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It’s not always easy figuring out what kind of business to start up, especially if you hear all the doom and gloom stats about how many businesses fail shortly after hanging the “open for business” sign. For some perspective on how to choose a business that has legs, we spent an hour with Norm Brodsky on StartupNation Radio. He’s a columnist for Inc. Magazine, and founder of several multi-million-dollar ventures that are worth bragging about.
Norm offers his wisdom on 3 criteria you should consider before starting a business.
1. The business concept needs to be well established
According to Norm, the first criterion for starting a business is that the business concept needs to be well established. “At least 100 years old,” says Norm. “You don’t want to spend a lot of money educating people about how to use your business. It’s to your advantage that people know that the business concept exists, how to use it, and where to find it.”
Example – Norm and his wife were in Paris one day and walked by an area that sold nothing but cashmere sweaters. She said that the area would be a terrible place to open up a new shop (selling cashmere), but he thought that it would be perfect. As Norm sees it, if someone is looking to buy a cashmere sweater, that’s the block they’d go to. He wants to be located where everyone will already be looking for that kind of product or service.
2. Industry standard needs to be antiquated
The second criterion is that the industry standard needs to be antiquated. By that Norm means that the business concept exists and is in practice, but improvements can be made using technology and improving service.
Example – In the record storage business, prior to Norm’s venture into the industry, the standard was for things just to be packed up and moved. But Norm made some improvements. He used basic technology to provide customers a receipt for their items on the spot. This customer service feature, which only required some basic modern technology gave him an advantage over his competitors who weren’t yet providing this simple convenience. That put Norm’s CitiStorage at the forefront—creating a new industry standard.
3. Finding a niche to fill within the industry itself
The third criterion is finding a niche to fill within the industry itself. Just by really digging in and understanding an industry, you can often uncover certain angles that are not being covered. Find a new twist on service, a new twist on marketing, a new mix of products or customer-friendly policies. Somewhere, there’s an angle—and often times old-guard companies that have been in the business for a long time get lazy and used to “business as usual.” That’s your opportunity if you’re looking at starting a business.
Example – Everybody loves Starbucks for their coffee. They’re a progressive company that serves coffee in more ways than you can count. They provide an excellent product, and great service. They have almost every angle covered, except for 24 hour service at most locations. College kids (and the writing staff from StartupNation), for example, love to “pull all nighters” at their local coffee shop. Some of Starbucks’ competitors have taken advantage of this “niche within the business.”
Whatever your skills, whatever your ambition, just remember that the best businesses to choose are sometimes simple variations of businesses that have been around a long time. Norm’s tips, we think, are spot on—reinventing the wheel is for high-risk ventures and big budgets. If you want a less risky path when starting a business, consider simply providing a much better wheel and get your business startup rolling!