How to start a business that works

The most important thing I learned in business school is this:

Most businesses fail. 

Not because the product wasn't any good (in many cases the product is amazing).  They failed because not enough people knew about it.  In other words, the marketing failed.

In fact, 6 months with Seth Godin has made me realize that not only is marketing important, it's pretty much everything.  Therefore, don't do what most entrepreneurs do:  come up with a brilliant idea for a product, fall in love with it, and then try to market it.

If you want a high likelihood for success, start by picking a business or product that lends itself to great marketing.  But how? 

Well, luckily I've created a set of 4 marketing questions that can help you.

So, if you're serious about starting a new business or developing a new product for an existing business, here's what I want you to do:

1. First, read the 4 questions and their explanations below (and it wouldn't hurt to read the books I reference either)

2. Come up with a list of 50 business ideas (sound like alot?  here are 999 to get you started).

3. Pick the 3 businesses that best answer the 4 questions below.

4. Of those, pick the one you're most passionate about.  

5. Execute, execute, execute.

Ready? Go!

Does your business lend itself to virality?

Everybody wants their product or brand to go viral.  Who wouldn't want exposure that spreads like wildfire?  But most companies' strategy is to build a product first and then try to come up with a campaign that will make that product go viral.  This couldn't be more backwards.

Of all the products and campaigns in the world, only a small number are actually successful in going viral.  And since virality is priceless, it could be worth organizing your entire business around.

If you want your product to go viral you've got to first think about what types of things make an idea spread in your target market, and then pick a product/business that has those qualities.

(Online greeting cards are a perfect example of products that are designed to go viral --but don't pick them...there are too many already.)

I would explain the specific qualities that help make a product go viral here, but I can't do a better job than Seth does for FREE (Unleashing the IdeaVirus). 


Does your service create an emergency?

You make money when sales are made.  But in order to persuade someone to buy anything, first, you have to get their attention.  Any salesperson knows that this is often the hardest part. 

Therefore, wouldn't it help to sell a product that creates an emergency for the person you're selling to?  Something that is likely to demand their attention immediately?

Get Satisfaction's service creates an emergency right away.  They host a centralized forum where consumers can discuss complaints about companies and their products in order to receive "people-powered customer service".  Often, heated debates rage on their site about the company's product.  The only way for that company to take full control of those conversations is to buy Get Satisfaction's service.

When Get Satisfaction makes a sales call, they don't have to fight as hard for the customer's attention as other companies do.  Get Satisfaction doesn't have to convince companies there's going to be a fire, there's already one raging that needs to be put out!

The key to creating an emergency is leveraging scarcity.  Why would anybody buy your product now, if they could just put it off for another 6 months, without any consequences?

Pick products that lend themselves to expirations, deadlines, and limited availability, that allow you to create a sense of urgency for the buyer.


Is game theory on your side?

Have you ever looked at a company like Google or Facebook, businesses that totally dominate their markets, and think "they must know something that I don't."  They might...it's called game theory.

You may have been bored to death in school learning about a hypothetical scenario called Prisoner's Dilemma, wondering what the heck it had to do with anything.  Well it turns out it's more important than you might have ever imagined. 

There are a ton of insights that result from game theory that aren't necessarily intuitive, but are wildly important in business.  Game theory is the essence of strategy and it could help your business scale exponentially by allowing you to outhink your competition.

For example, there are many products whose benefit to the customer increase as more people use them.  So from a game theory perspective, existing customers have an incentive to get their friends to adopt the service too. 

When businesses that operate with this simple principle grow, they tend to grow at an explosive pace.  And who wouldn't want that for their own business? (Skype is an example of a service like this).

Learn game theory, appreciate it, and then pick a business where the game theory is in your favor.  (There are a bunch of good business books on game theory.  Google it.)


Is your story remarkable?

Your product might be great, but is your story?  Remember, there are tons of great products that no one talks about, and therefore no one knows about.

That's because what makes people talk is the story that a product tells (or the story you tell yourself when you buy a product).  Tom's Shoes didn't spread because their shoes are the best on the market.  They spread because of their "One for One" philosophy.  For every pair of shoes you purchase Tom's gives a pair of new shoes to a child in need.  And the best part of their story is that it's the exact same pair!

Here's a secret to having a good story.  Stand for something.  Pick a product associated with a movement of some sorts.  A movement that people can contribute to, feel apart of, and get passionate about.  Change the status quo.  People like to talk about change.

When choosing a business, try not to get so caught up with the features and benefits.  These are clearly important, but what is even more critical is choosing a product with an incredibly unique, authentic, and remarkable story.



And so I'm back to my original thesis...the most important part of building a business is picking a good one to begin with.  But the second most important part is simply to start.  You can't build a successful business if you don't begin the process.  So what are you waiting for?

 

Comments

[Business For Sale]

great informative article and post. Thankz.

[ultrayellowpages]

There are of course, many other good reasons for wanting to start your own business and, if it's for you, it can be the most exciting, satisfying and rewarding thing you have ever done.bill shor

bill shor

[Steve902]

Wow, nice post. Thanks for sharing this. Marketing is indeed so important, and these days to stay on top of that, you generally will need to employ social media marketing well. And everybody knows to use Facebook and Twitter these days, but how about online video? Putting a fun, concise video on YouTube, AdWido, and other video sites can help your small business get the exposure it needs to succeed (hopefully!).

[Al PIttampalli]

@Mic and @g - Thanks for your comment. Ethics is a funny thing, because it has very much to do with perspective.

