Be Good for an Entrepreneur

On another level, the phrase “dog grooming London” had only 81 searches in April 2006, according to the Overture search, so the U.S. affection for this service clearly hasn’t reached UK shores yet. Half of the searches were for dog grooming courses, so any thoughts of opening a new dog grooming shop in London would need some more clear-cut evidence of demand, given the preliminary findings of this rough and ready search. By analysing the search terms for your idea with these tools, you can assess potential market demand, get ideas for appropriate names for your good or service, and use the findings as one reference point in your analysis.

If the intention is to set up a local service, then familiarity with the local area will be as powerful a resource as any Internet search method. The lesson here is also that ‘entrepreneurs’ don’t necessarily have to be inventors, merely people who can spot opportunities to do something better or more cheaply than others, or provide a local version of a business run elsewhere. Having decided upon the good or service to be provided, a wantrapreneur must research the opportunity to ensure familiarity with some of the key issues. You can search for sample plans from similar ideas on www.bplans.co/uk or look at Business Opportunity Profiles from Cobweb at www.scavenger.net to help you understand your specific business. Savvy entrepreneurs will back up online research with face-to-face conversations with potential customers and other business owners. Finally, an extensive search of Google is recommended to ensure that your market research is as up to date as possible.

 

The ‘Bricks to Clicks’ model

You can also do an analysis of incumbents in the various markets of your potential interest to see if there are inefficiencies or unnecessary costs in the process of getting the goods to the consumers. It is pretty obvious that the Internet has enabled a more efficient means to showcase product wares to a much larger audience (and also a more geographically dispersed one). It is also clear that more traditional retailers with high street stores carry a much higher cost burden. Providing you can configure your business accordingly, there are opportunities here to undercut the traditional behemoths. An online store can take the place of the high street store in many instances and offer the same good or service at a much more competitive price level. Glasses Direct (www.glassesdirect.com) is one such example, where the young British entrepreneur James Murray Wells decided to set up his own online optician as a direct response to the prohibitive cost he believed he paid for glasses while he was a student. Without the overheads of the likes of Specsavers, Glasses Direct is able to undercut the standard retail prices by significant margins while still being very profitable.

The growing rental market for DVDs, spearheaded by the likes of Amazon and ScreenSelect, is similarly targeting the long-standing high street players such as Blockbuster.

They both recognise that ultimately, the consumer just wants to be able to choose a DVD and play it, and this can be facilitated without a costly store infrastructure. If you think something is bad value and you do some research regarding the industry structure, competition, distribution, product components and so on, you may stumble across a brand new idea for improving the overall offering by replacing the most costly elements, such as the overhead on a high street store. Finally, a popular way to dip your toes into entrepreneurship is to set up an eBay shop. eBay even has a facility called ‘eBay pulse’ http://pulse.ebay.co.uk/ which can help you to assess the potential demand for any product by enabling you to see what the hot products selling on eBay are. No prizes for guessing that PlayStations, DVDs and iPods are amongst the most popular.

 

The branch out strategy

While setting up in business always contains elements of risk, there are ways to reduce the levels of inherent risk. The most obvious one is to branch out into an area in which you have previously worked. For example, a Manchester-based nursery school teacher deciding to open her own nursery in Cheshire is a considerably less risky proposition than if she moved overseas to France to open up a boulangerie. Indeed, branching out is how many people start up. After spending a number of years in a particular industry or firm as an apprentice, they decide to go it alone. This is undoubtedly a sensible strategy, particularly as you are a subject matter expert who understands the market and you may have an existing base of clients who will follow you to your new company.

 

The acquisition

Another option to consider is acquiring an existing business. The key here is to have a clear idea of the sorts of industries and geographic locations in which you want to work before you start. Sites such as those run by BusinessesforSale.com (http://uk.businessesforsale.com ) have a database of 1,000s of businesses that are for sale and that may be of interest. While not a low-cost method of going it alone, there are advantages in that the business will already be trading and there will be a record of how it is performing and whether there is room for improvement. One of the critical elements in this option is setting a value for the business. Valuations for a particular business can vary wildly and there is no generally agreed method for valuing a business objectively, although there are several standard calculations which are often used in conjunction. The key challenges are assessing the current cash-generation capability of the business, and realistically assessing its future capabilities. In short, acquiring a business is best left to the more sophisticated entrepreneur who has a team in situ looking for undervalued businesses with strong growth potential.

 

The franchise

According to the British Franchise Association (www.thebfa.org ), “Business format franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.”

Franchising is an increasingly popular route to going it alone. As with the acquisition option, franchising requires that you have capital to invest and are looking to introduce an existing ‘winning formula’ into your own area. There are a number of franchise websites and magazines, such as whichfranchise.com (www.whichfranchise.com) which contain further details regarding the benefits of franchising. Again, once you have decided that franchising is something you want to pursue, you’ll need to decide in what industry you want to franchise. Past personal experiences and franchise coverage in your area should play a role in the decision.

 

The add on

By observing successful products and growing trends it is also possible to piggyback on the successes of others at very low cost. As the saying goes, “success breeds success”. For example, when I searched for “iPod” on eBay (May 2006) I found in excess of 50,000 ‘solutions’. While the iPod has been a phenomenon in its own right, it has also resulted in major successes for the likes of Belkin, which creates cables, cases and chargers for the iPod, Bose, which produces speakers, and Griffin Technology, which produces iPod accessories such as the iTrip, an FM transmitter. In other words, one new product can create a whole raft of opportunities in ancillary products and services. Is there a new product that you can exploit with a complementary device that makes the whole experience of using the core product a better one?

Although the above examples may relate to larger companies, there are also thousands of smaller eBay-based companies benefiting from identifying the success of one item and offering all optional complements to enhance the user’s experience. Indeed, even eBay itself has been the target for one such company, iSold It (www.isolditonline.co.uk ). iSold It is a nationwide chain of eBay drop-off stores that makes it easy for anyone to sell their wares on eBay. The lesson is simple. Once something becomes successful, it is likely to spawn a myriad of resulting opportunities. The key is to identify them before anyone else does.