“What made you think you could make any money doing that?” I was asked for about the 600th time in my life this week.
When I started Renaissance Fireworks 10 years ago I told everyone my idea. You would think I was killing it at open mike night at the comedy club. I am not sure anyone but me and my wife believed I could make a living selling fireworks 2 weeks a year, let alone make it into a business. The first year I almost lost my belief. Thank goodness my wife didn’t. A year later I quit my full time job and became a full time boss-type person. I went back and worked from time to time in sales but after 3 years I never worked for someone else again.
Almost two years ago I noticed a small market for wedding sparklers. We tried a few things here and there and threw some money into it. In two years we have built an online wedding sparkler store into a business that had over 6000 orders placed in 2012 and in 2013 we are looking at over 10,000.
Now we are on the verge of launching a software system designed for small business and even mid-sized if they ask nice. It is not designed for large corporations and maybe we will let them use it, maybe not.
So why all the focus on small markets? Why not go after the big fish? Why why why you say? Because that is where everyone else is fishing. You can now plainly see my Minnesota coming out as I use fishing to explain this. Imagine a big round lake. Now imagine your family only eats fish. (I know but bear with me here)
Now there is a fishing guide that knows where every fish in the lake is. He tells all the fishermen the BIG ones are on the west side of the lake. Not very many but if you land one it will feed your family for a month. On the East side of the lake are small fish. Each one might be a meal for 1 person so you will have to catch a lot of them and probably fish every day to feed your family. They are easier to catch but of course much more effort and commitment. SO, 20 fishermen line up on the shore every day to go fishing. Where do the majority go? They go West. They go West because one big fish will feed their whole family for a month. They just need to land that one big fish……
I go East.
I consider myself a niche market expert. Most business owners want everyone and everything. They ignore small markets because it just does not generate enough in sales or income they sale. Bullshit. If you know of a niche market, that lets say is rather small in the business world. Maybe the entire US market for that niche does 4 million dollars. Now bear with me, that may sound like a lot of money but in market size it is a pimple. 50 states and for simplicity sake lets divide it equally. Thats $80,000 in each state spent on that niche. What that means is that if you set up a brick and mortar store and captured 100% of the sales in your state your business would have sales of $80,000 a year. If eating cardboard and living in your store is your thing that works. So what you have is a market so small that no one will specialize in it and it will only be touched on the fringes.
“What about the internet” screams the person not locked in a closet for the last 10 years. Sure with the internet you can reach anywhere but it is still considered a small market to most. Market penetration on 10% is considered a dream by any company and that still only has your business at $400,00 a year. Only……..How many $400,000 a year businesses do you need before you are killing it? What if you had just one and it was all done by just you?
What if you looked at that 4 million dollar market with different eyes and said instead of trying to compete with everyone for the 4 billion dollar market I will just go own 80% of that 4 million dollar market? Seriously….why not?
No one else will put in the effort to own that market in most cases. There will be people picking at it here and there but no one will go after it because they do not see the value. I do. If you own a market then it is yours.
So this is my clumsy way of saying while all the other guys are chasing the big fish I will GLADLY be the guy scooping up all the little ones every single day of the week. I’ll also be the guy that can say he owns a market. or two…..or three….or…..
I saved this image a long time ago because I thought it was fitting for entrepreneurs to see. Today this is what I am reading. Plan A is no longer an option so we pivot to Plan B. This is the life of the boss. Changes do not stop the plan, they just change it. If you want to be the boss you have to be able to adjust and pivot when things do not go as planned. If you are a smart boss you have B, C, and D already to go based on what you have learned from Plan A.
So here we go, onto Plan B. Truth is that Plan B is not more difficult, it is just not as much fun.
When you start something be ready to change. Be ready to accept that your original idea may not be the right one. Be open to input. Be open to the fact that you may be wrong.
Let me give you a couple examples.
Red Bull was devised by the son of a Coca Cola Executive. He came up with the idea for a high energy drink that he could market to truckers. He pitched the idea to his father as a product Coca Cola could take on. His father said he would personally bankroll the idea so long as his son did it himself and made a few changes. One change was not limiting the market to just truckers. I think everyone has seen the success in that change.
