Thursday, February 26, 2009

"Startup in Thirteen Sentences" and "Three things you need if you want more customers"


Two great short articles this week - both with simple and straightforward messages for those wanting to start a business.

Seth Godin's Three things you need if you want more customers - here I will give them to you -

1. A group of possible customers you can identify and reach.
2. A group with a problem they want to solve using your solution.
3. A group with the desire and ability to spend money to solve that problem.

and Paul Graham's Startups in 13 Sentences.

Paul says if he had to pick only one: "Understand your users."

Both Seth and Paul are striking on the same stake: if you don't identify/understand/know your market, you are done before you start.

But Brad - if people only understood my great solution, they would love it! Maybe. How do you know what people you are trying to get to understand your solution?

If you can come in to the CBD with answers to 1,2,3 - now we can take advantage of the services and offerings available to entrepreneurs. Too often people come in with everything else - then try to find a customer base.

Friday, February 20, 2009

alla garibaldina


The italian phrase alla garibaldina refers to 'an enterprise begun with carefree audacity, little preparation and a lot of risks' Paul Hofmann

Is your startup alla garibaldina?

While Garabaldi succeeded in bringing Italy together into a country, your enterprise is more likely to fail. We love the myth of the entrepreneur - striking out on his or her own and making it big. And I certainly don't want to downplay the importance of passion for what you want. When you investigate our mythic entrepreneur, we often find that they did have preparation in their previous experiences - skills gained or learned - that carried them through. What seems to be effortless, is instead the result of endless work.

Every entrepreneur who comes through my door tells me of his passion for whatever idea he has. Yet almost none return for a second visit. This could well be a critique of my advice - and maybe they go off and do succeed. But we could use less myth and more realism.

Tuesday, February 17, 2009

Your pain is not the Customer's pain


I recently have been trying to sell a Belstaff shoulder bag. I bought it when in UK, in pounds. The dollar was weak at the time and so now as I try to sell it, due to my arbitrage, I won't recover what I paid.

In pricing my bag at what I'd paid, rather than what the market was buying, I was confusing my pain with the customer's pain - just because I had overspent, does not mean I can have the customer also overspend. He might be sympathetic to my plight, but won't cover my mistake.

When you sell your product or service, remember you are trying to hit the intersection between the customer need/pain and your desired return. A Rolex does not cost $5000 to make and distribute - but it is bought and sold at that price because it crosses the customer's desire for a swiss watch and the profits they want to get from it.

If you are a retail store, don't be afraid to move out slow selling items - take your hit and move on. Then do a better job next time at choosing products to sell to your market. When Circuit City said it would close its stores, people went there looking for bargains - not finding them, they left (with the stores even slower than before they announced closing).

BTW - I still have the bag!

Friday, February 13, 2009

The Business of Incubators

Allow me to do a bit of navel gazing...

There have been a couple articles the last few weeks about business incubators having difficulties. Here is a link to a Business incubator program suspended (the Adirondack Regional Business Incubator in New York). These articles usually contain some statistics about the return value of incubator programs, how many businesses were created, and other reasons why they should not shut down the programs.

While I have no specific information about that particular incubator, the article notes that they did not have enough sustainable financing to continue. What I find interesting is that for entities that are created to help businesses become successful, we in the incubation industry seem to have a hard time doing the same for ourselves.

It seems to be relatively straightforward to get grants and other sources to open a facility, get the mayor with the big scissors to cut a ribbon,..., but once open how do theyexpect to keep going? If it costs $400,000/year to run an incubator, but revenue from a full facility will bring in $100,000/year - where will the rest come from? Usually the rest comes from local funding agencies (Chamber, Economic Development Agencies, Grants) - but when there is a down turn in the economy, or change in a funding agency, the money disappears and the facility shuts down.

The problem is caused by something I occasionally see in a client business: the person paying for the product is not the end user. The incubator's operational expenses are largely covered by some other agency. The success of the programs are in local businesses - but they don't pay the incubator beyond the rent.

When we give reports to the agency, we say '50 jobs were created with incubator businesses, bringing in $x to the local community.' But those $x don't pay the salary or expenses of the incubator - the funding agency does.

At least in those incubators that take equity in their clients there is a clearer connection between the success of the program and success of our clients.

If a local community wants to setup an incubator, they had better be clear about where their dollars are going. Does the local community realize that they will be carrying a facility and staff indefinately on their budget? That is not in and of itself a bad thing - local communities fund police, fire, and other departments. But if there is some implied "well, the facility will become self-sustaining" I think that sets the community up for heartbreak.

That is why I was heartened to read Benton Harbor area not ready to sustain incubator - a community that realizes it is not ready for one yet (and maybe not ever). Instead they already offer a good set of services, and with some iintegration they can gain most of the benefits of an incubator.

Local businesses and entrepreneurs need and can take advantage of the services we offer. But we need to be fair to our stakeholders.