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Archive for October 8th, 2008

What Is A Business Model?

Wednesday, October 8th, 2008

by: Geoff Ficke

During the 1990’s a number of examples of new business terminology cane into vogue. Among these was the term Business Model. The usage of this term has become so capricious that the original definitions and intent of these two words has been diminished and confused.

In essence, the Business Model is simply how an enterprise will organize processes to make money. The ability to adjust, change, innovate, learn the lessons of history while looking ahead and streamline systems is the best way to describe this crucial element of business development.

As an entrepreneur, success requires that you identify and perfect a Business Model that will enable your new opportunity to launch, gain traction, grow and keep growing. This is the difference maker for successful and unsuccessful budding entrepreneurs trying to self-market through their own company structure.

Remember that success starts with ideas that initially seem small and grow very big. They didn’t seem particularly fantastic when initially created, but who knew that the transistor, vacuum tube, Coca-Cola, internal combustion engine, laser, or tin can would have such an important place in each of our lives.

Franchising is a Business Model that today we easily understand and recognize. Licensing is another. Kiosk retailing is a style many entrepreneurs utilize to launch their business, gain experience and gauge market acceptance before attempting deeper, broader market penetration.

E-Bay is one of the latest inventors of an innovative market disruptive model. The ability to use the inter-net to construct an online community and establish a huge commercial opportunity for that population is stunning. If E-Bay’s sellers were counted as employers, E-Bay would be among the largest employers in the world. E-Bay takes a small listing fee and sales commission, and caveat emptor reigns. With software, servers and rules, E-Bay has transformed how many people buy, sell and earn a living. The use of a computer and a small supply of saleable product allows anyone the chance to succeed, and earn their daily bread as a “do it my-selfer”.

I encourage entrepreneurs to concentrate on the product or invention that they are attempting to commercialize. The Business Model is only important if they are keen and able to self-market their idea. The innovative product or service idea is more important initially. A better mousetrap or widget can always find a commercial home if properly presented.

The Business Model Must Be Innovative and Flexible

Wednesday, October 8th, 2008

by: Geoff Ficke

What does the following list of companies have in common?

A&P

Hudson Motor Car Co.

Montgomery Ward

TWA

Horn and Hardart

Studebaker

Indian Motorcycle

Bonwit Teller

Woolworth

Bethlehem Steel

Polaroid

LTV

These Companies were successful, recognizable brands in their respective categories. They were publicly traded and a number were in the Nifty Fifty in the 1970’s and/or the Dow Jones Industrial Average. The element they all have in common (and with hundreds of other equally recognizable names) is that they did not innovate. They created a static business model and did not anticipate that there were newer, better ways to implement new technology and strategies.

Let’s look at two old, established retail categories and how the ability to innovate has determined contemporary success or failure.

Music Stores

Recorded music retail has always been a competitive market. Tower Records followed the national chain concept, offering a broad range of music styles and competitive pricing. Mass marketers such as Target and Best Buy offer music as well, typically only the more popular artists, narrow and deep. Every city had a local shop, sometimes specializing in a specific area of musical taste. The underlying similarity was that a customer came into the store, made a selection and then purchased the CD or album.

Then along came the inter-net. The ability to protect trademarks and copyrights was believed to trump this technology. Artists and record companies believed that legal protections would enable them to continue as always: selling an album, with one or two hits, for $20 to $30. Software was written enabling the music consumer to cheaply, or for free, download specific hit songs while avoiding the filler cuts. The Napster effect has revolutionized the music industry.

Napster is a disruptive technology. The world of music retail was stood on its head. Legal fights and challenges are still being fought. However, chains like Tower Records are gone. The marketplace did not allow for a rigid system to thrive in the face of innovation. Tower did not stay flexible, anticipating technology advances and changing tastes. Trying to sell albums with 15 cuts, when the consumer only wants to hear and pay for two hit songs, is an obvious loser.

Airlines

Until the late 1970’s the airline industry was protected by Federal Government regulation. This enabled the airlines to artificially inflate fare pricing. Hub and spoke systems were created. Each major carrier had a geographic area of strength (Delta the southeast, USAir the middle Atlantic, American the mid-west and Latin America, etc.) that they dominated. Unions were aggressive and the carriers were profitable so the need to squeeze costs was not urgent.

When de-regulation occurred in 1978 the major carriers did not anticipate the radical disruptive innovation that was just around the corner. An aviation pioneer in San Antonio named Herb Kelleher did. He watched as fares plummeted without government regulation protection. Competition for gates, destinations and expansion resulted in many regional carriers (Republic, Piedmont, etc.) being gobbled up by the majors. Out of the changing landscape for air travel Mr. Kelleher saw opportunity.

Mr. Kelleher created and launched Southwest Airlines to address a gaping need. Southwest utilized a business model that reflected the changing landscape in providing air service. The major carriers utilize complex pricing models that try to maximize seat yield revenues per mile flown. Southwest posted one low price for every seat on a flight. The major airlines were totally union shops. Southwest was non-union. The major carriers flew a mix of plane models. Southwest flew only the Boeing 737 (this streamlined service and parts expense).

Very quickly the flying public recognized that a Dallas to Phoenix flight that was $579 on American, and $149 on Southwest, was a no-brainer. Southwest remains ahead of the curve with standardized policies, simple restrictions, a feel good fun loving staff, hedging contracts for jet fuel purchases and the promise of value for money on each flight.

Southwest capitalized on the changes it recognized was coming in the air travel universe. Today, there are a number of airlines utilizing some or/all of the Southwest model and virtually all are successful. Easy Jet, Jet Blue and Ryan Air in Europe are booming while the old-line giants all over the world are in desperate straits.

