I saw a drawing on Charles Robinson’s post about books for entrepreneurs and it spoke very directly to me – and not in a nice fluffy way.
More in a kick up the ass kind of way.
It’s a very simple truth – and there’s no way to avoid what it’s telling you.
Do you know the kinds of people that succeed in business?
They tend to be the kind of people, in my experience, that you’d want on your side in a fight. People that stand their ground. That don’t give up. That move forward.
A surprising number seem to be born under the sign Taurus. Something about being bull-headed perhaps.
And the thing they do is get on with it.
A lot of us don’t. We have ideas. We talk about them, to our other halves, at the pub. It’s conversation and chat and wouldn’t this be brilliant.
Here’s the thing.
An idea is ephemeral, a thought in your mind. You might think it is valuable – but it’s worth nothing until it’s made real.
Now, one could argue over this – but what’s the point. Some people will say that ideas are valuable and you should protect them and sign NDAs before you talk about them.
Others will say that there is no point – no one is going to take the effort to steal and implement this idea of yours. If it’s that easy to steal, then you can’t protect it anyway.
So, putting those things aside, if you are – right now – in a position where you have an idea and want to be an entrepreneur, what should you do?
What’s the single most important thing you should do?
You should talk to someone with the power to make the decision to buy what you have to offer.
That’s the end game. So, you need to start there.
All this talk of ideas and businesses ends at this place. With you handing over something that the person who takes it wants more than the money in their wallet.
In economic terms, it has utility – worth or value.
What’s going to get them to make that decision to buy?
That’s a function of demand – and this gives you a hint of how to get from the idea you have to a viable business.
There are seven parts to this function – and it goes back to the first chapter of an economics textbook…
Ask yourself these questions:
- What is the price of your product?
- How much of it will the buyer want?
- What are their tastes and preferences?
- What else will they need that is related to your product to get full benefit from it?
- How much money or income do they have?
- What are their expectations about future prices?
- How many such buyers exist out there?
Let’s do a quick exercise and work through these questions for a possible business. Lets say you’re setting up a marketing agency. It’s just you in the business.
- What’s your price? Say your hourly rate is $100.
- How many hours will the buyer want? Perhaps to get the job done they’ll need 10 hours a month.
- Tastes and preferences? They like writing but haven’t got the time to manage social media and PR.
- What else do they need? An advertising budget – perhaps $500 a month to get started.
- How much money do they have? They’re okay with a budget of $2,500 a month.
- What do they think about future prices? They’re expecting charge rates to stay broadly flat.
- How many buyers are out there? You specialise in B2B consultancy firms – and there are perhaps 30-40 within 20 miles of you.
Does that seem reasonable? Say you need to get in $4,000 a month to maintain a decent standard of living. So you need 4 clients that have a budget of $2,500 – around 10% of your potential market.
If you think you can make that work – then you now have a plan for your business.
Now you need to pick the phone, send an email, send a letter, get a referral – use some way to talk to the kinds of people that can make the decision to hire you.
The one thing to notice is that an economics model doesn’t care what product you actually have.
There’s nothing in there that talks about quality or sweat and tears or your feelings.
It looks at your product from the customer’s point of view.
The only view that matters.
And the sooner you face that, the sooner you will stop having ideas and start creating businesses.