In this episode:
00:16 – My project stream checklist
00:50 – Look for a lifetime customer model
01:24 – Prepare for a long-term commitment
02:08 – Seek the ideal price point
02:56 – Consider scale
03:40 – Your capacity to supply
04:29 – Make sure your business solves a problem
04:58 – Reach your customers
Lifetime customers equal lifetime profit. [Click To Tweet].
Pick the middle price point and go up from there. [Click To Tweet].
The ideal market gives your business room to grow. [Click To Tweet].
All it takes is a starving crowd. [Click To Tweet].
The bigger the problem, the better the solution will appear. [Click To Tweet].
James Schramko here, filming from Hawaii where I’ve been doing a business retreat for our podcast, ThinkActGet which Ezra Firestone and I do. In this episode, I’m going to talk about the ways that you can filter for a potential business idea.
So we’ve sat down with a few business owners and each one of them wanted to start a new venture. So I pulled out my project stream which is a systematic checklist of taking an idea from start to finish, and we get up to the business model part and that’s where I have a set of filters that helps me determine what sort of business I want to go into. So we went through that checklist and I thought you might really enjoy finding out the things that I would look for in a business, and perhaps you might have some of these in your business. So let’s go through the list and see how your business stacks up.
Lifetime Customer Model
The first one I look for is a lifetime customer model. This is where you get one customer and you keep being able to service them for a long time. This is more profitable, it’s much easier and you actually don’t have to focus all of your efforts on customer acquisition or customer traction, or paid traffic, or conversions. Once you have that customer, you can focus on the customer and looking after that customer, and keeping that customer for a long time. That customer, when they’re happy, will actually bring other customers and continue to purchase. So that’s the first filter: the lifetime customer.
The other thing I look for is the long-term commitment. Are you interested enough in this and are you expert enough in this to be able to surround yourself with the information you need to serve this market? That means you may want to go to events. You may read trade journals. You may follow blogs. You might listen to podcasts.
You have to be able to have that conversation with the customer for a long time. When I was in the automotive trade with BMW and Mercedes-Benz, I did that from 1995 through past to about 2006. That’s a long time in one market, over a decade, and you have to be able to have that conversation over and over and over again. So surround yourself into a market that is something you’re happy to talk about and happy to stay up with.
Right Price Points
Look for the right price points. If you go into a very low price point, or very low margin business, you can expect very aggressive competition and people will come and go from that market as they go out of business. I like the selected intermediate to advanced pricing level because you automatically have different customers. You have enough margin to have a great business and there’s less people in that market.
Almost everyone is scared to compete in that mid- to high-priced point level. And you’ll find this really good customer. A lot less people serving that customer and it’s easy to stand out. Again I draw back to my BMW and Mercedes-Benz experience and it was much more pleasurable than having high-volume, high-churned, low-commoditized price point. So whether to product or service, pick the middle if you can and go up from there.
The next thing is scale. Do you actually have enough audience that you can grow this and still have a business? I’ve made the classic mistake of niching down too small and running out of audience. You could be the biggest fish in the pond, but if your pond is a goldfish, then that’s kind of limited. So pick a big enough market that you can enter into and specialize or niche to the right part of the market that allows you the growth.
Because you’re going to be confident, because you’re going to be following these sort of tips that I put on SuperFastBusiness, you will be able to grow into a bigger fish and you’ll grow into a bigger pond if your pond’s a little bit bigger to start with. So don’t go micro super niche just because it’s easy and because you get a fast start. You will run out of growth and you’ll have to start again.
Capacity to Supply
The next one is capacity to supply. You have to be able to actually supply the market. There’s no point going into your business model if you can’t actually find a source of supply. Whether that’s you, whether it’s a team, whether it’s an external supply, you need to be able to find supply. And I see a lot of people running into this mistake.
They think they’re going to go into a business, they set their prices low and they’re either doing the work themselves, in which case they run out of capacity because you only got 180 hours per month; or they get a small team and they just can’t keep up with supply and they find it too hard to attract and recruit a very small team and keep them sustained.
So go and look for quality supplies. Again if you look at Mercedes-Benz, they get supply from Michelin and Bridgestone and Pirelli and that gives them enough ability to continue manufacturing cars because there’s plenty of tire supplies.
Your Business Solves A Problem
Make sure that your business solves a problem. If your business doesn’t solve a problem and if there isn’t an audience of people out there who have that problem, then it’s going to be a tough job. So start with the audience if you possibly can. As the great Gary Halbert used to say, give him just the starving crowd, that’s all it needs. So start with the audience who has a problem that you can actually solve and look for a large market of people with huge problems. The bigger the problem, the better the solution will appeal to them.
You want to make sure that you can reach the customers. You have to be able to access these people easily whether that’s Facebook, newspaper, radio, communities, forums, live events, you’ve got to be able to easily access these people with problems. So, now if you have some of these filters in place, you should have a pretty decent business model that is going to do what you need it to do. And I’m sure, as this has worked for me and many of my students, it’s also going to work for you.
What I’d really like you to do is ask your questions right near this video or comment below this video if any of these have resonated with you. Perhaps you made a mistake with one of these filters and it’s cost you dearly like it has with me. Perhaps you’ve nailed it, you have it right and you have a fantastic business. Tell me about it, right near this video. I’m James Schramko coming to you from Hawaii. I’ll catch up with you soon.
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