My perspective is that almost all business transactions (although there are clearly many exceptions including ones that are illegal or forced) are profitable for both parties or else the transaction won't occur.

When you get locked out of your home late at night, and you have to call a 24 hour locksmith, you will pay handsomely. Many people call this unethical because locksmiths are preying on people that are in a vulnerable situation.

But the reality is if the locksmith wasn't there, that guy wouldn't have any place to sleep that night. Therefore whatever he charges is ethical, because if it wasn't, nobody would buy the service...the transaction won't occur.

[ultrayellowpages]

To start an internet business that works you must treat it as a business, not a hobby. Start slow at first. Be patient. After all, you've got all kinds of time. Time is on your side because after you get your business up and running, you can spend about two hours per day running it instead the usual eight hours per day on a regular job. And it's a lot more fun!

Saratoga springs

[Jill Anderson]

Congrats Al. I'm so excited for all of you. Best to you always.

[ultrayellowpages]

When you start a new business, you need money ­to get it off the ground. You need the money to rent or purchase space for the business, furniture and equipment, supplies, professional fees such as legal and accounting, as well as continuing the research and development of your product or service. You may also need money to pay employees. There are several places where you can get the money that a new business needs, but first you need to think about which type of funding will work best for your company.

bill shor

[Mic Edwards]

Get Satisfaction's business model is ugly.

If that's what you choose to emulate, I think you'll need Seth to add an ethics component to your 'course'.

[g]

>Does your service create an emergency?

That's crass and manipulative bollocks of the most exploitative kind.

Sure, it may work, but it's no way to operate decently.

[saurabh thakur]

it's a wow post. truly. marketing, marketing, marketing.

[Harrison Schmidt]

Great post.

"In fact, 6 months with Seth Godin has made me realize that not only is marketing important, it's pretty much everything."

Right on, I wish they would begin marketing. Yea, you need a good product too, but good products really aren't that hard to create, they just take time. It's a lot harder to figure out how to spend less money and resources on advertising your product than you make back.

"For example, there are many products whose benefit to the customer increase as more people use them. So from a game theory perspective, existing customers have an incentive to get their friends to adopt the service too."

A good way to give your customers an incentive to get their friends to adopt your service or product too, is to have a really great affiate program, and especially with digital products this is really easy to do(there are lots of great affiliate management programs and scripts).

"Seth is one of the top marketers in the world. If you had done an MBA with one of the top designers in the world you may leave believing that design is pretty much everything." - Amitabh

Uh, no. If you go learn design from a master designer and they don't show you how to sell your skill, you'll come away still not being able to make any money. No matter what your product or skill, if you aren't good at marketing and can't get your product or skill in front of people, you're not going to sell any or get hired.

Build a remarkable product or learning to do something remarkable really well, market it, make money. That's all it takes.

[Matthew Pearson]

Fantastic post!

I would say that the focus has to be on fulfilling a need during development rather than creating a product. Successful marketing is for most of us hugely important, but there are some rare business plans where companies like Google take over the world without marketing themselves (although they became so rich by allowing us to market through their channel, so perhaps marketing really is the be all and end all of business).

[Al Pittampalli]

You make a great point, Dave...thanks.

[Amitabh]

Great read and good points. How about a few counterpoints:

1. Start something you love to do. Nobody knows what will become viral. Google certainly didn't start off based on its 'virality'. It started off as a thesis.

2. It is good to learn Game Theory. The application in real life is probably a little more difficult. Shoot for a great experience. Success will follow ... whether you know anything about game theory or not. I would recommend peop-le also read books that offer counter point to Game Theory. Taleb's Fooled By Randomness comes to mind.

I believe most businesses fail because of
1) Poor product experience
2) Lack of perseverence.

Ultimately business is all about trying out different ideas. An MBA is more about common sense (and that's where SAMBA will certainly help.)

Congratulations on your graduation. Here's wishing you all the success in life that you have dreamt of.

[dave]

First off, I wish I could go back in time and have the experience that you all had. Congratulations.

Secondly, be careful "6 months with Seth Godin has made me realize that not only is marketing important, it's pretty much everything."

Seth is one of the top marketers in the world. If you had done an MBA with one of the top designers in the world you may leave believing that design is pretty much everything.

When reflecting on the last six months keep that in mind and good luck.

[Ochuko]

Two things stuck to my brain from your lessons:

1. Stand for something and use this to tell your winning story

2. Put your customers on the hot seat ('force' them to make quick purchase decisions)

Thanks for sharing this. Congrats on your graduation :-)

[Wesley Verhoeve]

thanks for this, I'm reading a bunch of these and trying to apply them to my own business now :)

[Al Pittampalli]

VJ, thanks for your comment. I highly recommend Unleashing the Ideavirus and Purple Cow, both by Seth Godin to understand virality and creating a remarkable story. I can also recommend reading Prisoner's Dilemma by William Poundstone to learn about game theory. Although the book is very academic it will give you a real appreciation of the power of game theory.

[Digvijay "VJ" Singh]

Jon,

Thanks for this one. It's helping me get closer to feeling that there is way...

You mentioned some reference books earlier in your blog but I did not see any references put in...

Could you please pass on the reference information if possible?

[Jess Sloss]

Wonderful Post. The deeper I get into "ad agency" type work, the more hope and excitement I have for entrepreneurs.

Marketers are hired to try and reverse engineer a reason, a story and reason for attention. Yet it makes far more sense to figure those key points out first.

Thanks for a great read.