From Anne Giles Clelland:
Once upon a time, I had a great idea. I designed products and services around that idea and hired an attorney to form a company to own those products and services and an IP attorney to trademark the idea. I got a business license and business insurance and engaged the services of an accountant. I built the products and services. I described the idea in lengthy, exquisite detail on my website’s About page and how it would surely produce hockey stick growth. I had more ideas and added new features to the products and offered new services. I bootstrapped my start-up with personal funds.
According to the Kauffman Index (cited by Forbes), the story of a new business launching begins 320 times each month in the United States. According to the Small Business Administration, over 50% of those stories have unhappy endings within 5 years.
My story does not have an unhappy ending, but it could have had. The plot development in the story I've just told is flawed because it's missing two antagonists, i.e. answers to these questions:
- Does the market value my idea enough to pay for it?
- If so, what is my business model, i.e. what is the way I am going to get my idea to that market in a way that makes money?
Here are arrow signs showing the sequence of events in my first story:
Idea → Company → Products and Services
If I could begin my entrepreneurial story over again and answer those antagonizing, fundamental questions, I would write it this way:
Idea → Market? → Answer: No → Dealbreaker
As great as my idea is, as much as I love my idea, as much as I believe others should love my idea and see how great it is and value it, if they won’t pay for it, that’s a great idea, not an idea for a business.
If the results of my market research – the answer to "Does the market value my idea enough to pay for it?" is "No" – the story of my great idea should remain an unfinished draft. I need to think of another idea and get a job while I do, perhaps with a successful entrepreneur’s company where I can learn the art and craft of developing an entrepreneurial success story.
If my research did discover a market for my idea, the next plot development in my story should look like this:
Idea → Market? → Yes → Business Model? → Answer: No → Dealbreaker
The business model for a great idea that the market will pay for has to address these questions:
- How much will it cost to build the idea into products and services?
- How much will the market pay for those products and services?
- When I do the math on how much I pay vs. how much they pay, do I make a profit?
If I can’t make a profit, again, I have a great idea for a business, not a business.
Here is the sequence of events in the plot for a great entrepreneurial success story:
Idea → Market? → Yes → Business Model? →Yes → Company → Products and Services → Market! → Profit!
My bet is that most entrepreneurs, as I did, start businesses with great ideas rather than with great ideas with a market that will pay for them. Businesses without customers fail. That’s a very short, tragic story.
In great stories, the main character is capable of being enlightened by experience but has to be humbled first. It took founding not one, but two start-ups for me to begin to learn how to launch a business, not a great idea. The second start-up failed. With the first start-up, I am having to journey backwards, modifying my company’s product and service offerings to be what the market wants and will pay for, not what I thought they “should” want.
The story of my third start-up is unfolding and the plot is thickening, and not without conflict. But I am the humbled character. I can be taught. On this entrepreneurial journey, I am following the signs required for a great story with hope that the ending will be a real business, tangibly and intangibly profitable for all involved.