Wedding Day Sparklers, one of my companies, was envisioned as a company that we would set up booths at wedding shows and then sell sparklers to brides. We may even have to travel to other shows around the country to do it. After doing two wedding shows we came to the conclusion that we were going to lose a lot of money. Wedding show booths start at around $1000 for the bigger shows. We spent $1200 on each show for booths. Ordered $5000 in inventory. Bought supplies and decorations. Ordered business cards and set up a website. Now we are a good $10,000 into this.
Total sales after doing two wedding shows…….$140.00.
Doing the math you would see this was a loser. So what to do? You can:
A- Fold up shop and cut your losses
B- Keep doing shows to get more data
We chose C. We stopped doing the shows and started advertising on Google Ad-words with a small amount of money to see if we had a market or not. We learned how to use google ad words. There are a great many websites and videos to do that. So we set it up and launched the website with online sales. With a small effort our first week generated $1250.00 in sales. We ran for 30 days without making any changes and then tweaked the content and price we were paying for advertising. The following week we did $2500 in sales. So we spent the next year gathering data (Google makes it easy to do) and making tweaks and adjustments.
In 2012 Wedding Day Sparklers sold almost $400,000.00 in sparklers. We did so by being able to pivot, adjust, and most of all learn our market.
None of that happens without a plan B, C and even D.
Adjust, adapt, overcome.
Me and my ilk are venturing into new territory and have been for quite a while now.
My latest obsession is my company Otterology. Otterology is a Software based in the cloud that takes .csv reports and/or links with API’s to generate inventory management and enterprise reporting for small and mid sized businesses to make sense of their sales using SQUARE, Paypal, or any other mobile payment technology.
It’s jeanyus, it really is. What we have developed allows ANY business to use an ipad, or another tablet if you are not inclined to use the superior Apple product, and make that Ipad or tablet a full Point of Sale system with complete inventory, reporting and even bookkeeping control. How cool is that?
There are 2.5 million users of SQUARE and 8 million businesses using paypal. What we have created makes their lives easier and much less work. It gives them accountability and access to the data they need.
So what is the problem you say to yourself as you read this. The problem is we created this for us to use. We used it for 2 years. Ran almost 2 million dollars worth of business through it. Over 70,000 transactions itemized, sorted, and made into useful information and then realized……hey…..other people could use this.
So here we are. Launching a disruptive software system for next to nothing in the marketplace. We should be wearing party hats and renting a bulldozer to move all the cash we are making. Wrong. We have to get the product out to the masses. We have to hire people to keep tweaking and adjusting the software. We have to keep working on it and all of that costs money. A lot of money.
I personally have invested more into this than most people pay for a home. That taps me out so now I am selling shares of the company to Angel investors. “Angels” do not have wings despite their name and only one has been playing a harp so far.
They are people, or groups of people, that invest in early stage companies for a piece of the pie. This sounds great but they are very selective and cautious in doing so. They like to see traction and sales coming in. They like teams that are ready to go.
So far so good.
So here I am meeting with people and trying to tell them what we have and how great we are. How we are ready to take on the world. While that is all true it feels like a sales pitch and truth be told it is. We have a great product. Its tested and it works. We have people using it. We have “traction”.
What we don’t have is enough money to keep it rolling for the next year. Hence the Angels. So now I am spending my time trying to get people on board with this spectacular product in a market that will expand by 20 times in the next 4 years. It should be easy but I am here to tell you it is not.
Angels listen to tons of pitches. Everyone talking to them has the next great thing or they wouldn’t be doing it. Angels have to figure out where they want to invest to maximize their returns. Everyone is pitching and talking about how great they are. Honestly most of the things I have heard sounded dumb to me. Maybe that is why I am not an Angel…..yet.
It is not like the show Shark Tank.
So now I have learned things like “pre-money valuation” and “series A” and “Pro forma” so that I can talk confidently about the process. This is hard for me. I have “bootstrapped” (Built with your own money) Every single one of my businesses in the past. I have built them myself and with diligent control of income and outgoing. I have been obsessive about cutting costs, increasing profits, and maximizing sales. I, in essence, have been in control of all the money and have not had to depend on others to keep things rolling for the most part. I have taken loans to get them up but that seems different than looking for investors.
I’m sure it will all seem different once it happens but for right now I am waiting for others before I can expand and grow. Not something I am used to or very good at. It will happen, but the waiting is killing me.
Someone sent me a link to this image. I liked it, BUT I think it is incorrect.
It states being creative or not being creative as the examples. I know a lot of creative people and just because they are creative does not mean they are willing to do something.
