I think that’s a mistake. As I explained in how to start a new business I believe you should always test a business idea, especially your own business idea, before you invest a substantial amount of either your time or money in it. Failing to do so is a very bad idea.

So how do you go about testing your own business ideas?

Well there’s several approaches, ranging from asking friends, family and anyone down the pub for their opinions (not recommended) to actually going out there and doing it – if it succeeds it’s a good idea, if it doesn’t it’s not (again not recommended as it’s a very expensive way to test a business idea). Instead I favour testing any ideas for your own business in several ways. Firstly desk research and when it comes to that in a recent post ‘The 2-Minute Opportunity Checklist for Entrepreneurs’ on the Harvard Business Blog, Prof. Daniel Isenberg (of the The Isenberg Entrepreneur Test) described a pretty good test:

1. Does your business idea soothe someone’s pain, discomfort, frustration, or dissatisfaction?
2. Are there lots of those people out there?
3. Do these people (or companies, or governments) have money to pay for it?
4. Will they be able to decide quickly to buy your product or service?
5. Does your idea exploit something about you that is outstanding or unique?
6. Are there important assets you have that no one else has? (money, access to customers, technology, leadership skills, execution, location, salesmanship, etc.)
7. Can you think of at least two people who might join you?
8. Do their skills complement yours?
9. Do they have the same values as you do?
10. Do the majority of people whose opinion you highly respect think your idea is a good one?
11. Does at least one person (and not more than three people), whose opinion you highly respect, think your idea is a bad one?
12. Is there something about the idea or its implementation, that compels you to really devote yourself to it?
13. Can you sneak by the big competitors without them noticing you for awhile?
14. Can you find a potential customer who will take your calls, give you feedback, try a pilot out?
15. Can you start up without huge gobs of money?
16. Can you keep your fixed costs low during launch?
17. Does your idea lend itself to small incremental steps that can inexpensively generate valuable information as well as at least a little cash?

He suggests that if when you evaluate business idea against this criteria it scores 16 or more ‘yes’ answers then you should get on and start a business around your idea. He expands on a few points noting that great ideas are those that attract detractors, explaining:

…unless you have at least one major detractor, then you are probably not on to something big. In fact, if everyone thinks it is a wonderful thing to do, then probably a legion of competitors is on the launch pad.

Then provides a great description of a good business opportunity:

Opportunities consist of:

1. the alignment of a market need,
2. a personal competence,
3. values or motivation.

If your business idea passes that desk research stage, then it’s time to start failing fast, failing cheap! By which I mean find cheap ways to develop prototypes and test your ideas. Where cheap doesn’t necessarily mean low cost, but rather that they use a relatively low proportion of your start-up capital. The point being that you will make mistakes and get things wrong in the early days of any business and if the first mistakes uses all your capital it’s game over, in contrast if the first mistake costs you just 10% then you have nine more chances to get the idea right and start a successful business.

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If you have the site bookmarked or you link to it, please update your links.

Everything should work exactly as before, all usernames and passwords for the blog and forums remain the same and should still work. However as with any move of this size, there might be some small teething problems – if you come across any please let me know.

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That said, far to many would be entrepreneurs put off starting a business for fear of pursuing a bad idea. They shouldn’t. If you want to be an entrepreneur, it’s far better to start any business, no matter how bad the idea might be, than to never have started one at all.

Bad business ideas are only a problem if you don’t follow the mantra of fail fast, fail cheap (see How To Start A New Business for more on that). In fact I’d go so far as to say that most bad business ideas are to do with the execution of a business idea rather than the business idea itself. For example, starting a business (or launching a new product) without all of the following:

• a proven demand for the product;
• a tested strategy for delivering the product profitably;
• a proven route to market;
• a realistic financial plan and sufficient finance to execute the plan;
• a plan and the right skills (either alone or as a team) to execute the plan.

Is clearly a bad idea. Then there’s the ultimate bad business idea: competing on price. There will always be someone cheaper and the race to the bottom will ensure there is little if any profit to be made. If price is your USP, then it’s time to call your idea a failure and start looking for a new business idea.

