Most businesses fail

-Chris-

http://www.sixmonthmba.com/2009/07/how-to-start-a-business-that-works.html

How to start a business that works

The most important thing I learned in business school is this:

Most businesses fail.

Not because the product wasn't any good (in many cases the product is amazing). They failed because not enough people knew about it. In other words, the marketing failed.
In fact, 6 months with Seth Godin has made me realize that not only is marketing important, it's pretty much everything. Therefore, don't do what most entrepreneurs do: come up with a brilliant idea for a product, fall in love with it, and then try to market it.
If you want a high likelihood for success, start by picking a business or product that lends itself to great marketing. But how?
Well, luckily I've created a set of 4 marketing questions that can help you.
So, if you're serious about starting a new business or developing a new product for an existing business, here's what I want you to do:

1. First, read the 4 questions and their explanations below (and it wouldn't hurt to read the books I reference either)
2. Come up with a list of 50 business ideas (sound like alot? here are 999 to get you started).
3. Pick the 3 businesses that best answer the 4 questions below.
4. Of those, pick the one you're most passionate about.
5. Execute, execute, execute.

Ready? Go!

Does your business lend itself to virality?
Everybody wants their product or brand to go viral. Who wouldn't want exposure that spreads like wildfire? But most companies' strategy is to build a product first and then try to come up with a campaign that will make that product go viral. This couldn't be more backwards.
Of all the products and campaigns in the world, only a small number are actually successful in going viral. And since virality is priceless, it could be worth organizing your entire business around.
If you want your product to go viral you've got to first think about what types of things make an idea spread in your target market, and then pick a product/business that has those qualities.
(Online greeting cards are a perfect example of products that are designed to go viral --but don't pick them...there are too many already.)
I would explain the specific qualities that help make a product go viral here, but I can't do a better job than Seth does for FREE (Unleashing the IdeaVirus).


Does your service create an emergency?
You make money when sales are made. But in order to persuade someone to buy anything, first, you have to get their attention. Any salesperson knows that this is often the hardest part.
Therefore, wouldn't it help to sell a product that creates an emergency for the person you're selling to? Something that is likely to demand their attention immediately?
Get Satisfaction's service creates an emergency right away. They host a centralized forum where consumers can discuss complaints about companies and their products in order to receive "people-powered customer service". Often, heated debates rage on their site about the company's product. The only way for that company to take full control of those conversations is to buy Get Satisfaction's service.
When Get Satisfaction makes a sales call, they don't have to fight as hard for the customer's attention as other companies do. Get Satisfaction doesn't have to convince companies there's going to be a fire, there's already one raging that needs to be put out!
The key to creating an emergency is leveraging scarcity. Why would anybody buy your product now, if they could just put it off for another 6 months, without any consequences?
Pick products that lend themselves to expirations, deadlines, and limited availability, that allow you to create a sense of urgency for the buyer.


Is game theory on your side?
Have you ever looked at a company like Google or Facebook, businesses that totally dominate their markets, and think "they must know something that I don't." They might...it's called game theory.
You may have been bored to death in school learning about a hypothetical scenario called Prisoner's Dilemma, wondering what the heck it had to do with anything. Well it turns out it's more important than you might have ever imagined.
There are a ton of insights that result from game theory that aren't necessarily intuitive, but are wildly important in business. Game theory is the essence of strategy and it could help your business scale exponentially by allowing you to outhink your competition.
For example, there are many products whose benefit to the customer increase as more people use them. So from a game theory perspective, existing customers have an incentive to get their friends to adopt the service too.
When businesses that operate with this simple principle grow, they tend to grow at an explosive pace. And who wouldn't want that for their own business? (Skype is an example of a service like this).
Learn game theory, appreciate it, and then pick a business where the game theory is in your favor. (There are a bunch of good business books on game theory. Google it.)


Is your story remarkable?
Your product might be great, but is your story? Remember, there are tons of great products that no one talks about, and therefore no one knows about.
That's because what makes people talk is the story that a product tells (or the story you tell yourself when you buy a product). Tom's Shoes didn't spread because their shoes are the best on the market. They spread because of their "One for One" philosophy. For every pair of shoes you purchase Tom's gives a pair of new shoes to a child in need. And the best part of their story is that it's the exact same pair!
Here's a secret to having a good story. Stand for something. Pick a product associated with a movement of some sorts. A movement that people can contribute to, feel apart of, and get passionate about. Change the status quo. People like to talk about change.
When choosing a business, try not to get so caught up with the features and benefits. These are clearly important, but what is even more critical is choosing a product with an incredibly unique, authentic, and remarkable story.



And so I'm back to my original thesis...the most important part of building a business is picking a good one to begin with. But the second most important part is simply to start. You can't build a successful business if you don't begin the process. So what are you waiting for?

Discuss!

antoinolachtnai

A lot of companies fail not because they aren't based on good ideas, but because they simply don't have the capital or management or technical capability to see them through.

Youtube in particular only got anywhere because it had access to an awful lot of capital. The whole concept was unprofitable for many years (and may still be).

Being able to market and spread the message isn't enough to make a company successful. It needs to be fundamentally profitable.

You're right Antoinolachtnai, Youtube is still not making a profit although Google expect it to make a profit in the future. (Positive PR ?)

-Chris-, A remarkable story and Virality seem to go hand in hand. Virality = the buzz spreading from person to person and remarkable story = the creation of the buzz.

PS: That 999 ideas thing, I don't rate many of them as actual good (practical) ideas at all.

TheCostumeShop.ie: Ronan

I loved Kiyosaki's take on this topic, 9-10 businesses fail that's a fact and all that meant to him was that he would have to start 10 businesses before he became a millionaire.

Bandara

Fancy Dresser wrote: »

I loved Kiyosaki's take on this topic, 9-10 businesses fail that's a fact and all that meant to him was that he would have to start 10 businesses before he became a millionaire.

or alternately he'd have to choose and operate one business correctly to become a millionaire........

TheCostumeShop.ie: Ronan

Hammertime wrote: »

or alternately he'd have to choose and operate one business correctly to become a millionaire........

Clearly he didn't start 10 at the same time. Infact his first velcro wallet business was massively successful earned millions but because he hadn't enough experience to be running a multi million dollar business they ran out bought fast cars and didn't keep a close eye on the finances. It folded.

My point was if you want to be an entrepreneur you have to be committed to the process and learn from your failures. Everyone makes mistakes, its what you do after that counts.

Not a person dig at yourself hammertime, but the odds in franchising are better because the upside potential and downside risk are curtailed.

Bandara

Fancy Dresser wrote: »

Clearly he didn't start 10 at the same time. Infact his first velcro wallet business was massively successful earned millions but because he hadn't enough experience to be running a multi million dollar business they ran out bought fast cars and didn't keep a close eye on the finances. It folded.

My point was if you want to be an entrepreneur you have to be committed to the process and learn from your failures. Everyone makes mistakes, its what you do after that counts.

Not a person dig at yourself hammertime, but the odds in franchising are better because the upside potential and downside risk are curtailed.

my tongue was firmly in cheek...

niceirishfella

There's a thing here in Ireland about "Failure".
Like you're a untouchable disaster in the future if you Fail........totally the wrong view imho.
I've failed........and should have known better. I got out of the bizz I was in and learnt a lot and will implement what I learnt going forwards.
In the US, having a failed bizz behind you is like a badge of honour, that you've been through it, paid your dues and learnt from the painfull/costly process.
Some VC's there will not lend to you if you have'nt had a failure behind you.