Proctor and Gamble is a wonderful example of an old alpha enterprise that is constantly re-inventing itself to reflect changing market conditions. Dell Computer, MicroSoft, Intel, Research in Motion, Nokia and many more are examples of businesses (all little more than 20 years old) that innovate, change, anticipate and succeed. They were all small startups only a few years ago.

For entrepreneurs, the ability to innovate and keep ahead of the field is crucial. When analyzing the potential for a successful market placement the ability to create a cutting edge business model is so important. If your goal is to open a male clothing shop and one already exists in the area you have chosen, you have a problem, unless you can differentiate your unique selling proposition. Maybe this can be accomplished by offering a tailoring operation for hand cut suits, or specializing in formal wear.

Whatever your product or service, define a business model that separates you from your head to head competition. Do not play the price game. Lowest price is almost always a temporary benefit, someone will come along that can produce cheaper, faster, better. Your goal should be the offer of a benefit that the customer will value, desire and not find immediately available. Then back up the benefit with superior service and the promise of continued new cutting edge innovation. Innovate or die!

Opportunity and Innovation – The Power of Weird Thinking

Wednesday, October 8th, 2008

by: Geoff Ficke

“The Big Idea” that will make an entrepreneur successful is not obtainable by filling in the blanks on a magic invention template. Where do ‘The Big Ideas” come from? Why are some people able to develop exciting concepts and others, though constantly scheming, achieve nothing of value? How do serial inventors repeat success, again and again?

Entrepreneurs are born, not made. Thomas Edison performed over 1000 experiments before perfecting the electric light bulb. Think of that fact, and apply it to people in general. He failed 1000 times to get it right. How many people do we know that will keep trying to succeed at a task if they fail three times, five times, 12 times? We all know the answer, not many. Business school can not teach this kind of drive, determination, and dedication to a task.

Entrepreneurs and inventors are different. Successful entrepreneurs excel at commercializing opportunities. Inventors excel at creating. Not every inventor is an entrepreneur. Nevertheless, creating exciting new products is an art that is essential to entrepreneurial success. Many inventors employ others to commercialize their creations. Some entrepreneurs also have the ability to develop exciting new projects. There is simply not one silver bullet answer that defines the requisites for success.

There are, however, several traits that all original thinkers have in some fair amount. Thinking outside the box, pride in weirdness, seeing problems others miss, acceptance of failure and the Natty Bumppo halo are a few of the qualities we see in successful original thinkers.

Thinking Outside the Box

This has become almost a cliché. We see the term used in advertising and executives trying to spur creativity always are exhorting the team to think outside the box. This is difficult, impossible for most people, to actually do. They live in the box. They are risk averse. They fear failure. They certainly do not want to present an idea that others might laugh at!

For these and other reasons thinking outside the box is almost impossible in mature organizations, certainly any organization with an entrenched bureaucracy is not readily open to new ideas. This is one reason there is so much opportunity for entrepreneurs and small business to succeed.

Wal-Mart has re-engineered the logistics of retailing by designing order flow technology superior to every other retailer in the mass-market space. W.T Grant, Montgomery Ward and Woolworth were huge businesses before Wal-Mart existed. They did not think outside the box and allowed Wal-Mart to carve them up with better prices, selection and service.

Southwest Airlines was created as a low cost, fun alternative to the big established carriers. They have remained profitable and grown while American, United, Delta, USAir and Northwest stuck with the old business model and all suffer bleak futures as going concerns. Southwest standardized fleet equipment, have stayed non-union, hedge fuel contracts and only fly from cities where they identify huge opportunity to succeed at the expense of the national carriers saddled with excess overhead.

Estee Lauder is the recognized queen of the cosmetic world. She started in the 1950’s making a moisturizer in her home. The product was not accepted by a single department store. Finally, she asked the buyer at Pogue’s Department Store in Cincinnati, “why won’t you give me a chance”? The answer: “We already have plenty of moisturizers. Give us something different”. Mrs. Lauder did not give up. She reckoned that the product performance alone would not open the sales doors necessary to be her salvation. She designed a new marketing feature: the gift with purchase. Today every cosmetic brand uses the gift with purchase as the most successful sales tool in the history of the beauty industry. The leading brands of the 1950’s (Elizabeth Arden, Germain Monteil, Helena Rubenstein, Max Factor and Revlon) are all either out of business or greatly diminished while Estee Lauder is the largest fine cosmetic house in the world.

Ms Lauder, Sam Walton at Wal-Mart and Herb Kelleher at Southwest Airlines did not invent cosmetics, retailing or air travel. They did think outside of the box and create marvelous successful businesses. Ray Kroc did not invent the hamburger: he only created McDonalds standardization of quality assurance and a franchise system to deliver that benefit. Michael Dell did not invent the computer. He invented a way to customize each unit and eliminate the need to carry expensive inventory by pre-selling each unit before a component was assembled.

Pride in Weirdness

Who wishes to be thought of as weird? A very small portion of any population hopes to stand out by being weird in dress, body markings or other appearance feature. For the most part, people work very hard at being accepted as normal, in sync with their surroundings.

Entrepreneurs are generally average, normal in the way they talk, dress, recreate and live their personal lives. It is their thinking that is different, and this can be weird. They see things differently. The entrepreneur may divine a problem that others do not see or does not yet exist. They see answers before the rest of see needs.

Who needed the TV dinner before introduced by the Swanson family in the early 1950's? Most homes did not yet have television. Dinner was an American ritual. And yet, as television intruded on American life, our habits changed. Speed and convenience replaced ritual as pre-eminent product features sought by consumers. The TV dinner was the perfect example of a bit of weird thinking addressing a need that did not yet exist.

