To suggest that now might be the time to start your business might seem ludicrous. However, the current economic climate might just provide a unique time to get your idea off the ground.
The high rate of unemployment offers a large pool of talent that, in better times, you might not be able to find or afford.
Large amounts of commercial space are sitting empty and available at very reasonable rent rates.
If you are still working, you are one of the lucky ones. However, since most employers are struggling to find enough hours to keep people productive, its likely you could negotiate a reduced work schedule to allow time to work on your concept.
Communities are desperate to find businesses to help grow the employment base. The help you need might be more readily available.
Okay, the above points may not be enough to get you up and out of that Lazy Boy. But, as you mull this over, consider the plusses of becoming the master of your own fate. If I now have your attention, let me provide you with some starting points - the questions you need to answer before making the big leap.
Sit down and write down what it is you are proposing and why a customer would buy it.
Take time to assess the competition. This process involves a little more time than you might think. Competition can be direct (people selling the same thing) or indirect (those selling something comparable). Talk with anyone and everyone who might have some insight in your potential market. Take that input and weigh it carefully. Too much negative feedback might mean you need to reshape your idea or, in the extreme, stop pursuing it. As you assess, ask what it is about your idea that will allow you to sell it at a higher price. What added value does your idea bring to the customer?
Ask yourself how your concept will bring customers back for repeat purchases. A business that works from project to project is far more difficult to grow and sustain.
Find potential customers, then spend some time determining if there is strong enough interest in your product to abandon what they currently use. Figure out before hand what you will charge. (Remember, in step two, I mentioned the need to figure out how to sell at a price higher than the competition.) One of the biggest startup mistakes is to assume that lower overhead right now will allow you to sell at lower prices. If you are successful, you too will accumulate overhead as you grow and soon will be faced with the need to raise prices. Therefore, its better to create above average margins in the beginning. By adding value to your product, you also differentiate your product from competition. You will build needed cash for growth and allow yourself elbowroom for later price flexibility.
When contacting potential customers, start a list with the strongest interest at the top. This will help determine who to go to first. Assess if there are enough strongly interested customers to give you a large enough sales base.
Assess your personal commitment. Starting a business requires that you are comfortable working with ambiguity, have focused concentration and are willing to give huge amounts of personal time.
Assuming you follow through with information gathering, Ill discuss next steps in my next column. (We havent yet begun to talk about money.) For many newbie entrepreneurs the first focus is on figuring out how much money they might need and looking for ways to find it. Preliminary entrepreneurial work requires no money just the personal time you invest to gather information.
Next time, well walk through your startup and ways you can launch with a minimum of money. Bootstrapping your concept, while also building value, makes later funding much easier and less costly.
Erdman is chief executive of Strategic Growth Resources, a business acquisition firm. Previously, he founded entrepreneurial programs at the University of St. Thomas in St. Paul and the University of Iowa. You can reach him at email@example.com, or by telephone at 218-326-6939.