Last week I took some time to meet a group of young entrepreneurs at the CIE (Chicago Innovation Exchange at the University of Chicago). During that meeting, I shared some of the lessons that I learned during my career. A follow-up question from one of the attendees prompted me to put the following condensed, but better organized version of my thoughts down in writing.
- Make sure that you understand the business you are getting into as well as you can. Take the time early on to really understand the business you are developing because the better thought out the idea, the smoother its realization. And, even in the best of cases, i.e. you follow this advice, things never go smoothly, but spending the time early on might very well mean the difference between success and failure.
That said, a thorough understanding of the opportunity you are chasing requires that you don’t avoid the hard work of detailed (both breadth and depth) research. Good research takes several forms: 1] Use the Internet (and 2] be willing to follow the non-hyperlink related resources that the Internet suggests, i.e. don’t be lazy and confine your research to the Internet, if a lead takes you to a book, research paper or person, go for it), it is a great resource, but has its limits, which is why; 3] You must spend time with your potential customers and the other business entities that will be part of your ecosystem. There is no substitute for face to face; yes, it must be in-person interaction. Getting people to meet with you is really hard work and getting them to really engage is monumentally difficult, but it is worth it, so make it happen at all costs!
- Two corollaries to the pervious point:
- Make sure that you understand the value proposition of your business. This is different from and in addition to understanding your products/offerings/solutions. And it includes making sure that your potential customers are willing to pay (enough for you to support your business model) for your offering(s). There are way too many appealing, even sexy business opportunities that people really aren’t willing to pay for. Don’t get stuck with a great idea that isn’t commercially viable.
- Don’t ask your customers what they want. Understand how their business works and look for the places where things aren’t working or are terribly inefficient. By taking this approach you will understand their pain points (which may be so ingrained in their business that they don’t feel the discomfort any more) and most likely see opportunities that they don’t even know exist.
This is definitely the hard road; the one less traveled. But, it is the path the real pros take and it is infinitely more rewarding. Only a handful of the best consultants I have ever worked with have mastered this discipline.
When we were doing the initial exploration into the opportunity for Textura, most of the people we talked to didn’t see payment processing in the construction industry as being an issue—even though it really was. And, that issue formed the basis for a vibrant business and a platform for multiple other related opportunities.
- Look for people who can help you. You and your partners probably don’t have all of the knowledge and experience to make the venture a success. Recruiting a team of advisors that can help to fill in the gaps and if nothing else be a relatively impartial sounding board is really important to making the right decisions. The less experience you have in business, the more important these resources are.
- Your business idea doesn’t need to be sexy. Many of the most successful businesses do things that need to get done and for which people are willing to pay a good sum to make sure they get done well. Textura is an example. Textura processes payments for the construction industry—not sexy, but a darn good business. Another example that I use, more than I probably should is ServiceMaster. They provide a variety of services that are really pretty mundane, but it provides a good long term opportunity for investors. So, if you have a good idea, even if it isn’t sexy, go for it.
- Make sure that you understand all of the things that need to be in place to make a business successful. This obviously includes product, but a successful business also needs a sales organization, a support organization to care for and nurture your customers, a product development organization, finance (and I don’t mean accounting) and the management to make all of them work in a way that will result in a successful venture. While a good idea is critical, it won’t make up for shortcomings in the other areas enumerated above.
- Make sure that you know and can work with the people who are going to give you money. It is worth taking the time to make sure that the “idea for the business” isn’t the only thing that you agree on. They are going to have a significant say in the business, so make sure that you agree on the approach to exploiting the opportunity, the way you expect to run the company, the company’s culture and most importantly how you and they approach bad times because you don’t want to find out that there are differences in how you and those who have funded your business approach these items after they have a substantial stake in your business.
- Finally, make sure that you understand where your business is going to go. What will the first 5 or 10 years of the business look like? This is the “vision”. It doesn’t need to be detailed, but it does need to be well-formed and something that can inspire your staff and investors to understand the long term potential of your idea, not to mention the basis for a roadmap as your venture develops and it needs a more detailed long range plan.
These are my thoughts. I am posting this to make it generally available to young entrepreneurs, but also to get critical feedback from those of you who are more experienced. And, I will post revisions to this post based on said feedback.