Inventors and entrepreneurs tend to take great pride in their iconoclastic thought processes. The mad scientist analogy can be a stretch but the results are often so amazingly offbeat that we must conclude that weird thinking might be a benefit.

Seeing Things Others Don’t!

Henry Ford did not invent the automobile. The Germans Daimler and Benz had perfected and harnessed the internal combustion 10 years before Ford. In the first two decades of the 20th century there were over 200 companies producing horse less carriages in the United States alone. Who remembers the Hupp Mobile? Does anyone pine for the Lansing? What did Ford see that the others did not?

Simply, Henry Ford recognized that the automobile would not achieve it’s potential as a conveyance until most of the public could afford to own one. He had to drive prices down. His success was in the process he created, not in the automobile itself. Standardization, scale, motion production lines, integration of component production and assembly were concepts none of the competition were pursuing.

This vision thing can be applied to almost every successful enterprise. The originator sees opportunity others either miss, or do not recognize as significant. Howard Schultz realized that in Europe people treated the coffee drinking experience in a completely different way than Americans. He took the quality standards of the successful franchise operations he studied, crafted an upscale position for coffee (actually, now latte, frappe, etc.) and founded Starbucks. He saw an opportunity that had not been commercialized, branded an experience, just not the invention of coffee drinking.

Acceptance of Failure

We all fear failure. Successful entrepreneurs, however, know that taking risk does not come with guarantees of success. They do not like failure. Failure is just part of the game. They get up and try again. The risk taking precedes the rewards for success. Smart entrepreneurs attempt to mitigate potential losses and failures. Serial entrepreneurs have an amazing nose for sorting out potential hurdles and deal killing situations.

Do Not Respond to “Prove It”!

Most new ideas are met with a heap of skepticism. Inventors and entrepreneurs often are asked to “Prove it’! You can not prove something until you try it, produce it, test it, or verify performance. Denial of funding or other needed assistance can not be contingent on proving performance of a theory. This is why having working, production quality prototypes is so vital.

Natty Bumppo’s Halo

When I was a boy (many moons ago) we read all of the James Fenimore Cooper classic pioneer novels. These were stories set in the pre-Revolutionary War era and the hero was the Deerslayer, the Pathfinder: Natty Bumppo. Natty was amazing. He was always in dire straits, surrounded, outnumbered and betrayed. Just when the reader thought Natty was a goner, he improvised. Utilizing his immediate surroundings, sunlight, ground cover, knowledge of animal traits, or dozens of other frontier skills that he had acquired he escaped and put things right.

I always called this the “halo effect”. Natty Bumppo was the first great improviser I came upon as a boy and he is an excellent model for creative, improvisational thinking today. He was an 18th century James Bond. He found answers and created successful strategies out of the available elements of his environment.

The successful inventors we work with in our consulting business are normal people. However, they have been able to improvise in an area of their life and create an opportunity. I am always amazed by this ability. The level and amount of creativity in the world is stunning. I wish there were more entrepreneurs (doer’s) than dreamers fronting projects and inventions.

Look at every aspect of your life and consider this a fertile area for creative improvisation. Work, faith, recreation, hobbies, and family are a few of the areas where each of us has some life experience in many areas. Passion about an area (hunting, golf, fund raising, wellness, exercise, education, etc.) is the most likely source for an inspiration.

I have worked with a woman, just having experienced delivery of her first baby, successfully patent, develop and market a pain monitor for very late term contraction charting. She looked everywhere for an answer to this need and found nothing available for home use. She saw a need and acted.

A passionate game hunter was losing too many shots while in the stealth portion of the hunt. He was a big man and a bit noisy in the field. He designed an over boot to minimize, distort and muffle sound as he made his final approach. This breaks up sound patterns that animals have come to associate with man: edge to the hunter.

We have seen firemen invent an elegantly simple method for putting out grease fires, the largest cause of fires in the home. Board games often come from families shared interests. A teacher brought us a combination game, teaching tool to coach children in proper nutrition habits and combat childhood obesity. A social worker has designed a simple, individualized, inexpensive, modular homeless shelter kit. A Little League baseball coach created a tremendous trainer for perfecting throwing fundamentals. A Christian Ministry has created a prayer club featuring blessed anointing oils as described in the Bible.

In short, people get ideas, innovations, new concepts and creative inspiration from anywhere and everywhere. However, it is far more likely that your idea will come from some area of your life’s experiences. You will more easily be able to recognize an opportunity and place a value on the idea if it comes from your areas of knowledge and interest. We have seen gourmet cooks invent a unique cooking utensil. It is very rare though to encounter a complete field jump, such as a high school English teacher, creating a new style of writing software code for military logistics integration.

Where Does the Money Come From?

Wednesday, October 8th, 2008

by: Geoff Ficke

Fact: In 2005 over 500,000 new business incorporations were organized in the United States.

Fact: Of these 500,000 new businesses less than 1,000 received venture capital funding.

There are vastly more entrepreneurs seeking start-up funding than there are available funding sources and investment pools. This is a fact. And yet, 499,000 incorporations occurred in 2005 without the cover of an investment funding commitment. Many of these new businesses will fail. Nevertheless, the urge to seek the fulfillment, financial security, freedom and the satisfaction of overcoming the odds still drives us to try.

The lingering doubt, and hurdle each of these new entrepreneurs confront is this, “where does the money come from”? We look at, on average, 600 submissions per year in my consulting business. The absolutely, number one reason, most of these presentations will not ever make it beyond the idea stage is an unrealistic understanding on the role of investment and sources of available start-up funds.

