Solving Problems

Sometimes, rather than creating a solution to an existing problem, an entrepreneur simply sees a gap in the market that needs to be filled.  Maybe there is no dry cleaner in a large area of town, or no upscale dining options. It is possible that those needs have not been filled because they are not that important to the market. However, it may also be the case that this type of business has never been attempted in a particular market.  This is one reason that market research is so important prior to starting a business. Where you might see a need, there might not be enough of a market to sustain a business. If there is need for a specific product or service, however, then filling that need is an excellent business opportunity.

 

Another way for an entrepreneur to create a business is to innovate or invent.  These topics are related, but they have their differences as well. To invent means to create a brand new product or process.  To innovate, on the other hand, means to contribute a significant improvement to an existing product or process.  Thomas Edison invented the lightbulb, but energy-efficient bulbs like LEDs and CFLs were innovations. While invention is the more popular notion, innovation is just as important.  After all, Henry Ford did not invent the car or the assembly line, but the pairing of the two processes at his factories was a wildly successful innovation. Both invention and innovation offer significant opportunities for entrepreneurs to make their mark.

 

Franchises are often a good introduction into the small business world.  A franchise is a business model where a big business allows entrepreneurs to operate a small business (or several small businesses) with the big business’s brand in exchange for a percentage or fixed amount of the profits.  Subway Inc. is an excellent example of the franchise model, as most of their restaurants are not owned by the company (franchisor), but by individual entrepreneurs (franchisees). A franchisor is a business or individual who sell the rights to a business to multiple other businesses, and/or individuals, so that they can operate as the original business.  A franchisee is therefore a business or individual that purchases the rights to operate another business as their own.  Many franchises are turn-key businesses, meaning they require very little input from the franchisee to get up and running.  It is essential to thoroughly investigate the franchisor and the offer to ensure that your efforts will be rewarded. Not all franchise opportunities are equal, and neither are all franchisors.  A good resource for researching franchises and available offers is franchiseopportunity.org. Finding the right franchise opportunity is a great way to get started in the world of business.

 

If you happen to be starting at square one, and are looking for an idea that fits into one of these categories, then there are many ways to come up with a great business idea.  One of the simplest ways is performing a Google search. A Google search for “I need a business idea” turns up headlines like “19 Best New Business Ideas for 2016” and “1,001 Smart Business Ideas in Case You Need Inspiration.”  Use one of these ideas for your new venture, or just use them to spark your own creativity. Perhaps there is an existing business in which you have spotted an inefficiency or one that you think you could run better. Business ideas can come from almost anything, so keep an open mind and be observant.  

 

https://startupweekend.org/Once you have a business idea, developing it is the next step.  There are plenty of great resources available to help develop your business idea.  One of our favorites is Startup Weekend. Startup Weekend is a not-for-profit company that operates 54-hour conferences across the globe where entrepreneurs, technical experts, and aspiring startup business owners alike can come together to turn ideas into concrete businesses.  Startup Weekend is an excellent way to connect with like-minded people who can help you turn your dream into a reality. In addition to the active development portions of the weekend, there are guest speakers and coaches there to help teach you along the way. You can find out when Startup Weekend will be coming to a city near you on the front page of their website,  

 

Among many other excellent educational resources for startup businesses is the United States Small Business Administration (SBA).  The SBA website, sba.gov, has educational materials available in their Learning Center with topics ranging from how to get started with a startup business to cybersecurity for a small business.  Among the services offered by the SBA are district and regional offices, connections with local help centers, and specific partnerships with centers devoted to helping women, veterans, and those small businesses that have been affected by natural disasters.  The SBA can even help you apply for a small business loan or grant. Overall, the SBA is an excellent resource for anyone who needs help with a startup or small business.

 

There are countless things to consider when starting a new business. The first, and most important, decision is what your business will be.  The products or services that your business offers have to solve a problem, fill a need, be innovative, or be inventive. Once you have a great business idea, you need to use the available resources to develop that idea and help you turn it into a real business.  There are many different ways to create a successful business, but all good businesses have one thing in common: a great leader.

