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View Full Version : Is your business idea a good one?


Steve
04-18-2006, 04:15 PM
BusinessWeek (http://businessweek.com/smallbiz/content/apr2006/sb20060418_453227.htm?chan=smallbiz_smallbiz+index +page_getting+started) - Vetting Your Idea
Seth Godin on how to tell whether your ingenious thought could make a viable product ** and how to impress investors if it does

An aspiring entrepreneur has an idea for a new business. He thinks it's great, but how can he test it?
The first thing people considering starting a business should do is ask themselves ** honestly ** whether they're building a freelance venture or an entrepreneurial venture. A freelancer gets paid to work. An entrepreneur makes money while she sleeps.

There's nothing wrong with freelancing ** with creating something interesting on a bespoke basis. It's like having a job, but you're the boss. But you have to recognize that at the beginning and build the business accordingly. You shouldn't raise money, you should keep costs low, and so on. An entrepreneur, in contrast, raises money and hires people to do the work so that she can focus on growth.

When should entrepreneurs take their idea to investors?
Most often, people go for money too early, because they're afraid. My rule of thumb is that debt is bad. You should borrow money only if the money is going directly into something that will generate profits exceeding the interest.

In general, you have the greatest chance of success if your business makes money as it grows. You don't have to be McDonalds (MCD) to make money. A small chain of restaurants can still be successful. Compare that to something like Dolby Noise Reduction, which isn't successful until it's the default.

In The Bootstrapper's Bible you warn, "if you try to steal the giant's lunch, the giant is likely to eat you for lunch." In other words, don't compete head-to-head with big companies. Any other final bits of advice on picking the right idea?
You have to figure out how your idea fits into the architecture of the world. If your success depends on your product being sold in thousands of CVS (CVS) stores across the country, that's a problem. If your product is 5% better than the existing version, no one is going to buy it. People will only switch if your product is significantly easier to use and more effective. So the first step is being remarkable. Then comes the methodical planning.