My first assessment of an opportunity is always the idea itself. Assuming the submission passes our layered analysis, the next hurdle is the inventor or prospective entrepreneur. Is he a dreamer, or a doer? And the first disqualifying trip wire for a dreamer is the expectation that they can have someone incur all of the financial risk, 100%, while they commit nothing. When I say nothing, I mean no patent filings, no production quality prototypes, no qualified research, no testing, etc. They have only an idea.

Angel investors do exist, but even they do not very often consider investment in dreams, cocktail napkin designs or untested theory. And yet we eliminate 60% of the product opportunities we view, many with interesting commercial potential, simply because the submitter can not, or will not invest in their own opportunity. If you do not believe in yourself, your opportunity, why would anyone else?

The development monies for patent and trademark filing, design, research, creating working models is what the funding world calls 3-F money. 3-F money comes from friends, families or fools. This is very high risk and usually very small amounts are needed. Most of the products we see require from $12,000 to $20,000 to put in a professional presentation that could be of interest to investors, licensees or partners. Most of the people that submit to firms like ours have jobs, homes, and investments. Many love to chat about their boat, second home or recent safari vacation. But they claim to have no money to invest in a project that they state is an absolute winner, and will make millions for everyone involved.

This is an absolute deal killer, a non-starter. We are constantly solicited to become the inventor’s partner, hundreds of times per year. Investors must see passion, commitment, confidence and an inventor with skin (dollars) in the game. The lack of personal commitment one brings to a project is proof that a dreamer is impersonating an entrepreneur.

Friends, family and fools assist in funding, investing or partnering most of the 499,000 new incorporations filed in 2005. This does not include the huge number of sole proprietorships established each year. Most new businesses do not require the involvement of venture capital funding sources, blind pools or investment banks. Their scale is too small for consideration by firms seeking larger investment opportunities with huge harvest (cash out) potential.

Many entrepreneurs have used credit cards, personal savings, a home equity loan, sell that antique car, tap a retirement account, or utilize an inheritance to fund their new enterprise. Just remember however, this is high risk and more business start-ups fail than succeed. Nevertheless, securing the initial development funds in this way shows commitment and can advance a project to the point where deal placement is a real possibility.

During the 1990’s a gold rush mentality occurred that distorted the financial markets. Money for many investment types was readily available. Due diligence was morphed by theory and new age abstract business models. The sky was the limit.

Well the sky was not the limit. The bubble burst and in the first decade of the 21st century we are now in an investment cycle where cynicism rules. Every deal is thoroughly vetted and re-vetted. Terms are very strident. A submission must be absolutely professionally researched and presented. The market allows for no shortcuts or errors in assumptions made.

With this reality in hand, and the knowledge that self-funding, or 3-F funding are the most prevalent options for startup monies, are there any other options? What are they? There are several, and I will be writing specifically in more detail on each. Consider:

  • Bootstrapping

My personal favorite, as I successfully started my first business by bootstrapping. What is bootstrapping? Simply stated, this is an avenue to start your business without borrowing, giving up any equity, total self-reliance on yourself. Sell your product or service before you have inventory. If no one buys you have lost nothing. If you receive orders you know you have a winner. More entrepreneurs successfully can start the road to success by bootstrapping than by any other method.

  • Licensing

Since the bubble burst in 2000, we have done far more product licensing campaigns than any other deal style. Licensing requires a thorough foundation of intellectual property protection. First to market advantage, a strong Unique Selling Proposition, lowest possible of goods (while maintaining highest possible quality standards) and verifiable sales model.

  • Angel Investors

There are so-called angel funds, so named because like fairies they sprinkle a little dust on potential deals of interest, just seed money basically. Angel funds tend to stick to specific fields (technology, wellness, software, etc.) where they have great experience and contacts.

They typically take an oversized piece of equity, as first money in is most at risk. In addition, angels are few and far between, hard to find. Look at local Chamber of Commerce fairs and regional government incubators as a source for networking angels.

  • Mezzanine Finance

Once a deal has shown market potential, sales are growing, the market is responding and the risk factor has been mitigated, mezzanine financing becomes an option. Usually the mezzanine round is for far more investment money than the angel-round, and the equity percentage is not as dear. Many banks now have mezzanine arms to service growing, but not yet mature opportunities. 

  • Investment Bank

Investment Banks are very difficult to work with unless a project is typically past the angel and mezzanine funding stage. They want to see sales traction, even if in a limited test market. Investment Banks have exceedingly aggressive Harvest Goals, recognizing that even with the most heavily vetted deals, only 2 in 10 or so will succeed and pay-out.

Also, Investment Banks are not interested in small loan amounts. It is a reality that it is easier to secure several million dollars than several thousand for a new project. They will not be interested in a local bakery.

A strong, experienced management team is always a top priority for Investment Banks.

  • Small Business Administration

The SBA is an excellent avenue for the first time startup, minorities and women to utilize as a funding source. The SBA is government subsidized. That said; it is very slow, bureaucratic and risk averse. A good source of funds for traditional types of businesses, such as retail, local service and light manufacturing.

  • Factoring

Again, this is a personal favorite, as I have used receivable factoring to fund several of my startups. Basically, a factor is a financial institution that will buy the firms purchase orders, if the orders are from top grade companies. For instance, the entrepreneur receives a purchase order for his widgets from Walgreen in the amount of $200,000. The order becomes a form of collateral and a pre-negotiated percentage is advanced to the vendor. This is used for working capital, often for completing inventory production. The open balance, less factoring fees, is credited when Walgreen pays the invoice amount. Virtually every dry goods manufacturer factors invoices.

In summary there are many funding options available depending on the size, scalability and current status of the new business opportunity, no entrepreneur should ever attempt to approach funding sources without a customized business plan, exciting presentation materials and strong financial projections. The most likely source of funding for 99% of all new ventures will be personal resources, friends, family and fools.