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Here’s the 20 questions in his ‘Isenberg Entrepreneur Test’:

1. I don’t like being told what to do by people who are less capable than I am.
2. I like challenging myself.
3. I like to win.
4. I like being my own boss.
5. I always look for new and better ways to do things.
6. I like to question conventional wisdom.
7. I like to get people together in order to get things done.
8. People get excited by my ideas.
9. I am rarely satisfied or complacent.
10. I can’t sit still.
11. I can usually work my way out of a difficult situation.
12. I would rather fail at my own thing than succeed at someone else’s.
13. Whenever there is a problem, I am ready to jump right in.
14. I think old dogs can learn — even invent — new tricks.
15. Members of my family run their own businesses.
16. I have friends who run their own businesses.
17. I worked after school and during vacations when I was growing up.
18. I get an adrenaline rush from selling things.
19. I am exhilarated by achieving results.
20. I could have written a better test than Isenberg (and here is what I would change ….)

He believes that if you answer yes to 17 or more of the questions it’s time to start your own business. Seems a pretty good list to me, the only ones I would have answered no to when I became an entrepreneur were: 15, 16 and 20 – but I’d say yes to 20 now!

How about you?

He also points out that taking risks is not on the list and adds to the points I made in my post Risk And The Entrepreneur explaining that entrepreneurs:

…reframe the salary vs. entrepreneur choice as between two different sets of risk: the things they don’t like about having a steady job — such as the risk of boredom, working for a bad boss, lack of autonomy, lack of control over your fate, and getting laid off — and the things they fear about being an entrepreneur — possible failure, financial uncertainty, shame or embarrassment, and lost investment. In the end, people who are meant to be entrepreneurs believe that their own abilities (e.g. leadership, resourcefulness, pluck, hard work) or assets (e.g. money, intellectual property, information, access to customers) significantly mitigate the risks of entrepreneurship. Risk is ultimately a personal assessment: what is risky for me is not risky for you.

He also highlights that “I want to get rich” is not on the list either and as I explained in Getting Rich As An Entrepreneur he also explains that:

…on the average, people who set up their own businesses don’t make more money, although a few do succeed in grabbing the brass ring. But the “psychic benefits” — the challenge, autonomy, recognition, excitement, and creativity — make it all worthwhile.

Which I’d agree with.

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For those that don’t know the Health in Pregnancy Grant is a £190 grant paid by HMRC to all pregnant women who have reached 25 weeks. They receive a Health in Pregnancy Grant form from the midwife at their first appointment after 25 weeks. Once you’ve received the grant form you fill it in and send it off, a few weeks later HMRC write to you to tell you they’d paid it to you. Which is nice. My wife was certainly pleased to receive her letter yesterday letting her know she’s £190 richer.

So why is this a marketing failure? Because we’re not really sure WHY she’s £190 richer. Sure the midwife muttered something about healthy food as she handed over the voucher which gave us a clue. Then of course the word ‘Health’ in the name gives us another clue. Sadly the claim form and the payment letter from HMRC just looked like the tax man’s normal white and green letters. Nowhere was their anything telling us what the grant was for or even why we were being given it.

So I’ve been Googling it. The first advert in for the Governments Health in Pregnancy Grant website as is the first natural search result – they got that bit right. Unfortunately the site it takes you to, which is titled Money4mum2be doesn’t actually tell you what the money is for other than the rather vague:

The payment is called ‘Health in Pregnancy Grant’ and is to help you prepare for the birth of your baby.

So I did a bit more digging and found this press release from 2007 which quotes Financial Secretary to the Treasury Jane Kennedy MP as saying:

We recognise that this is an expensive time for families. To support these extra costs in the run up to birth, the Health in Pregnancy Grant will enable all pregnant women to claim extra help from April 2009 once they’ve had the appropriate health advice from a health professional like their midwife.

It builds on a series of improvements in the provision of maternity services including an increase in statutory maternity pay from 26 to 39 weeks and the support for women on low incomes provided by the Sure Start Maternity Grant and Healthy Start Vouchers. The grant also gives an extra incentive for all women to take up the professional health advice available during pregnancy.

So there was obviously the intention at some point to offer health advice with it, but we’re still not sure what that advice would be.

