaction between customer segments, and the likely growth rate of your target segment. Technology vulnerability is another factor I suggest you consider. To explore this area, you will need to figure out how vulnerable your new product/service is to technology trends/advancements. See this cool video on how cloud computing is changing the marketing game. The last consideration to factor into the equation is “microeconomics” namely the size/volume of the market and your projected profitability.
6. Make an educated “Go/No-Go” decision: If you do the prior FIVE steps then this becomes a fairly easy final touch to the entire process, namely deciding whether or not to move ahead or abandon this new business idea. Of course reaching this stage and deciding NOT to proceed can be extremely difficult even when all indications lead you to avoid pursuing because you are so emotionally committed to/invested in wanting to charge boldly ahead.
AWESOME RESOURCES TO HELP YOU.
1) “World Wide Rave” book by David Meerman Scott. His rules:
* NOBODY cares about your products except you.
* No coercion is required.
* You should lose control.
* Put down roots.
* Create triggers that encourage people to share.
* Point the world to your (virtual) doorstep.
2) “How to make your case in 30 seconds.” How to craft a KILLER elevator pitch.
3) Entrepreneurship/Start-Up Social Media Sites & Resources:
* PartnerUp: online community on Twitter for entrepreneurs.
* StartUpNation: Everything you need to start a business.
* Biznik: Going at it alone…together.
* Cofoundr: Exclusive deals for entrepreneurs.
* The Funded: All-in-one resource for entrpereneurs.
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach