The FINANCIAL — In the early 1913’s people said that the streets of New York were paved with gold. While this statement wasn’t literally true, it was possible for a normal person to work hard, be smart and build an empire in the USA. When you fast forward a hundred years to 2013 Georgia tops the list of best countries in the world to start a business.
Georgia has just the right mix of economic growth, democratic legislative process and market need to create a great climate for small business success. The streets of Georgia are paved with opportunity.
During the next few weeks, we will walk through the stages of starting your own small business in Georgia. If you are willing to devote your soul to your new venture for a few years, you will have a great chance of changing your future and the future of your family forever. There are few countries in the world that give you this kind of opportunity, and Georgia is one of them. Few countries in the world are a better place to open a business.
Picking the right business and the right location are the two most important decisions you will ever make as an entrepreneur. Mitch Hill, the founding CEO of Avanade used to say, “If you pick the right idea, you can screw up almost everything else and still succeed. If you pick the wrong idea, you can do everything else perfectly and still fail.” Here are four important principles to help you choose the right idea:
№1 – Serve a proven market need. Even if you can predict the next market need, the safest way to start your first venture is to serve a proven group of existing customers. Years before Apple changed the world by inventing the iPod, it opened its doors by selling computer kits to an existing market of electronic hobbyists. Years before Microsoft released Windows, it made enough money to grow by licensing an operating system to IBM.
Do what these visionary companies did to get started. Serve an existing market need. It is OK to borrow your first customers from a competitor. 🙂
The first rule is – Choose a business idea where similar ventures are already successful. This choice will be the foundation of your future prosperity. After your business is strong, you can afford the luxury to experiment with innovative products. Follow the path of Steve Jobs and sell “already in demand computer kits” before “introducing the world to your unproven musical iPod.”
№2 – Don’t make price your competitive differentiator. A competitive differentiator is something that your company can offer potential customers that you competitors do not provide. Great differentiators will draw new customers to your business, and they are critical to gaining market share. GeoCapital, for example, is able to process many of our loans in under 60 minutes. Our competitors take several hours to do the same work. Fast loan processing is one of our competitive differentiators.
For your new business, you need to decide how you can improve what is already being offered by your competitors. If you are opening a car wash, perhaps you include a free shoulder massage while your customer waits. If you are opening a restaurant, perhaps you offer a non-smoking section for foreign tourists, or print menus in German and French. If you open a market perhaps you decide to stay open 24 hours a day if the other local markets close at 22:00 every night.
There is no perfect answer to what your competitive differentiator should be, but you MUST have one. Talk to your potential customers and ask them what bothers them about their current supplier. Go to other neighborhoods or cities and look at what people in your same business offer their customers. Learn, borrow and invent a better offering. Make your product better and customers will come to you.
It is critical though, that you don’t fall into the easy trap of offering the same product for less money than your competitor. Price is a rotten competitive differentiator. Competing on price alone will only serve to bring you very price sensitive customers and lower your overall potential profit. Consumers seek VALUE, not just low price. The customers who support a successful business will more often choose quality over price. You yourself probably have the same consumer ethics. Wouldn’t you rather have a Mercedes and an iPhone than an Opal and a Nokia? Even though the Mercedes and iPhone cost more money?
I’m not suggesting that you need to sell your product for more than your competitors. I am suggesting though that you sell a BETTER product for roughly the same amount of money.
The second rule is – Define solid competitive differentiators, and don’t let price be one of them.
№3 – Locate your business where customers already go. Picking the correct location is critical to the success of most businesses. Customers are used to going to particular places for specific needs. If you want to open a car wash, open it next to other car washes that are overloaded with customers. Then when your competitor’s bay is full, they will drive into yours to avoid a wait.
Likewise, if you want to open a market, open in an area where other successful markets already exist – not in a neighborhood that you think needs a market but does not already have a market. You can always choose an unproven location as your second opening. Put your first location where you know it will have customer traffic.
The same holds true for other businesses as well. If you are going to open a restaurant, open next to other successful restaurants that are too busy to serve their customers.
There are two huge hamburger restaurant chains in the US. One is Burger King and the other is McDonalds. In the 1990’s when McDonalds selected a new restaurant location it would commission neighborhood demographic studies, analyze automobile traffic patterns and interview potential customers. Then McDonalds would make a calculated, informed decision about where to locate a new restaurant. At times this analysis would cost over $100,000 USD, but they rarely made a location mistake.
Burger King took a different approach. They waited until a new McDonalds opened and sent a guy to count the customers. If the McDonalds was doing well in that location, Burger King would open right next to them.
The third rule is – Think like a taxi driver and park your business next to a large group of existing customers. It does not matter if you are selling rides to the airport of French pastries; this principal is exactly the same.
№4 – Connect with your customers. Talk with at least 50 potential customers who currently buy from your competitors. Ask them what would make them happier with the product or service they currently buy. Even though it will be tempting to share your idea of a great competitive differentiator, don’t do it. Make these conversations about them. Listen to their needs and learn from their experience.
Several decades ago the president of a medium sized, Japanese electronics company flew to the US for several weeks. The goal of his trip was to show a normal Americans a prototype of his company’s new product, and then watch them play with it. The company president and his leadership team took ideas and complaints from these normal US citizens and improved their product before trying to sell it.
The name of this company was Sony and they called their product the Sony Walkman. In the chaos of starting a new business it is critical that you, the owner, stay connected to your AVERAGE customer. These customers will ground your thinking and they will help you give them what they need.
The fourth rule is – Your customers will make your successful. Start talking to them even before you settle on a business and idea and location.
This week’s article focused on choosing a good idea for your business. Stay tuned next week for practical business finance tips that every new business owner should know.
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