Need or Want: Your New Product Will Succeed if it Addresses Need

Wednesday, October 8th, 2008

by: Geoff Ficke

I have always tried to teach my children the difference between needing and wanting a product. This is a value judgement that applies to every human, many times in surprisingly differing ways. People born to great wealth view need far differently than those of us born to the lower classes. I might need an efficient baby stroller for my grandchild, while a Beverly Hills grandpa needs a Bugaboo (the Danish stroller that can sell for well over $1000). Both do the same job, I need a stroller that safely holds and transports my grandchild for about $130. The Beverly Hills grandpa wants a stroller that transports his grandchild safely, and also, stylishly, offering many more features than my “need” vehicle.

One of the areas of greatest interest, to inventors and entrepreneurs, is the type of product or service that can offer the greatest payoff; need, benefits and return on investment when marketed. My counsel is to always seek projects that offer performance benefits addressing needs. The opportunity to offer fresh answers to problems will always trump a new feature enhancement on an existing product.

I have written about convergent and divergent products and the overwhelming advantages of the latter. Need products or services are often divergent. Need products create an offering and an opportunity where no product answers formerly existed: They face less competition, offer much greater profit potential, typically have a longer product life and can often be extended with new features (thus, becoming convergent).

Obviously, it is much more difficult to conceive a disruptive innovation/technology or product than to tweak an existing item. This is the reason the reward, both financial and psychological, are so much greater when a need is answered.

Let’s look at an ancient industry: jewelry. For centuries jewelry has been basically supplied and sold in the same way. Precious stones and metals were mined. Craftsmen work the gems and metals into artisan pieces. Wholesale distributors or brokers sold the finished pieces to retailers. Retail stores sell to the public. This has been the supply chain for the jewelry industry, essentially since biblical times. But, times have changed.

I consulted on a project several years ago built around the concept of placing computerized jewelry kiosks in department stores. Software was written enabling the customer to customize over 1,000,000 styles of jewelry based on desired price, gem choice, stone placement, karat, etc. The end design can be viewed on the computer screen, and an order placed. So, what is the need addressed here: In this case, personalized customized artisan jewelry at significant savings for the customer and, retailers drastically reduce the expensive inventory that jewelry demands plus payment is made at time of sale, well before delivery. Here the consumer, the factory and retailer enjoy a unique triple win. This disruptive type of innovation can shake older, slower channels of distribution and force snowballing advances in benefit delivery.

A woman might need a $7 jar of Oil of Olay moisturizer. She may want a $155, ½ ounce jar of Crème de la Mer. Most of us need an automobile for basic transportation. The Ford Focus or Honda Civic is a practical, economical choice. Many of us desire much higher end models such as BMW or Lexus. Each of these choices have an engine, four wheels and brakes. They all get us where we need to go. The logical Honda is needed. The Mercedes is wanted.

As an entrepreneur, ease of market entry is usually much greater for a product that answers the need for new usage benefits. Innovation is often a matter of degrees and definition. A new medical technology might address a rare disease that affects only a few thousand people. Nevertheless, an important need has been addressed. Typically such a technology will command very high pricing per application or treatment.

Features that embellish already existing product models can be profitable. It is usually easier to re-fit or re-design these features. The overall opportunity for market acceptance, finding lengthy sales traction and massive profits, however, is typically smaller when attached to “want” products.

Everyone needs a toothbrush. Recently I discussed the battery-operated spin-brush with my dentist. I had bought a spin-brush for everyone in my family thinking that it offered better dental care. My dentist advised that there was no clinical support that the battery brush offered better dental care than the old fashion bristle brush. More important, he says, was how we actually utilized the brush. The spin-brush is a want product, and priced about triple the price of the old fashion effective brush we grew up with.

Visit any fashion mall in the United States and you will find Brookstone and/or Sharper Image retail stores. I love to visit these stores. They are bastions of style, novel product features and creativity. They are also exclusively “want” stores. An inventor or product designer can do well by selling to these lifestyle stores. But, the big opportunity is in the creation and marketing of products that answer real unanswered needs, not added bells and whistles decorating clocks, foot massagers and wind chimes.

Design is crucial to success in many product categories. Design can enhance features and raise the perceived value of a product. Jimmy Choo design’s ladies shoes: priced at $300 and more per pair. What makes this designer’s shoes so highly desired, valued and wanted, simply the design. Inventors and entrepreneurs need to address design, but Jimmy Choo is only the latest popular shoe designer. How long will he last? There is a very long list of fashion designers that were also the latest, just not the greatest.

Great Britain based Clark Shoe’s has been providing the same styles for over 100 years. Initially Clark was boot-maker for the British colonial army. The Company’s signature shoe is the classic Desert Boot. The unstylish Desert Boot, was, and is a staple for outdoor comfort and performance even today. Clark created a shoe to address a need, and is a recognized brand around the world. Sales traction, pedigree, brand awareness and generations of devoted users have made Clark a very profitable and excellent model for entrepreneurs to study.

We live in the worlds most energetic consumer driven marketplace. Television, magazines, billboards, and the inter-net scramble to break through market clutter and deliver advertising messages to stoke our desire to purchase jeans, perfumes, watches, Scotch whiskey and automobiles. The intent is to drive our “want’ emotions.

The real opportunity for any aspiring entrepreneur is to address “needs”. A product that addresses our crisis of childhood obesity would fill a huge need. An aging population will need wellness technologies to minimize contact with an expensive health care system. Answering this type of need will pay huge financial dividends and offer the added benefit of doing societal good.

