2 Things to Focus On with a New Business Idea
Someone asked me the other day…what is the most important things about your business idea for a first time entrepreneur? What should you focus on? I was actually really happy to get that question, because I know what this entrepreneur was experiencing: information overload. It’s too complicated.
Sometimes, us entrepreneurs that have been in this for a while, or even maybe just our second attempt after a failure….we forget what it’s like for others first learning. We throw them all this information, overload them with our complicated terms of “intellectual property protection” and “valuations”.
In my case, I only survive as an Entrepreneur because I maintain a general knowledge or overview of EVERY SINGLE function in my companies. I don’t go deeper than that, and I don’t think other Entrepreneurs need to (unless you are an expert in that field, or your business specializes in that field). Again, this is just my opinion and what has worked for me. You have to have that general knowledge to be able to recruit talent, know what needs to happen, etc. Leave the indepth information to the experts.
I just wanted to offer a really simple peice of advice today for trying to sort through their concepts or ideas, two things to focus on with a business idea:
1. How You Make Money
Focus on how you make money; because at the end of the day…this is the only thing that will keep you alive. I see a lot of social networks and stuff out there trying to start-up, I ask them how they’re going to make money off this concept, they say advertising. Then the reality sinks in when they realize they have to reach about 1,000,000 pageviews a month before any major advertiser will even look their way. That means you are not only responsible for paying to have it built, but you are also 100% financially responsible for figuring out how to get to those 1,000,000 pageviews with whatever resources you have.
Financial projections are so important; not just for investors….but for your own sanity. I’m actually more of a fan of financials than I am business plans. Forgot where I read it, but something like 95% of all business owners don’t break even when they think they will. Then, 50% don’t breakeven within 9 months of when they say they will. Ouch! A lot of it has to do with those little things big pictured entrepreneurs don’t plan for…like tax calculations, payroll costs, etc.
There’s plenty of tools out there that make this really easy, and automatically calculate those things for you. It can also figure out how much your company will be worth 2-5 years down the road. EZ Numbers is probably the best for this…and if you do end up fundraising, it prints out a lot of cool reports.
2. How You Decrease Costs
This is the second thing to worry about when you’re building a business in that idea phase. How you make money – how you decrease costs= profit margin. I’m not saying there isn’t a bunch of other things that come into play (like will someone actually pay you for what you’re trying to charge money for), but just trying to help simplify it and give you something to focus on.
There are tons of things you can do to decrease costs. Like reinvest into hiring employees, good employees have an ROI. Example: you spend $50,000 a year on an annual salary. That person should produce $250,000; either directly or indirectly for that business. Look for other ways to reduce costs….strategic partnerships that can bring you tons of new customers. Share office space with other business owners. Share employees together. Building a product? Manage the development yourself, instead of outsourcing the whole project. You’ll have to manage all the moving pieces, but Entrepreneurs are good at that anyway.
Like I said before, there’s lots of other things to consider. But if you need something to keep at the front of your mind and focus on to make your business or idea successful…just remember:
How do you make money? How do you decrease costs?