The Failed, Stolen Venture

Hearkening back to an earlier entry, I would like to restate the importance that, for a new business to succeed, EVERYTHING MUST GO RIGHT. The people who stole my business could have some small flaw in their plan that is upsetting the whole of the operation. Lack of advertising, a poor application, shoddy service are just some of the possible problems.

Exactly as I would have, this company (I can’t remember the name or find The Economist article) is giving the service out for free. Price cannot be the bane of its problems. Furthermore, the company doesn’t plan to charge for its service in the distant future. It will only make money via advertising revenue. This is an interesting approach that I think will greatly hinder profits in the long run. The company should understand the precedent that people readily pay for cellphone services and should charge money for their service to boost long run profits.

I am very interested to see how this company performs. Perhaps it will fail and I can start a similar company in a couple of years taking into account why the current company failed.

New Venture: Stolen

I didn’t envision starting this business for more than five years. I want to finish college, work for a company, and travel. After about five years I envisioned creating the company like so: I would raise money, commission engineers to build the technology, cut deals with cellphone companies, make the service free to start with, and, as the client base reached a sizable amount, begin charging for the service. Lastly, I would take the company public, have a huge IPO (hopefully) and sell the company. But… MY IDEA WAS STOLEN!!!

A couple months ago, I read in The Economist magazine that the technology associated with my idea had been INVENTED and incorporated into a business. The great thing though: the business was struggling mightily. It could not get that many customers, which may suggest that people are not as curious about who is in their proximity as I thought. More likely though, the business had not been perfectly operated.

A New Venture continued

…Third, I would have to cut deals with cellphone companies. Whats to say that the companies would want such a technology on their phones and why wouldn’t they create it themselves to stiff me out of the profits? I believe that the cellphone companies would see this product as a potential profit source so they would be inclined to work with me. As for the second part of this conundrum, I would have to patent my technology and hope that what I create is superior to what the cellphone companies create. It is a gamble to bank on the creation of a better piece of technology, yet not an unfathomable gamble. It still has a high probability of success.

Fourth, many cellphones are low grade. For a cellphone to handle an extensive profile, it must be a somewhat advanced model. From what I have seen, however, cellphone technology improves quickly and there are enough good cellphones on the market for a substantial customer base to form.

Lastly, how can this venture make money? People have come accustomed to paying for cellphone services. A precedent has been set: people pay for internet on their cellphones, text messages ect. Unlike the internet where people infrequently pay for services (ex. Facebook, Myspace), people seem to have few qualms with signing up for fee based services on cellular technology.

A New Venture

About 6 months ago I devised a new idea for a business. The idea was such: I would invent an application that would allow people to create profiles for themselves on their cellphones. The profiles, at the very least, would include pictures of the people and their names. A person could include in the profile additional information such as interests, job, favorite movies, age ect. Through the application, the person could see other people’s profiles (quite similar to Facebook) of people within their immediate proximity; about 50 feet. The application would serve two major purposes. First, it would satiate peoples curiosity. From my experience, everyone is always interested to know who is around them. Second, it could help people in bars or clubs find other people with similar interests and, therefore, unite these people and give them a talking point.

I identified a number of issues with this idea, but I came up with ways in which the issues would be neutralized. First, people may be concerned about privacy. To combat this, the profile can be as extensive and revealing as the customer desires. Furthermore, Facebook and Myspace success suggests that people are not concerned about privacy to the point that such an idea couldn’t become popular. Second, can such a technology be invented? I certainly cannot invent things for cellphones, but in my planning I took it for granted that talented engineers could invent whatever I asked of them. This may be flawed thinking, nevertheless, I have an inkling that this kind of technology is possible to create and I would definitely do more research to ensure it could be created before I invested any money…

The World is Flaky

You LEARN so many major and subtle things about life, the business world and yourself, from starting your own business… In this entry I will discuss how: The World is flaky.

A very small percentage of people in both one’s social and work lives are responsible about timeliness. Moreover, they rarely complete what they say they are going to complete 100% of the time. Other people’s inabilities to stay true to their word impacts your life, because in this day and age people are busy and it is imperative that one keep a schedule. One untimely person can ruin your whole schedule. You must take other peoples flakiness into account if you want to keep your life in order.

Discovering that people are flaky may not seem like that much of a revelation: everyone who is at least 12 years old has experienced some girl or guy friend standing them up for some activity. Everyone has come to know that people flake out in social settings quite frequently. What blows my mind, however, is that, in the business world, people still tend to be flaky. I had thought the word “professionalism” had come to exist because it encapsulates how professionals act. This is not the case. Professionalism, timeliness and sticking to one’s word 100% of the time, is still as spotty in the business world as it is in social settings. For example, every piece of hardware I ordered for the Mochi Stand failed to come in on time. To compensate, I told producers that I needed the items earlier than when I actually did need them: an almost childish adjustment, but flakiness is a fact of life.