Is Now the Best Time to Start a New Business

Wednesday, October 8th, 2008

by: Geoff Ficke

I am often asked if these are good times for new enterprise opportunities? Should I wait? Is the economy down? Is it a good funding market? Is competition too intense? These, and dozens more stated concerns are nothing more than self-imposed hurdles to movement.

Now is the best time in history to start a business, launch a product or offer a cutting edge new service. More people than ever before have jobs. More people than ever before own homes. More business incorporations are established each year than the previous year. Global prosperity is galloping along, with formerly poor countries like China, India and Malaysia, seeing spectacular growth (potential new customers for new products and services) in the middle class.

Much of what I just stated might seem at odds with the media presentation of a struggling economy. The mass media knows that bad news sells. It is in their interest to report the problems of General Motors, layoffs, health care benefit cuts and downsizing while ignoring the spectacular growth of jobs and small business more than making up for the fallen old lions of industry. Mass media has a goal of keeping readers on edge; uncertain about the future and discontented. Pay no heed, do your own research on current market conditions if this is a concern.

The opportunity to successfully start a small business, market an invention or new service is always dependent solely on the value, novelty and benefits of new offering. If there is an under-served market segment and you can identify a niche in a large market category, the time is always right to move ahead.

For many years I called on large national department store chains. Buyers always had a reason why now was not a good time to place an order. “Easter is coming”. “We have inventory next month”. “Let’s see how next weeks sale goes”. Always excuses. Meanwhile inventory on hot items was low and sales would be lost. It is the same with inventing excuses to delay an entrepreneurial opportunity.

My advice to students, clients and inventors is simply this: “Time is never an entrepreneurs friend”. I saw an entrepreneur lose a multi-million dollar contract purchase with Home Shopping Network by three days. Initial hesitation, self-imposed hurdles, lack of focus and mistakes in the development process caused needless and damning delays. HSN was fed up and placed the order with an inferior but better organized competitor. The loser of this race never recovered. The winner does over $20 million annual turnover with HSN and has built a strong international business. It is maddening to me how often delay equals opportunity lost.

Do not delay movement to commercialize an opportunity based on short- term business conditions, perceived or real. For example, interest rates have been historically low for the last several years. Recently they have begun to inch up. How high will they go? What effect might the rise have on ultimate success for my venture? No one really knows the exact answer. We only can state with certainty that rates go up, rates go down. Look at the historic averages and anticipate that these averages will hold true to form. Base your financial assumptions on the mean averages, but do not delay movement on a great idea because of uncertainty about one element. Remember; if rates go up, they rise for your competition as well.

Also, do not listen to negative nannies nit picking your project. If you have done an effective job of due-diligence, can identify your market niche as being under-served and can quantify an excellent financial proposition you probably have the makings of a successful business. You will certainly know more than the critics. It is easier for people to be negative than to encourage your interest in taking a risk. Risk equates to possible failure for most people. You will be changing your life and most people instinctively fear change.

I always encourage seeking advice from friends, family, valued experts and independent counselors. It is important to know as much about your projects strengths and weaknesses as possible before committing your energy and resources. I also know that successful entrepreneurs almost always have an inner compass which sorts through the mass of concerns, objections and negatives they receive. It is always easier to say no, not move forward, than to commit and push ahead.

America is teeming with dreamers and doer’s, all hoping to succeed in a cluttered, very aggressive marketplace. Delay is never a wise course of non-action if your project has real legs and commercial viability. Somebody else is potentially working on a directly competitive product. You can not afford to lose a first to market advantage because of dallying and uncertainty about entering the market at the optimum time. There is never a perfect time to start. There is only now, and now is plenty good enough.

Alternative Strategies for Hesitant Entrepreneurs

Wednesday, October 8th, 2008

by: Geoff Ficke

The ability to succeed as an entrepreneur is one of the most rewarding experiences any person can enjoy. Seeing your product on a store shelf is an amazing rush. Knowing that your service is benefiting the public is incredibly rewarding. Beyond the obvious monetary rewards, the knowledge that you have achieved a level of success most people can not even attempt is a significant gift.

So what does an inventor, or creator, do to advance their opportunity if they do not have classic entrepreneurial makeup. In my consulting business I see an inordinate number of great product placement opportunities and an inversely small number of real potentially successful entrepreneurs. It is very tough for anyone to step out of their comfort zone and wear a completely new shirt. This is one reason there are so few entrepreneurs and so many dreamers. Nevertheless, there are opportunities and strategies that can overcome personal entrepreneurial limitations.

There are numerous, sound, legitimate, capable consulting firms that can handle business opportunities for inventors. They are able to perform a basket of services that most individuals would find overwhelming. A good consultant saves the client time, money and mistakes. Make sure you interview more than one firm, ask for current and past references, request samples of products the firm has developed.

Do not use an invention submission service, ever! This is always a road to heartbreak hotel.

An effective consultant should be able to offer a strategy for execution before the inventor lays out a single dollar. The firm should be able to perform, or have access to professionals that can perform every aspect of the projects needed elements. If the inventor has certain abilities, (ability to assemble financials, engineering, production of 3D CAD art, etc.) ask to have them backed out of the fee structure, as these can be self-performed. The comprehensive consultant can act as a projects managing consultant (handles every aspect of development, sales, marketing, production, negotiations, etc.). Often, the inventor needs only needs specific tasks performed, in areas where they are inexperienced or challenged. This often includes sales and marketing.

A consultant should be able to clearly advise best strategies, opportunities and limitations the project might face. They should also be realistic in assessing potential for success. Be wary of unbounded enthusiasm and guarantees of success.

Many inventors approach me and state unequivocally that they need a specific amount of money. I have never, never seen an inventor who could justify the amount of money they THINK they need. They are guessing and have not conducted any of the required research essential for quantifying the projects real financial needs.