The lesson here? If you’re going to carry out some marketing, be it for your business or as a public information exercise have a clear goal and build the entire campaign towards delivering that one clear goal. Otherwise your marketing will fail. My wife’s advice – put a leaflet in with the form and another in with the payment notice explaining what the grant is for. I think she’s right.

Got any more examples of marketing failure? Add them to the comments below.

Oh and please don’t take this a criticism of the midwives, they do a fantastic job. How they cope with the insane amount of rubbish the government/health service has them handle on top of actually looking after the health of pregnant mum’s is beyond me. It would drive me mad.

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What’s a service business?

Which is actually quite a reasonable question, as there seem to be several accepted definitions. One such definition is provided by the Three-sector hypothesis which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). On that basis just about every business idea on this blog is a service business idea. But that’s not what I meant. I was using service business to refer to a business that sells a service, where a service is defined as the intangible equivalent of a good. Generally after buying a service you don’t own the service – for example a taxi business is a service business, after using the service you own nothing more than you did before.

The reason I like services businesses and will usually suggest service business ideas to would be entrepreneurs is that they typically have very low start-up costs. For example consider the following service businesses:

• Cleaning – starting a cleaning business requires little more than the cost of some basic cleaning supplies.
• Web design – starting a web design business requires little more than a computer and Internet connection, which if you’re reading this you probably already have.
• Consulting – starting a consultancy business needs little more than some stationary.
• Recruitment – starting a recruitment consultancy requires nothing more than a mobile phone and Internet access.
• Delivery – starting a newspaper delivery business costs next to nothing and at least one billionaire has cut their teeth in business doing so.

Then there’s leaflet delivery or dog walking… I could go on for ages.

It’s not just the low start-up costs that make service business ideas attractive though, they also tend to have low overheads and high gross profit margins, plus many of the ideas (i.e. Vertical Search Engines and blogging businesses) are hugely scalable.

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Have you ever heard of Polaris Media Group? Well, if you have not, please Google them! They offer themselves as an entrepreneur business where their ‘distributors’ advertise products
sold by the business and make a profit. You also make money by bringing others into the business and earn a percentage of what they sell.

Is this legit and legal?

No, I’d never heard of Polaris Media Group until you asked, but I did Google them and found a few sites:

• Polaris Media Group – their website. Very tech heavy and as a result slow to load, making it very tedious to find anything on the site. I didn’t actually manage to get any of the product pages to load so can’t comment on those.
• A review of the Polaris Media Group ‘Home Business Opportunity’ which explains that (note the highlight in bold): “Polaris Media Group officially launches on September 9, 2009. The company is a re-branding or launch of the popular personal development company Liberty League International. They offer the same basic product line that was offered by LLI . In addition, they have a new line of "stand alone" products that are designed to aid in self help and personal development for the entrepreneur in today’s economy.”
• A blog post suggesting that the Australian government recently indicated that Liberty League International is a pyramid scheme citing the press release here.
• Then there’s all this coverage on another blog.

So looking at the criteria I described in Defining Business Opportunity Scams:

• The investment required:  Unknown – I struggled to get their website to give me any useful information.
• the level of skill required: Unknown.
• how likely I think the average person is to make their money back: Unknown.
• my opinion of the value for money of the business opportunity: Unknown.
• Would I invest my own money? NO!

I would steer well clear of this business opportunity because I’m unable to find any useful facts about it other than, that it has attracted the attention of at least one national government as a scam.

If there’s a business opportunity you’d like me to review as a potential scam please contact me and I’ll review it ASAP. Equally I’d like to hear about any business opportunity scams that you’ve come across and would like to warn others away from.

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It’s also a myth.

Sure by starting a business and becoming an entrepreneur you are taking on a risk, in particular you’re taking on the risk that you’ll have no pay cheque at the end of the month. Though if you’ve ever been made redundant, had your employer go bust or been fired you’ll know that the same risk applies to those with a “secure” job. As an entrepreneur you can minimise this risk by ensuring you aren’t dependent on one customer for your income. As an employee you have no way to minimise the risk other than to become a part-time entrepreneur!

In both cases there’s the risk that you can’t find another job should things go wrong. The experience of starting your own business rarely damages your job prospects. Thus both the employee and the entrepreneur face the same level of risk.

