the goose

I haven’t really been on the Tuesday Push bandwagon partly because this is mostly a blog for my own thoughts/clarifications than one that actual real people read.  On the other hand, I’ve met the RevaHealth.com guys down at BizCamp and will be giving a talk at the upcoming BizCamp Belfast gig with Caelen.

Disclaimers out of the way, Reva’s blog has been an excellent resource for me over the last couple of months.  Although the guys have a background in the healthcare industry they haven’t limited content to that sector and there are excellent resources for anyone looking to develop a web based business.  Assuming you are hale and hearty upon reading this I’ll recommend you check it out.  If you aren’t, there are thousands of health care professionals ranked on the main site.

If you want to avoid competing on price – come up with a USP (unique selling point). This is the mantra of modern marketeers. You need to have some point of difference that marks you out from your competitors. It can of course be tricky to come up with something that makes you unique. While most will claim “better service” or “cheaper prices” as a USP – really these don’t cut the mustard. The acid test for your USP is to ask yourself this question. “Could my competition reasonably make the same claim as I could?”. You’ll find that even seasoned professionals start to splutter if you put that question to them. Few really have hammered out a unique proposition.

Herein lies a common mistake for newbie business owners. They chose a proposition which is so unique – it does not yet have a market. This is where a second acid test needs to be applied. Let us suppose that you have recently secured a 10 year patent on “rose-petal perfumed nappies”. Fantastic. Surely everyone would prefer to smell rose petals compared to the alternative. Patent in pocket – you can be assured your competitors cannot make the same claim. The second question to test your idea by is “Is your product being sought out by people with money to spend?”. Now given you received your patent – it is safe to say that no one else has been looking for this. They will when they know it exists. In that case though – all you have is an idea. A good idea – but an idea none the less. I’ve written before on what an idea is worth. If people are not seeking out your service you don’t have what the experts call a ‘route to market’. No one is googling for it. This means you have to educate your market. This increases the cost and reduces the value of your idea.

So where is the sweet spot? To be in a category that people are aware of – without being completely off the radar. People go searching for plumbers online – but don’t often go looking for nappies there. Come up with an innovative twist (something with value that your competitor cannot lay claim to) in a category which people have heard of before.

What is an idea worth? Kicking back in the pub and swapping get rich quicky ideas is a favourite pastime of taxi-drivers and software engineers everywhere. Flexible working conditions and tales of vast dot com fortunes respectively stimulate business ideas into life. It is worth considering what an idea is really worth however. Its fun coming up with ideas – which means there is a ready supply. There are definitely more business ideas than there are businesses so why do their midwives guard them so jealously? There is a perception that if someone finds out the ’secret’ they could run off and instantly become financially independent. Of course there are famous examples of ‘ideas’ which did turn out to be worth millions. Xerox Parc, a Palo Alto based R+D facility that came up with the computer mouse gave it away to Steve Jobs while he was on a field trip there. More often than not however – ideas aren’t worth the paper on which they are written.

We are obsessed with coming up with an idea so good we wouldn’t have to actually work to make it happen. Of course- it does take work. Shed loads – to get even the simplest idea off the ground and into commercial reality. Only a tiny fraction of the population really put the work in that is required.

Luckily however -we don’t have to guess to hard as to what an idea is really worth. Licensing a patented idea is by far and away the purest valuation of what an idea is worth. Typically – license fees on a patent are in the 1% region.

I was fumbling around my appartment bedroom, swearing blindly, searching for a bleating phone alarm. In my stupor I had forgotten that I had agreed to spend the morning with some friends of mine. We had previously gotten together – chatting about life money and the day job. It wasn’t long before I was chipping in with my plan for financial independence by creating online cashflows. We had agreed to meet up and see if we could brain storm some ideas. For some time now I have been trying to put more of a system around evaluating ideas as they came along. That morning was the first time I really had a chance to apply some structure to what normally becomes a bit of a bun fight in terms of random get-rich-quick schemes being bandied around.

The morning meeting was a good idea. It meant we all had a clear head and the temptation to grease the creative juices with a pint of the black stuff wasn’t so strong. Our merry little group was made up of a group of technologists. We are or were all working in the telco sector – building large and scary cogs that whirled away deep in the bowels of your local multinational telephone company.

We were Iitching to pitch our ideas – but before we got started we decided to define out ‘investment criteria’. This was something I had picked up from the ICES Property Discovery Program. The program is an excellent introduction to what it takes to find properties that can create a cashflow. A key strategy used by the program is to first establish what your objective in terms of cashflow is. Our group decided that we were looking for opportunities that would generate €500 worth of monthly revenue each in exchange for one days work for the first 6 months. After that we would expect the work to lessen and the income to increase. The ICES program also promotes the idea – that in order to find one good property – you need to look at about a hundred deals. Roughly 10 will be worth doing a serious due diligence on. 3 of those should be worth making an offer on – and finally out of those three – you’ll manage to close on one.

In order to help evaluate that many deals – we decided to come up with criteria we could rank each idea on. We rank each idea against our investment criteria on a scale on one to three. The investment criteria we came up with were ..

1. We can describe the major benefit in one sentence.
2. The service can be subscription based
3. Low cost of sales (in terms of time)
4. The service would cost €25 monthly
5. A minimum of 100 clients
6. Low support costs (< 1 day a month)
7. Is there an existing need, not being met?
8. It is in a niche?
9. Do we have a domain expert?
10. Low prototyping cost

If we could come up with ideas that would tick all of these boxes – then we would go for it. To satisfy our financial objective – we would need a monthly €2,000.

So what were the ideas? Well – I would tell you if it were up to me – but for now we are keeping them under wraps. Its enough to say that they ranged from accountancy solutions to services for interiour designers to horse racing. A broad church. Of course – the sector or the particular application we are seeking to build is not so important. In a previous life I worked at Broadcom, a telco r+d outfit. We were coming up with ideas left right and center there – but nothing ever saw the light of (least of all its overfed, hungover employees). For now I’ll leave you to squint at the whiteboard we used. If you can make head nor tail of – its yours for free gratis.

We weren’t too invested in who came up with what idea. It was somewhat freeing to just dump all the ideas down and run through them at a high level. It became obvious pretty quickly which were the dogs and which were the racehorses. We did end up changing our criteria a little as we went along. Things that seemed important at the start weren’t so important by the end. I expect this type of tweaking will keep on as we evaluate more.

The next step is for us to total up the scores as see which one comes out along the top. We have a small business plan pitch by Guy Kawasaki. The winning ideas will be written up using this template so we can evaluate it a little more. For now we’re mulling the session – and we’re meeting up next week to pick some winners.