Uncomfotable Situations Part 2

…The best way to deal with uncomfortable situations is to be completely knowledgeable about all facets of your business. Knowing that you can cover all the bases should any difficult questions or doubts arise will help you go into situations with confidence. This will allow you to put on a performance: you will articulate and persuade. Your chances of success are at their greatest.

Another issue with constantly throwing yourself into uncomfortable situations is burning yourself out mentally. Humans only have so much energy. The mental exertion that you inevitably spend adapting to each new situation wears on you. It doesn’t help that you often have poor nights sleeps and million other things to do besides just dealing with people when starting up your business. To minimize energy expenditure while still doing a good job, you must learn to be carefree. If you put too much emotional investment into each interaction or stress about about the interactions too often, you will burn out quickly.

Being carefree is highly difficult; a business is your sweat and toil. The key is to have perspective. Your business is not the be all and end all. If worst comes to worse you are employable (companies love entrepreneurs because starting a business indicates that you have initiative and passion). You can drift back into the working world should things go sour.

Uncomfotable Situations Part 1

In my fourth installment in a series of less than uplifting take away points about entrepreneurship I will discuss how:

(4) Entrepreneurship is UNCOMFORTABLE… You have a product in which you are passionate about, but soliciting others to enter into contracts with you, knowing that rejection is a likelihood, simply feels unpleasant. No one will feel as passionate about your product as you. When you talk to other potential business partners and you see their lack of excitement it takes the wind out of your sail. You can’t let that happen. You must sell them on your product. You must win them over so that you can garner their services.

An hour before asking someone for services (in a meeting type setting), you feel nervous. For example, I had to meet with the head of product placement for Metropolitan Market. I had to convince him that my pastry should be on the shelves of his grocery store. I knew I would have to exert a great deal of energy, come off as intelligent, and argue convincingly. The task in front of me seemed harrowing. Nevertheless, I summoned up the energy and convinced him to carry my product. After it was over, I felt extremely good. You feel a high high when you succeed. Most of the time, however, you don’t succeed, in which case you feel negatively.

The high highs and the low lows make starting a business an emotional roller coaster. If you can’t handle this, you should probably avoid starting a business…

Money Part 2

…I was wrong. I calculated that a piece of the pastry (Mochi) cost 14 cents to make, with just taking into account the ingredients that go into it. I figured I could sell a piece of Mochi for anywhere between $2 and $2.50. This appeared to be an ungodly profit margin. Hotels, who frequently retain 80% of revenue as profit, couldn’t come close to this margin. I did not even begin to consider that my costs could exceed revenues. Nevertheless, renting a kitchen for $15 an hour, paying $500 a month to rent a space for my stand, driving from home to kitchen to stand to home everyday (about $150 in gas per month) made the money add up.

I had banked on a high volume of sales because my location had some of the highest foot-traffic in Seattle. When sales were slow, variable costs greatly exceeded revenues. Sales ended up being slow too often. Total costs exceeded revenues on a monthly basis. I had to either shut down and take substantial losses or find an ulterior business model…

My assumption that costs would outweigh revenues was simply unfounded. Every budding entrepreneur should look at his cost structure meticulously. He should also come up with a reasonable projection for revenue, perhaps based on market research. Ensuring that the one’s financial resources will not deplete is critical. Ingredients must be bought and rent must be paid: the fact is, a business cannot function without money. While it is impossible to derive a completely dependable source of money, you must find sources that have a high probability of producing. This way, you are at least hedging your bets that your income will cover costs.

Money Part 1

In my third installment in a series of less than uplifting take away points about entrepreneurship I will discuss how:

(3) The MONEY MUST be THERE… First, you need startup capital to get the business off the ground. This is intuitive.

Second, your revenue must eventually exceed your variable costs. Many people with great ideas do not take this into account. Internet companies are the chief example of this: they are founded on great ideas, but ad expenditures frequently cannot cover the cost of paying employees. When I first tallied the costs and revenues of my business before I began operating, it appeared as if revenue would exceed costs…

Everthing Must Go Right Part 2

The small ingredients required for functionality torture an entrepreneur. For example, a huge problem of mine was finding a good location for the pastry stand where I could also access electricity. Electrical outlets are on walls, yet, placing a stand against a wall hurts its prominence. I had three options: go against the wall and lose prominence, buy a generator which is loud and expensive, or utilize extension chords which present tripping hazards to pedestrians. I opted for the last option.

No electricity would have equated to death of the business. A shiny business license, stand, canopy, and product mean nothing without electricity. Another small, but potentially life ending issue; I needed a place to store my stand. Without storage, in a metropolitan place such as Seattle, my stand would have been vandalized. Other minor life threatening things: I needed a vessel to transport the pastry from kitchen to stand without upsetting the shape or allowing it to go bad, a nearby bathroom for me or other stand employees to use, and a stand that could take rain without rusting. The list continues…

Unlike almost every other aspect of life, a business must fit seamlessly together. If one part doesn’t work the whole thing fails.