 

There are countless business models for an entrepreneur to choose from.   Wholesalers are businesses that buy products and/or raw materials in bulk, and in most cases sell them to retailers or other businesses.  Wholesalers’ goods are less expensive per unit because they only deal in bulk. They make money because they sell a high number of units.  Restaurant Depot, a popular restaurant supply chain, is a wholesaler. Retailers are businesses that sell goods and services directly to consumers.  Target, Best Buy, and Walgreens are all retail businesses. By and large, most businesses are either business-to-business (B2B) or business-to-consumer (B2C) sellers.  Wholesalers are typically B2B sellers, while retailers are B2C sellers.  Most B2C transactions are simple, easy to close, and made at face value. While consumers do not have unlimited spending power, they typically have much greater discretion when making purchases than a business or its representatives do.  On the other hand, B2B sales are more difficult to close. This is because B2B sales require negotiations and the development of relationships in the business community, in addition to traditional marketing efforts. B2B sellers also typically have a much smaller market to address, as there are far fewer businesses out there than individual consumers.  

 

One of the most common reasons that entrepreneurs start a business is to solve a problem.  By being observant you notice all kinds of problems, and the one you are trying to solve does not have to be a big one.  It can be as simple as “I need a way to transport my cat” or “I need an easier way to clean my oven.” This is how we ended up with pet carriers and self-cleaning ovens.  If you notice a problem that many people have, or one that matters a lot to people, then it is likely a problem worth building a business around. Joy Mangano, whose life story was used for the movie “Joy,” built a large business off of a self-wringing mop, a simple idea.  The ability to identify a problem, find or create a solution, and then take that solution to the market, is what sets entrepreneurs apart. 

 

Another important consideration in marketing research is whether there is a benchmark in the market.  A benchmark is the consistent top performing business in an industry.  Benchmarking is the practice of comparing one's own business processes and performance metrics to best practices from other companies in the industry.  Benchmarking can yield valuable information about what it is that makes top businesses so successful, and it may help you find a way to gain a competitive advantage. 

 

Researching the competition is essential for small businesses.  Both direct and indirect competitors have a major impact upon small businesses.  A direct competitor sells the same, or nearly the same, products or services as your business. On the other hand, an indirect competitor sells different products that can fill the same need.  Ford and Chevrolet, for instance, are direct competitors. However, motorcycle manufacturer Harley Davidson is an indirect competitor for both, offering a different (substitute) product while still fulfilling consumers’ need for transportation.  When researching competition, it is important to note the level of competition that the business faces. Are there many large businesses in the industry? How much of the market share do the top two or three businesses take up? These are questions that must be answered.

 

The goal of any business is to gain as large of a market share as possible.  Market share is the percentage of an industry or market's total sales earned by a particular business over a specified time period.  While 100% market share is impossible for many reasons, including laws against monopolies, it is possible for a business to dominate a market.  The ability of a business to be market dominant is in large part related to the market size, the number of individuals in a certain market who are potential buyers and/or sellers of a product or service.  Regardless of the reason, a business will spend less time and money on secondary target markets than their primary target market, but secondary markets can still be valuable as a supplement.  The true focus of marketing efforts is, and should always be, the primary target market. 

 

A market is any group of people that have similar wants or needs and are capable of spending money to satisfy those wants and needs.  When selling a product, a business must know what type of market there is for their offerings to make sound business decisions.  Examples of markets include the market for soft drinks, for infant car seats, or for luxury homes. Most markets tend to change over time.  Market trends are the upward or downward movement of sales within a market over a specific period.  When researching markets, you must pay attention to trends in order to keep up demand. There is a vast amount of data available regarding all markets, which makes it important to break up markets into smaller segments for further analysis.

 

When starting a business, one of the first considerations an entrepreneur must make is what industry you wish to be a part of.  An industry is a collection of businesses that are grouped together by their type of operations.  Put simply, an industry is a group of similar businesses. Examples include the greeting card industry, the film industry, or the fast food industry.  The group of consumers to which an industry attempts to sell its products or services to is a market. The specific market that you will be selling to is another important consideration for an entrepreneur to understand in order to effectively sell your products or services.