It should probably say Entrepreneur and not. Those with an entrepreneur mind-set know the problem I am talking about. We look at the world through the tinted glasses of problem solving and opportunity.
To give you an example I can not help but start thinking, when I see a building….ANY BUILDING, for lease what would make a good business for that building. Looking at the location and design I start thinking of what would work well there. It is a constant battle to stay focused because there are never-ending problems needing to be solved and that is what gets us off.
The common misconception about entrepreneurs is that we are money motivated. That is true, but only to a point. Money is not the end-all be-all for us. If it was we could focus better. Its the challenge of solving a problem. For me it is the worst when I see someone doing something poorly AND STILL succeeding at it. I feel compelled to do it better just to make the person doing it wrong fail so that they stop doing it wrong. The money will come naturally if you do it great and keep your business head on, but to do it right and make money…..thats the really kicker.
I have started (not completed yet mind you) 3 businesses because of the fact that the product I wanted did not exist. I wanted it. Others wanted it. So why not create it? Do it right and you will make money at it. That is a given. It’s the doing it right part that seems to get in the way all to often. To do it right can take time,money, and a lot of patience.
My daughter asked me yesterday if I would help advise her and her best friend when they decided to start a business together. She gave me a couple of examples of what they were thinking about. The advice I gave her is the same I would give anyone. You need to identify a problem and then come up with a solution. That problem can be as simple as “There is not a liquor store in this area” to “I want to figure out how to make an artificial kidney that will work inside a body”. Both are problems. Every business idea is solving a problem. So identify the problem you are solving AND THEN go about creating your business. Do it right. Count your pennies. Execute and it will happen.
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Last time I wrote anything I talked about being different. That point has been driven home more and more over the last week.
I’m mot saying you should try to be different or that it is even helpful. I guess what I am saying is that you either have to be or why bother. If you are not different in the way you think then you will never come up with anything new or different. You might as well just buy into a Fuddruckers franchise.
I started in sales when I was around 25 years old. I’ve sold advertising, Cars, Swimming Pools, Hot tubs, and anything else I could get paid to sell. My employers spent tens of thousands of dollars training me to learn how to sell. They taught me how to talk. How to dress. Even what to talk about with customers. When they had all spent WELL into five figures they had a very mediocre salesman who hated his job, but made enough money to pay the bills and frankly was not trained how to do anything else.
So there I was for years selling stuff. Clean shaven. Hair cut (yes i once had hair), Dressed up, tie straight, even cologne. I was doing and saying what I was taught to do.
I was working at the MN State Fair. I was working for a local retailer selling hot tubs. Up to that point the State Fair seemed like a sort of punishment. You are outside in the dog days of summer. It is hot, dusty and you are surrounded by people with little regard for their bodies and their health which is evident by the way they shove food into their mouth as though it may run away. The outdoor tent we set up at was next to the famous pork chop booth which meant that the grilling of pork chops was non-stop and the grease filled smoke would coat the hot tubs in grease that then attracted the dust all day. That means that I got to grab a bottle of windex every hour and clean 20 hot tubs while being asked questions and sweating my balls off and drinking $3.00 a bottle water.
So there I am wiping down the hot tubs. I’m not very happy and I’m dressed like an idiot. Suddenly behind me I hear the same damn question I hear 500 times a day. “So how much is this?”. In my unsettled state I turned around and said “Does it really fucking matter if you can’t afford it anyways?”. The man who just asked me that question looked at me and said ” I just built a $400,000 house on a lake and own my own dental practice. Do you think I can afford it?”. Without missing a beat I said “Well where the fuck have you been all day?”.
An hour later him and his wife had spent $15,000 on a hot tub and gazebo and I had the scariest realization I have ever had in my life.
Everything I have been told I needed to do to be a great salesman was wrong.
It still took years to accept and just let it happen but finally I made a choice that I was not going to pretend I cared about things I did not. I was not going to shave. I would dress the way I want and say what I was thinking.
I have spent the last 10 years of my life being the exception to the rule in SO many ways. When I meet with people I say things I am sure they have never heard. I had a Skype meeting 2 moths ago the day of my vasectomy where I felt the need to point the camera at my crotch to show the giant ice bag on it. Keep in mind I had not met 3 of the people in this group ever.
So I guess the “lesson” here is don’t try and be something you are not. People can smell a fake even if they do not realize it.