Passion, Reality and Starting a Business
Learn from SCORE Westchester about the difference between passion and reality and the roles they play in entrepreneurship.
When entrepreneurs are thinking about starting a business, there are two distinct concepts critical to success that pop-up time and time again: Passion and Reality
Passion is best described by the following quote:
Because the people who are crazy enough to think they can change the world are the ones who do. -Steve Jobs
Starting a business is not easy. Entrepreneurs need to understand and express their passion. This involves the enormous task of developing a mission statement and plan. But that is only the tip of the iceberg. It also requires the enthusiasm, energy, and persistence to market the business concepts to suppliers, customers, and investors. For an entrepreneur to succeed today, they have to be willing to walk through walls. When we understand reality, we understand the problems, limitations, and constraints associated with any undertaking.
The emerging picture of many studies is that 10,000 hours of practice is required to achieve the level of mastery associated with being a world class expert in anything. -Quoted from Litwin in Malcolm Gladwell’s Outliers
Good ideas are a dime a dozen. Your best friend has the next million dollar iPad app idea. Entrepreneurs need to consider whether they can execute the idea and make enough sales to actually make money.
How can entrepreneurs balance passion and reality?
It is excitement and energy that drives a start-up. However, new businesses frequently fail because small (but critical) issues are overlooked.
Why will you succeed with your idea or concept?
Most of us understand the marketing concepts used in differentiating successful products from commodities. For large companies like Apple, Coke, and Nike success comes a lot easier with what seems like bottomless marketing budgets.
But what about the little guy? Entrepreneurs are frequently excellent at describing how they perceive their company as different. In fact, the best sections of many business plans are the description of the product or service and the expertise each member brings to the team. Consistently, the weakest sections of the same business plans are competition analysis, market research, marketing plans, and distribution plans.
With these key elements missing, no wonder so many start-ups fail. To avoid these pitfalls, it is necessary to examine these three areas of differentiation to achieve greater success:
- How is your business different?
- How can you communicate your difference to your target audience?
- Do enough customers care about your difference to change their behavior?
The internet is a critical aspect of any marketing program. The first critical use is to research the product (and potential suppliers), market, and competition. Having a website, social marketing, and an e-mail campaign are critical elements of most marketing plans - even for services and industrial products. Selling on the web is also becoming an important element of many programs and a great inexpensive way to start and test.
Key factors like quality, image, culture, packaging and customer service can be critical in affecting success. You expect a consistent meal every time you walk into a McDonalds whether it’s located in Times Square or West Texas. You expect the best in customer service every time you shop at Nordstrom’s. These factors evolve from the culture of the organization—their core values. Anyone can put product in a store or pictures on the internet and attempt to sell. It is the differences in service and other factors that separate the successful companies from those that fade into obscurity. For example, customers don't care what your product or service does, they only care what it does for them.
Will you make money?
It’s easy to get caught up in product development and marketing. Early in the process, entrepreneurs need to project when their product will start to make money. Without steady revenue streams, businesses often stall before they can even really get started.
A preliminary marketing plan outlining channels and target markets is absolutely crucial. One of the most frequent red flags to potential investors is a business plan projecting multi-million in sales with minimal marketing expenses. Also, assumptions made about issues like pricing, costs, and revenue need to be understood and explained.
Are we telling customers why we are great?
How do entrepreneurs find and communicate with customers without big marketing budgets? Startups frequently focus on how great their product is. More focus needs to be put on how your customers will benefit. Today’s technology allows what feels like a limitless amount of mediums to reach customers. But once a customer is reached, the message needs to be focused around how their lives will improve with the pitched product or service.
Can you deliver what you sell?
Operations and logistics are frequently viewed as secondary functions that can be outsourced. In reality, they present a huge opportunity for a business to become more efficient and differentiate itself.
Balancing and managing inventory to serve demand and reduce closeouts can be critical to success. Reducing lead times, improving flexibility, and planning can all improve effectiveness and lower costs. Consider the 80-20 rule. Many operations experts have shown that 80% of sales are derived from 20% of offered products or services. Entrepreneurs waste time, money, and frequently add confusion by adding too much complexity to their business models.
Starting a business is an exciting and potentially profitable effort. However it takes time, analysis, capital, and commitment. Entrepreneurs must allow their passion to drive them while staying vigilantly in touch with reality.
Provided by SCORE Westchester