At almost every convention I speak at, someone will approach me afterwards and ask: ‘James, should I start a hotel business?’, or ‘James, should I open a restaurant?’ The list continues: jewellers, clothing lines, even air lines. The fact is that I am not going to be able to answer this question for you. What I can do is tell you how to find the answer you need. There are 3 very simple, but very essential questions that you need to ask yourself before you give up the day job. Read carefully, because this is important:
Is This A Business, Or A Hobby?
Entrepreneurs normally have their ‘Eureka!’ moments when they find themselves solving a problem. The question is, is this problem relevant to the masses? It’s important to realise that not everyone will share your passion for digging holes, for DIY tinkering, or for multi functional storage space. Whilst these things may appeal to some, they probably aren’t going to generate enough interest to sustain a business. Your state-of-the-art shovel is invaluable to you, but perhaps not to your neighbour. So, before you launch your business, ask yourself this: am I catering to a hobby, or am I creating a business? If you admit that it’s a hobby, that doesn’t mean you are admitting failure. Remember: every idea that doesn’t work is one step closer to one that will.
Is It Viable?
If you’ve found the concept, it’s time to get statistical. For every business idea, you need to ensure that it fulfills this equation:
Price of product/service = Cost of Goods + Cost of Time + Cost of Opportunity (i.e. the money you have to spend to acquire and supply your customers) + Profit.
A lot of people tend to write time out of this equation. Never underestimate this aspect of starting a business. No matter how hard you work, how focussed you are, there are only so many hours in your day. The reality is, that if you leave any factor of this equation out it becomes void. Don’t scale yourself out of your own business, you are its core ingredient.
Is It Desirable?
If your statistics check out, you can progress to the next stage. Ask yourself: is this product or service actually desirable? This is different as to whether or not it’s a hobby – this is not a question of how many people it will appeal to, but how much. The only way to find this out is to do some field work. Ask as many people as you can what they think of your idea, and ask them honestly. These conversations need to be frank. There’s no use in your mate telling you it’s a good idea just so that they don’t upset you. Flattery will get you quite literally nowhere.
So, in conclusion: check your idea against yourself, then check it against the facts, then check it against your friends. This might seem like simple logic, but I see people get this wrong almost everyday. Don’t ask me whether your antique book shop will succeed, ask yourself. You are the only person that can make this happen – to an extent, you are your product. It’s not a shame to give up on a bad idea, but it would be to give up on yourself. What protocols do you have when it comes to taking a risk?
Author: James Caan CBE