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Start ups |
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Real-World Perspective: It is
important to know - really know the difference between the two types of
start ups. They come in two forms. An Idea Start Up and an
Opportunity Start Up. The core distinction focuses on understanding if something is a business idea or a business opportunity. (see blue ocean strategy) An opportunity is an idea that has these three components (@ wbco 08): 1. You can charge for it! Really charge for it! Enough to fund organic growth! Enough so out of each gross margin dollar you can keep 25% and put it back into the business, like Miracle Grow. If you can not positively prove there is investible margin, then you are not charging. Zero or less than Zero multiplied by any number is still zero or less than zero. Pragmatic people do not pay for or invest in negative margin volume. 2. You can scale it! Is the idea/product/service extensible--- can it be extended, scaled, duplicated - profitably? 3. You can execute! Execution means this, understanding, very clearly what has to happen in order for your idea to become a profitable reality, and understanding weather you have control of such things... if one key thing is over two steps away, if two things have to line up that are dependent on luck... then you are out of luck, you own an idea, not an opportunity. Real World Example #1: I had an energetic young man, smart as a whip, he developed a food product that took off in Whole Foods, doors started opening, 2 and 3 were Going Down! Problem, no margin to grow with... and in order to get margin, three things had to line up that he had no control over... he became a busy fool, very busy fool. This guy does not understand the three legs of the stool... his stool is laying on its side, missing one leg, the margin leg. Sure, he may get lucky, and his brand may be bought by a larger player, but you wonder about how much luck one can have when one has zero to very little product gross margins. Real World Example #2: Another dude, a successful past software start up and sell guy, now eating his nest egg, slowly, is working on an idea... he keeps pushing for the three elements... he understand the risk of luck... He pays for a seat on a TAB Board and he honestly reports: "Guys, I Got nuthin'..., but I want to run this by you...." He sees how he can charge, he clearly connects scalability, the problem is execution... he is relying on being lucky... he is hoping and working to position himself at the intersection of opportunity and preparation, he knows this will take some luck... he still refers to his business model as an Idea. Do we or do we not fit?: Start ups are not our core business. While we have a special glow in our heart for start ups, and sometimes we allow aseat on a TAB Board to be occupied by a start up individual. We will recommend you go see the boys over at the CED, or Score, they have a bunch of energy for this sort of stuff, or call Merrill Mason or his X, Fred Hutchinson. What position we play if we fit: We will listen and share a beer, but will not engage, this is outside of our core focus. What heavy lifting do we do for you in this category? 12 oz. Other reference Notes: . |
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| We specialize in discrete, real world, measurable, optimization, using methods and processes practiced and proven by thousands of companies coast to coast, not just in our backyard - The Triangle |
| Contact: walt@smart-state.com 919 345 6079 |
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copyright walt brown and company smart state 2010 |