Many inventors believe they need to raise vast sums of money to complete development, produce and sell their product. Rarely is this so. It is far more likely that a prototype can be sold or licensed, a strategic alliance entered, or a partnership formed, seriously mitigating the need for significant investment dollars. These are a few of the strategies a competent consultant might consider.

As an inventor of a potentially exciting commercial opportunity, it is important that you remain flexible and realistic. Inflated expectations kill more deals than almost any other factor. When I meet an inventor that has been working on their project for many years, I become wary, very wary. This is always a sign that they are deal averse, can not let go, want too much control, or have unrealistic financial hopes.

While consultants are available, there are other potential sources of help for the timid inventor. Many universities now have entrepreneurial study programs and offer mentoring. The Service Corp of Retired Executives is a well-known resource for small business assistance. Also, many local/regional governments have organized small business development programs, recognizing that small business is the principal creator of job growth and tax revenues.

Just because you do not have an entrepreneurial makeup does not eliminate your creative commercial opportunity from potential market success. Investment monies will not be chasing a rookie, limited ability entrepreneur. However, money and opportunity always is interested in exciting new technologies, products and services. Get the necessary experienced help to drive the project and enjoy the significant potential income stream that can be generated when a product is successfully sold, licensed or partnered.

Is It Possible For Anyone To Be A Successful Entrepreneur

Wednesday, October 8th, 2008

by: Geoff Ficke

This is a question that has no absolute answer. In many aspects of life an entrepreneurial spirit is useful. For our purposes, we will stick to the commercial and business areas and narrow the field of possible answers within this scope.

I believe that theoretically any person can be a successful entrepreneur. Unfortunately, this is far from true in the real world. Most people do not have the mix of drive, ambition, passion, fearlessness and creativity requisite in most successful entrepreneurs. Look at the lifestyle and career choices made by the vast majority of people. An aversion to risk, fear of failure and lack of confidence eliminate most people doing anything more than dreaming about seeking entrepreneurial opportunities.

It is very difficult for people to change. The successful entrepreneur is basically a risk taker, willing to put themselves, their ideas and egos on display in a highly competitive marketplace. They will hear the word no so often that they must become inured to that horrible little two letter word. Disappointment becomes their constant companion. Yet, they have a unique ability to keep pushing their project along, always seeing the glass is half or more full and a way will be found.

If success were easily achieved we would enjoy a whole lot more of it. I am always struck by how negative so many people are in every aspect of their lives. I have never seen a successful entrepreneur have a negative personality. It is an instant eliminator for anyone seeking to launch an entrepreneurial career.

So, we can be confident that successful entrepreneur’s are a different breed. The do not fear failure. The belief they possess in themselves, their opportunity and the benefits they will achieve from successfully launching their product is palpable. It drives them to overcome obstacles and find answers when none seem plausible. Anyone can attempt to become an entrepreneur. However, the evidence is powerful that success requires a unique set of personal attributes not possessed by most people.

Why Is the Right To Fail So Important?…and, Why It Is Mostly Unique to America

Wednesday, October 8th, 2008

by: Geoff Ficke

The American economic system of capitalism is unique in the industrialized world. Forms of capitalism exist in many countries, and the one general statement that applies to its usage is that capitalist countries are always more prosperous than non-capitalist states. That being stated, why is American capitalism so advanced, successful, admired and feared?

We all know that America offers the most dynamic advanced economy in the world. Brands such as Coca-Cola, McDonalds, Estee Lauder, IBM, MicroSoft, Kentucky Fried Chicken and hundreds more are badges of the amazing success of the American model in achieving worldwide prominence. Each of these enterprises were born of entrepreneurial roots, grown with care, and gracefully matured into powerful engines of profit. Other countries can proudly point to their own corporate successes (Finland and Nokia, France and Schlumberger, Chanel, Ireland and Waterford, etc.) No country, however, sports the depth and variety of colossal world brands as the United States.

So what accounts for the amazing growth and breadth of successful American enterprises in a very competitive global marketplace? And, what makes the American field of play so different and compelling as a job, profit and opportunity generator? There are many reasons that can explain parts of the template for success. However, an alpha element is that the United States system does not permanently cripple an entrepreneur who has experienced failure, even several failures.

Many successful entrepreneurs, while enjoying the fruits of their successful efforts, have also suffered the agony of failure. The American model does not insure the right to succeed, jut the right to try. This is not true in most other capitalist countries. Failure is not an option. Barriers to entry are high. Taxes, fees, regulations and restrictive covenants are almost universally more difficult than in America.

The opportunity to fail is not something that any entrepreneur initially considers as an asset. However, it must be considered that most new enterprises do not succeed. Business closings and bankruptcy is very high for new enterprises. Many entrepreneurs, having suffered the disappointment of failure, simply move on and look for a regular source of income. Real entrepreneurs will not give up. They have the genetic makeup necessary to succeed as an entrepreneur. They will keep trying.

I can attest to the difficulty of being an entrepreneur in other capitalist countries. I have started businesses in England, France, Sweden and Spain. When seeking to organize in these capitalist (to a varying degree) countries I was amazed at how difficult it was to satisfy the state. Upon reflection, exploring and experiencing the vagaries of these bureaucracies, I discovered a blunt answer for the very high real costs to enter a new business: these states use extreme barriers to minimize the chance for failure.

Fortunately it is just the opposite here in America. Small business incubators, regional business development centers, university entrepreneurial programs and mentoring organizations encourage the attempt to create opportunity for new enterprises. The result is a wildly vigorous stream of new product, invention, service and enterprise seeking to capitalize on the American economy’s vigor and need for constant sources of growth. All of this occurs while the risk of failure remains daunting for new start-ups.

