Inside Entrepreneurship: Tips on choosing a startup idea

Inside Entrepreneurship: Tips on choosing a startup idea

August 23, 2007 12:12 p.m. PT

Q: I’m a carpenter with no MBA, no real
business knowledge beyond running a small business, and no capital. But
I have about 10 or 15 rock-solid business and product ideas. If I had
capital, I know I’d be a gazillionaire right now. But who’s going to
invest in a carpenter’s ideas? I have no resume to back it up with and
my credit is not exactly great. If there’s anything you can do to help,
let me know.

Josh, Bellevue

A: One of the most
enjoyable aspects of writing this column is the opportunity to
correspond with entrepreneurs and small-business owners who have a
can-do spirit. With my morning coffee in hand, I start each day reading
questions from readers who believe they can do more — raise more
money, serve more customers, buy more companies or earn more money.

letter is representative of one of the most common types of letters to
my in-box. Just last week I received a similar letter from a Texas
woman declaring, "I want to build a golf course, resort and spa. I have
no experience, no money and no idea where to start; but I do have a
vision and I know I can do this."

Clearly, this woman is
passionate and determined. And, like you, she wants to know how to
start up a startup, even though her background seems an unlikely match
for the endeavor.

I’m not the kind of person who tells aspiring
entrepreneurs to abandon their goals. All things are possible,
especially if you focus more time on perfecting how you will reach a
goal, rather than the goal itself. This is the key to gaining the
confidence of investors and other startup partners.

Your first
step is to select just one of your rock-solid ideas for business plan
development. For your first startup, give preference to the business
opportunity that has any or all of the following attributes:

  • Requires the least amount of startup cash.
  • Requires the least amount of time to reach the point in which your projected monthly revenues exceed monthly expenses.
  • Does not require you to pioneer a concept and educate target customers of the need for your product or service.
  • Proves
    to have the largest demand from ready-to-pay customers. Here, you have
    to test which opportunity target customers like the best, not the idea
    you like the best. This means talking and listening to your target
  • Offers predictable, higher gross profit
    margins. Higher gross profit margins provide entrepreneurs with greater
    leeway to cut marketing and administrative costs to weather business
    downturns. They are also attractive to investors, lenders and business
  • Has, as discussed in last week’s column, strategic or intellectual property protections against competitor copycats.
  • Operates
    in a market that is not currently controlled by one or two large,
    well-funded companies. Choose markets that are "fragmented," growing
    and can make room for your business.
  • Is more
    closely related to your background. For example, you may be better
    equipped to manage a company that, say, is in the home improvement
    arena than a food service operation.

    I know this last
    thought is trite but worth remembering. Local investors around Seattle
    are always comparing risk and reward. They choose deals in which they
    can minimize the risks of a startup while at the same time maximize the
    reward they will receive upon the sale of a company. This balance
    should be your measure for opportunity selection, too. Choose with care.


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