As for financial risks, entrepreneurs tend to start with the same level of assets as employees and they’re just as likely to have a mortgage etc. As a result they’re unlikely to be facing any greater financial risk than an employee.

So what is the difference, in terms of risk, between an employee and an entrepreneur? It’s that entrepreneurs are in control of their future, they have the ability to influence the outcome, whereas an employee is at the mercy of their employer. Furthermore, most of the risk of a new business venture is born by the investors, employees, suppliers, customer and creditors.

In short being an employee is riskier than many people believe. Being an entrepreneur is much less risky than those same people believe. There is a proviso however; there are entrepreneurs (I prefer to think of them as gamblers) that do take risks, often massive risks, and like most gamblers, they usually lose (fail). In contrast rather than being risk-takers, most successful entrepreneurs are risk-minimisers.

So if you’d like to be an entrepreneur, but the ‘risk’ puts you off here’s some advice:

• Start part-time. Don’t give up the day job until you have some steady income from the business.
• Test your business idea before you commit 100% to it. Read How To Start A New Business for more on that.
• Work hard to ensure that no single customer accounts for more than 30% of your revenue.

In other words minimise your risk!

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• Every sales person wants to close a single deal on day one that blows his/ her target for the year – and then spend the rest of the year playing golf/ tennis/ Sudoku/ …..

Even very intelligent people fall into this trap. They start chasing the big deals, spending all their selling time on a relatively few opportunities that have a long sales cycle. The net result is either a poor sales performance or an unpredictable business. And they have probably consumed a large amount of their firm’s resources in constructing bids or proposals.

What to Do

• Break your potential sales opportunities into categories. Change your thinking from Sales Opportunities to Routes to Market or Sales Channels

• Get some idea of scale & of how competitive you are

  • If you have access to market data, use this to understand the size of each route to market, if not, assign an attractiveness score to each possibility – you might base this on population, demographics or a reasonable set of assumptions

  • Make sure you write down the basis for your assumptions – it is easy to translate a best guess into fact on the third iteration of the plan.

• Manage your time

  • Decide how much selling time (or how many people!) you will devote to each route to market

  • Plan your resources accordingly

• Define the metrics that you will use to measure the return you get from each route to market and over what time-frame

• Plan your activities for each channel, based on:

• The people you are dealing with

• The outcomes you are looking for at each stage in your process

• The people you hope to build relationships with

• Influencers

• Introducers

• Specifiers

• Choosers

• Users

• Decision makers

• Authorisers

• Payers

• Match your marketing promotion activity to the sales plan – making sure that you consider all the potential means of establishing the required relationships and supporting your sales process

  • On-line

  • Networking

  • Advertising

  • PR

  • Direct Marketing

  • Field sales force – ideally doing the things that only they can do

Measure

Measurement of sales and marketing activities is vital. In most businesses, the sales process consumes a substantial proportion of the business’ resources (or cost). You need to ensure that every activity is generating a return. That means ensuring that each step in your sales plan has the right metrics – reviewed often and used to drive performance and behaviour in the right direction.

This was a guest post by Paul Fileman of Results-Zone. Results-Zone bring extensive knowledge and experience gained in Blue Chip organisations to businesses like yours. They ensure that your business is fully exploiting a well thought through operating plan. They work alongside you and your team – as business results managers. They ensure that your team and your business are elevated to the results-zone. They bring you “hands-on” experience – similar to employing high quality management skills without the risk or costs in recruiting full time employees.

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Freesourcing by Jonathan Yates is a guide to starting a business with no money. In effect it’s a book length version of my post How To Start A Business With No Money.

Yates started his own business working from a spare room at home in April 2004. He’s since written two books, of which this is the second.

If you want/need to start a business and have absolutely no money and no idea how to do so then this book isn’t going to help. If on the other hand you have enough money to buy the book (less than £5) you’ll find plenty of ideas to help you bootstrap your business for free.

Even if you do have money with which to start your business it is still worth a read. Whilst I wouldn’t recommend following all of his advice – sometimes it’s worth paying for things – by getting as much as possible for free/very cheaply you’ll minimise your start-up costs which means you’ll be profitable quicker.

You can buy it from Amazon UK or Amazon USA.

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