The growth of the American economy can be attributed to the constant stream of small companies supplying ingenuity, new products and rapidly growing sales and income streams. Virtually no new jobs have been added in Europe over the past two decades. In 2005, America generated over two million new jobs alone.

Growth of the United States economy is not being driven by the mature multi-national companies associated with prosperity in the past. IBM, GE, General Motors, Delta, Delphi, and dozens of other formerly powerhouse firms are downsizing, firing employees and trying to re-invigorate their static business models. The growth of thousands of small businesses entering this vibrant marketplace is the real generator of growth, jobs and profits. The reality that many fail and a few succeed is the strength of the system.

The high barriers to entry applied by so many of our capitalist competitors minimizes their ability to be creative, innovate and take appropriate risk/reward decisions in this brutally competitive global market. This attempt to insure success is actually the death knell of real opportunity.

Successful Entrepreneurs Are Doer’s – Not Dreamers

Wednesday, October 8th, 2008

Successful Entrepreneurs Are Does's – Not Dreamers

Too Many Inventors Are Confused About the Difference

by: Geoff Ficke

For many years I felt that if you scratched any American you were scratching an entrepreneur. This is the country where entrepreneurial activity is most possible and seemingly every citizen has an idea with commercial potential. Sadly, over time, I realized I was wrong. If you scratch most Americans you are most likely scratching a dreamer.

The difference between a dreamer and a doer is profound. Successful entrepreneurs might have initially dreamt of success, but they will not stop there. The drive to accomplish necessary tasks to insure successful outcomes separates them from the dreamy class, which includes most people. Success is a goal that requires drive, determination, courage, fearlessness, planning, discipline, sacrifice and passion. It is not easy, or everyone would be successful.

What makes one opportunity succeed while another, even more promising idea, fails? It always comes down to the individual and their makeup. A few no’s and the dreamer folds their tent. The successful entrepreneur recognizes no as a hurdle, not a deal closer. The opportunity to overcome the objection represented by the word no is an absolute necessity for any individual seeking success as an entrepreneur.

Dreamers take shortcuts. Dreamers make guesses. Dreamers defer tedious research. Dreamers hope somebody else will do the work for them. Dreamers cannot succeed. And, most unfortunately, many perfectly wonderful commercial opportunities are lost because of this dreamscape approach.

Successful entrepreneurs are always doers! They overcome the often seemingly endless obstacles placed in their path. The road to success is a curvy one, very seldom taking a linear approach. Doers find a way to hurdle each obstacle and move ahead in the process. Doers do not fear criticism, but see this as an opportunity to improve their business model. Doers are realists, no fantasy allowed.

Most importantly, doers are positive realists. Most dreamers are negative. Dreamers see hurdles as absolute barriers. Doers find a way, trying any legal, available strategy to achieve success.

Why do most people work at jobs they really do not enjoy? They need income of course. Most of us have some level of a work ethic. However, the work itself is often not rewarding. Many employees feel underpaid, undervalued, under-challenged. They want to do more, be more valuable and contribute more. But it usually does not happen. They are stuck and will stay so, usually. Often, they dream of the one big idea for a get rich quick widget that will change the course of their empty life. But it is just a dream.

Many entrepreneurs I have worked with came from dead end jobs. However, they possessed the drive and desire to change the course of their lives for the better. Their widget was a vehicle for a great change and lifestyle adjustment. The opportunity presented by modern American capitalism is available for any entrepreneur to seize by the throat and hold on for an amazing ride.

I look at hundreds of commercial presentations every year. Less than one per cent will ever make it to market. And yet, about 30% of the submissions we review have some level of commercial potential, sometimes exceedingly high potential. It is sad to see so many dreamers lacking the cocktail of traits and qualities necessary for successful outcomes. This is a great loss for the dreamer, our economy and society at large, as many of these ideas have real merit and utility.

After many years of teaching, coaching and consulting with would-be entrepreneurs, I can instinctively judge the potentially successful person. There is always an air of passion about the opportunity, knowledge of the competition, belief in the product and themselves. This is obvious whether the initial meeting is in person, by phone or e-mail.

The dreamer invariably comes across as a tire kicker. Hoping, unsure, cloying in a manner that underlines the shortcuts they have taken in approaching an exceedingly competitive commercial market. “Let’s make a million dollars together”, is an entrée we often receive. Another losing approach, “I don’t know costs (or competition, or target demographic, etc.) I just know we will make millions on this, my Aunt Hattie loves it”. There are many more similar vacuous introductions accompanying otherwise interesting submissions. The predictable result is that opportunity is immediately torpedoed.

Doers have an air of strength. They do not kick tires, but appear ready to repair the whole car. They have answers to most questions and are open to coaching. They are realists and flexible. Dreamers often state they will sell their project for a million dollars. Doers recognize that a good deal is a deal where every party is fairly compensated. Doers will do everything within reason to make a deal happen.

It is a shame that success as an entrepreneur cannot be taught or bought. It can’t! Personal make-up, energy, positive attitude and drive have no retail price. People are either achievement driven or they are content to be average, or less. Entrepreneurs have the essential traits and elements necessary for success hard wired into their being. Why is unknown, I just know it when I see it.

Many inventors recognize that they are creative, not entrepreneurial. They possess the ability to create, design, or invent, but not the ability to project their inventions into the commercial marketplace. These creators are smart to seek professional assistance in securing placement or sale of their work. As Dirty Harry said, “A man has to know his limitations”. Not everyone can be a successful entrepreneur, but there are alternative ways to approach the market. This approach is practical for many creative people.

Dreamers unfortunately are doomed to fail. They will waste time, make mistakes, lose money and ultimately implode psychologically when the inevitable failure is at hand.