There are many ways to entrepreneurial success. Here is one, if you are a first-time entrepreneur:
- Do NOT try to produce a totally new, new thing. The reason is simple. When you produce a totally new, new thing, you need a lot of money to educate the market about what your “new new” thing is. Educating the market is very expensive, both in terms of time and money.
- When you try to educate the market about your new, new product, you burn a lot of your precious capital. When you burn your capital (like the dot com companies did in the US in 1999), you may go out of business altogether.
- Adding insult to injury, as it often happens in Nepal, you may then have to watch late-comers succeed with the very idea that you came up with because you foolishly spent all your money educating the market about the new, new product for your future competitors to benefit from! [Believe us: nobody gives you a medal for being a “business saheed”!]
- Instead of trying to produce a totally new, new thing, look at an established industry where there are existing suppliers, competitors, customers, etc. In other words, as a first-time entrepreneur, choose a known industry.
- In that industry, think hard to find a niche (your new thing): see what the customers are looking for but not getting, and see whether you can find a way to meet their (unexpressed) demand. Finding your niche or your twist in a well-known industry lies at the heart of first-time entrepreneurship.
- Once you find your niche in a known industry, educating the market will not be that difficult. That’s because people already know your industry, they can generally understand what to expect, etc.
- Once you have identified your niche, then, find a way to put “a moat around it”, as Warren Buffet says. A moat refers to a large body of water (preferably with crocodiles) around a castle. A moat makes it difficult for others to attack the castle. If you think of your business as a castle, what should your moats be? Price? Brand? Location? High switching cost? Service?
- Do NOT worry about competition. All reasonable people want to copy good ideas. Having competition is good, because it validates you and your idea. If no one wants to copy you, be worried.
- Even with a niche and a moat, how do you know what works? You don’t. Therefore, experiment small, fail fast, learn quickly, and change course to continuously scale up.
- In the back of your mind, always ask yourself these four questions, and try to have answers:
- What compelling reason exists for people to give you money to buy your product or service?
- How do you get what you are selling for less than it costs to sell it?
- How will strangers find out about the business and decide to become customers?
- What insulation (moat) do you have from commoditization (“just like what everyone has”) and price war (coming from competitors)?
This is a guest post by Ashutosh Tiwari (Some of the materials may have been collected from other sources).