A New Series on Business Startups — Part 11

Many startups plunge into the marketplace on a wing and a prayer. The young, inexperienced hopefuls have great expectations, but little knowledge of the complexities of the business they are getting in to.

The problem with this approach is that, except in rare instances, the new entrepreneurs will be forced into mimicking what’s already out there, including their main competitors. They will be competing directly with hard-bitten professionals and mature operations. They don’t stand a chance.

One way round this head-to-head gambit is to set up the enterprise initially as a hobby project, rather than a registered business.

The advantages of this alternative approach are many:

* You can win your spurs without too much financial drain or loss of face.
* You can gain expertise by copying the market leaders with little comeback.
* You can mature in the job and branch out from your competitors.
* You can gain respect in the market before making big investments.

This path is especially easy on the internet because entry costs are so small. Syntagma Media was started in this way, first as a tentative hobbyish project to test the waters, then as a semi-commercial enterprise with all profits reinvested for growth. Finally, as a registered business earning good returns for its owner.

Where entry costs are low, it’s always best to reach the comfort zone before fully committing yourself to a real business with all its overheads and legal headaches.

After all, you may not like it once you’ve tried it out for yourself.

A New Series on Business Startups — Part 5

From time to time in this series, we’ll slot in a case study to add a sense of reality to the often academic nature of the learning curve of starting a business. Here’s one from the UK.

While still a student at West of England University, Jamie Murray Wells used his student loan to start Glasses Direct from a disused stable block on his father’s estate. He negotiated deals with the spectacle-frame manufacturers which allowed him to undercut the high-street chains in the UK, like SpecSavers, by a substantial amount.

James Murray Wells, 23, now runs a multi-million pound internet company, which sells a pair of specs every eight minutes. He has netted sales of over £2.5 million ($4.8m) in less than two years

Jamie says: “It’s an exciting time. There’s an army of people wearing my glasses every day, and that’s an incredible feeling.”

Until this young entrepreneur turned his gaze on the industry, the £2.5 billion market was dominated by four giants: SpecSavers, Vision Express, Boots and Dollond & Aitchison. Needing a new pair of glasses while revising for his English finals, he was shocked at the price.

“I couldn’t believe there was nothing cheaper than £150 ($290) for what was essentially a piece of wire and two pieces of glass.”

He began contacting glazing labs to try to get a cheaper pair direct. He was told that the cost would be around £7 and that the process was done automatically in under 20 minutes.

“The mistake of high-street opticiancs,” he says, “is that they subsidize eye tests in the hope of clawing back margins on dispensing glasses.”

He used the last £1000 ($1,950) instalment of his student loan to develop his idea.

But time doesn’t stand still in the rarified air of this entrepreneurial eagle. Looking ahead a few years he sees himself as a billionaire buying himself an island.

“I didn’t grow up dreaming of being an optician, so it’s not going to be long before I move on and attack other industries — knock the bottom out of the property industry or pharmaceuticals, or whatever.”

Go to Part 6.

What happens when a successful startup goes wrong and the original founders are dispensed with for no apparent fault of their own?

This is the entrepreneur’s ultimate nightmare — to lose control of your creation in the expansion process then find yourself dumped by incomers.

And that’s the cautionary tale of JPG Magazine, an online and print business that morphed into 80/20 publishing and subsequent disaster for its founders.

The story is told at some length by Derek Powazek (pictured), who describes himself as a thinker, designer, and writer in San Francisco.

His conclusions from the experience are :

If it’s any help to other entrepreneurs, here’s what I’ve learned.

1. Make no assumptions when it comes to roles and responsibilities. Like my dad says: “Someone’s gotta call quittin’ time.”
2. Communication between partners is mandatory. And you cannot communicate with someone who is not communicating with you.
3. Decisions aren’t decisions if you have to keep making them. Set on the course and stick to it. If you keep talking about things that have already been decided, nothing will ever get done.
4. When someone says one thing, but acts in a contradictory way, you have a choice between believing their words or believing their deeds. Believe their deeds.
5. Never let anyone tell you what you want. When someone says, “You don’t want that,” what they really mean is, “I don’t want you to have that.”
6. Don’t stay where you’re not wanted, respected, or happy. Even if it’s your company.

Read the full story here.

A New Series on Business Startups — Part 2

Now that you have decided what kind of business person you are, and the general area you’d like to tackle, the next step is to select a business and get started.

First, let’s consider business types in a broad brush way. Essentially there are five sorts of businesses :

1. Making something (manufacturing)
2. Doing something (services/sales)
3. Fixing something (repairs/maintenance)
4. Creating something (crafts/arts/writing/photography)
5. Moving something (transport/removals).

If one of those immediately jumps out at you, you’ve found your compatible business area.

The next step is to break it down further into niches that particularly interest you.

The Venture Concept
When you’ve hit on an idea that sets your pulse racing, you next need to define the venture concept in more critical terms. Does the enterprise have any particular conditions calling for special attention? It’s rare to find any venture that doesn’t. For example, does it require action arising from :

* Special expertise required.
* Difficulties in marketing a product or service.
* Peculiar conventions in the industry.
* Technicalities.
* Specific tradesmen or professionals needed.
* Shelf life of products, e.g., refrigeration required.
* General regulatory regime.
* Specific legislation.
* Difficulties in generating business (closed shops).
* Current market conditions.
* Geographical considerations, e.g., importing bananas.

It is said that this conceptualizing stage takes up 5% of time in the pre-launch stage. In my view it take much longer : 10-20%. Don’t neglect this aspect of your business plan, or you’ll need to do it all over again if you hit the buffers, costing time, money and heartache.

It’s a good idea to note down all the ideas and decisions accumulated in this process, as that will :

* harden your knowledge of the concept
* remind you of what you’ve already discussed
* provide a list of contact names and phone numbers
* and give you a blueprint to work from at later stages of the operation.

You can’t have too much detail at the outset of any project. What you know now will determine the course you take. Too little knowledge and you’ll almost certainly make a number of false turnings.

Remember, the deity is in the detail.

Go to Part 3.