Today any firm can become fat and mostly happy, even if initially it was losing so much money it seemed to threaten its very existence, and became a basket case with a problem of survivorship. However, the fundamental thing is to keep learning from previous mistakes, and keep improving your entrepreneurial skills, otherwise, you will continue going backwards. Indeed, some of the branding of firms is so crazy that one has to assume that somebody inside the company has gone insane. The fortunate thing for entrepreneurs is that there are no good business ideas, just good execution.
Competition and the market
“Entrepreneurs should ask themselves if the market really exists if there is no competition”, says Entrepreneurship professor, Peter Bryant of IE Business School, Spain.
Even if you initially have a monopoly in any industry, eventually, competitors will enter the fray. Competition should never be ignored, even if it has a small market size currently, because it will always pose a threat anytime. Therefore, you should know your competitor more than they know themselves. Claims that there is no competition or the incumbents don’t pose a threat to their businesses, amount only to treacherous thinking, because i can assure you that at any given opportunity your competitor is analysing your business, and developing new innovations to counter your efforts. Unfortunately, gone are the days of resting on your laurels, because technological innovations are reshaping industries, and are constantly creating future threats to any industry. Competition doesn’t only mean your other industry peers; rather it extends even to other technological advances that might threaten your business.
Search widely to also identify current and potential imitators, whilst also checking often, as competitors’ initiatives and start-ups maybe difficult to see. For instance, a simple illustration is Nokia. In as much as Nokia was the market leader and the torch-bearer in the mobile phone industry, unwisely they drew so much satisfaction from that, such that they forgot to anticipate or forecast future trends in the mobile phone business. Smart-phones would become the next lucrative gadget to manufacture, and Nokia looked blindly on the other side and missed the opportunity to consolidate its market share by quickly developing its own smart-phones because it had the financial resources and muscle. Even if it wasn’t sure about this new gadget, it could have mitigated it’s risk by making an agreement with a rival to produce a joint venture product, unfortunately for reason best known to the company they decided turn a blind eye to the new craze that was about to change the mobile phone industry. As i write this they are still playing catch-up to Apple, Samsung, Blackberry etc., who have suddenly become the new market leaders.
Furthermore, any entrepreneur should know extensively the competition and develop counter strategies. For example, the big music record companies failed to take Napster seriously, only to realize late that it was hurting their sales, even though they later fought court battles with Napster, the damage had already been done. That is from being powerful, they suddenly became vulnerable, such that when Apple came up with the i-pod, the music industry had no option but to quickly get into agreements with Steve Jobs so that they got the few crumbs, Apple might have offered rather than lose out completely like they did with Napster.
Winning 1 percent of $1 billion is easy in dreams; you have to move mountains to achieve that reality. Never think that customers will always come, because unless it’s a socialist economy, the choices of substitutes will always be available and the customers are not compelled to buy from you if they are not happy with your products, or if they don’t know about your products. Make extensive efforts to develop a relationship with your customers, have your brands imprinted on their minds despite your market size.
A sale is the lifeblood of any business, and marketing is the spine. Great companies don’t just create brands, they also create movements. Movements are created by being held in high esteem, and revered. Entrepreneurs often over-estimate the size of their potential market because of performing inadequate market research. Conducting sufficient research on potential and existing competitors assists you to focus on a market segment that can boost your business, because defining your market segment too broadly is a costly oversight. It doesn’t matter that a bigger market gives you a chance to grab a slice of the pie; you might be forced to compromise on quality too soon because of over-stretching your current resources.
Lastly, ask relevant questions such as: What are potential customers buying now? What is their incentive to switch to buying a new product? Is there enough market demand to support the introduction of a new product?
Focus, Equal Partnerships and Key Customer Syndrome
After you have had that dream about that brilliant and great billion dollar idea, write a business plan early on, even if it’s for your own benefit. Furthermore, being in business requires a road map, just like life in general requires some sort of a plan. The business plan ensures that you set both short and long-term goals for the business, such that you have a reference point to check your progress against along the way. Without a clear vision of where your business is heading, your great idea can get muddled along the way. The good thing about planning is that, it builds habits and habits create actions and actions get things done.
Let’s be honest, entrepreneurs need to see beyond the first 6 or 12 months operation. It’s essential to have a concrete idea of how to keep the company profitable over the next several years. In addition, the companies that flourish are the ones that are not stagnant, but are constantly reinventing themselves, improving their products, services, and finding new revenue streams to increase their turnover. Rome was not built in a day, nor were there no daily developments, meaning that you need to execute your plan and strive for improvement each and every day.
Moreover, let me state that, some companies might not need a formal business plan, however, a start-up that needs significant amounts of capital to grow and more than a year to turn a profit definitely needs a roadmap of how much time and money it’s going to take to achieve its goals. This might require going through the key metrics that make your business tick and building a model to spin off a couple of years of sales, profits, and cash flow projections.
Normally, when starting a business, it’s very tempting to divide ownership equally among the partners and attempt to make all decisions through a consensus. However, disagreements will always inevitably arise, despite the fact that partners might agree in the early stages of the business. It’s also inevitable that partners most often will have different ideas about how much time to put into the business, regardless of what agreements have been made about what level of commitment is required. Therefore, it’s always advisable to ensure that there is a defined leader with adequate authority to make final decisions, and sufficient compensation to remain motivated.
In as much as a gentleman’s agreement is the norm when most companies are founded, however, even that behemoth and revered company called Apple, had its issues which led to Steve Wozniack to turn his back on the company that he had co-founded. One person ultimately has to become a majority owner, even if it means it’s 51 percent it doesn’t matter.
Every business might need to have that one large customer in the beginning to get the business off the ground; however it shouldn’t be a means to an end. Having one customer, who generates more than 50 percent of your revenues can be a recipe for disaster if that customer goes out of business or stops buying from you for some reason. Don’t rest on your laurels because you have one big customer, use that edge to build on, and work on acquiring more customers- both large and small. Customer acquisition is the best funding strategy, since strong revenues improve valuation and reduce financial pressures.
In conclusion, on-the-job experience is the best way to learn about a business. Before trying to launch a start-up, you can gain experience in the field through an internship or a related job. Furthermore, your lack of experience in the industry you are trying to enter can lead to many costly mistakes. Moreover, it doesn’t mean that there are no exceptions to the norm; some entrepreneurs can equip themselves with information about their industry through extensive research.
Lastly, know yourself, trust your instincts, and be prepared to make the hard choices, fail and fail again, be critical about yourself, and most importantly love what it is that you want to do. Above everything, luck matters; always try to be at the right place at the right time.
