Invest In My Idea

People go into business to sell products or to provide a service. That’s it. It follows then that the very heart of your business will be your ability to produce those goods or services at reasonable prices so that you can make a profit when you sell them.

Planning for Your Service

Service businesses must provide their service, whatever it is, efficiently, quickly, affordably, and affably. It’s a tall order. If you are opening a veterinary clinic, for example, your office has to set appointments that you will be able to keep on time, provide a bright and cheery atmosphere, offer valuable and affordable services, and have a staff that is friendly and knowledgeable.

If you think about it, that’s essentially the same prescription for success for any service business. A carpet cleaning business, a law office, an auto re-pair shop, or a health club all must provide affordable and efficient services. How do you do that? The first step is systemization. You need to set up pro-cedures and processes that will be followed every time for every customer or client.

Begin with your computer system. There is a lot of specialty software out there aimed at different sorts of businesses. You can bet that someone, some-where, has created a program for a veterinary office that allows them to take appointments, track animals, and create bills. The vet needs to find that pro-gram just as you need to find the program for your service business. These pro-grams are the first, critical step toward professionally producing your service.

  Real Life Example

“When I opened my first law office, I wasn’t sure what sort of law would be-come my ‘specialty.’ One day, shortly after I began, I received a phone call from an ad seller at my local newspaper. He had gotten my number from a listing of new business phone numbers.

The man asked me if I wanted to advertise in the paper’s classified section, specifically, in the service directory. It sounded like a good idea to me, so I said yes. He asked me what my specialty was, and I told him that I wasn’t sure. He then told me something that would change my life. ‘If you want the phone to ring,’ he said, ‘you will put in an ad for bankruptcies.’ I had done a few bankruptcies at the time, so I agreed; I wanted the phone to ring.

And he was right. Soon enough potential bankruptcy clients starting calling. My first bankruptcy took me 12 hours to prepare as I had to type in forms found in the back of a book. I soon bought a bankruptcy-preparation software program, and cut my time down to an hour. After a few years, I could pop one out in less than half an hour.”

Beyond computers, training is essential to producing a winning service business. All employees have to be on the same page, with a common un-derstanding of what is expected of them and where the business is headed. Most employees today want to do more than just put in their time and take home a paycheck. They want to feel they are part of something important; that their work makes a difference. Your job is to help them feel that way. Let them know your vision for the business and for them.

You might consider coming up with a mission statement for your busi-ness that you all agree on. Many small businesses have a mission statement prominently displayed in the office to which the employees often pay lip ser-vice. But great service businesses get their employees to actually buy into that mission and believe in it. When employees don’t understand what the business is about, or if they are forced to heed some maxim on a plaque that they neither buy into nor believe is true, morale suffers.

Beyond having a shared mission, the smart entrepreneur will also be, like Ronald Reagan, a great communicator. Good communication could entail a quarterly “state of the company” report to employees, encouraging them to give suggestions or ask questions, or one-on-one meetings with employees devoted to career goals. This fosters a sense of teamwork, a major factor in developing a superior service business, according to a Department of Labor survey.

Take Starbucks, for example. Howard Schultz of Starbucks believes that teamwork is so critical to the company’s success that employees (called “part-ners” in Starbucks-speak) spend several days after being hired learning how to be part of the Starbucks team and how to provide superior service. Schultz tells all new employees (about 500 a month), via video, how happy he is to have them on board. Even part-time workers repeatedly hear how much they are valued during the 24 hours of training they get in their first 80 hours of employment. Training is essential if you want your service to stand out.

The final thing you can do to create a great service business is properly reward your employees for providing superior service. Rewards can take many forms, but the most obvious are compensation, profit sharing, and ben-efits. Less evident rewards can also make a difference. A gift certificate, a luncheon to honor employees who have made outstanding contributions, or free T-shirts all help boost morale.

Creating a great place to work, one where people feel motivated, en-gaged, and part of a team with a purpose, can do a lot toward making your service business shine.

Your Product

Certainly not all businesses will be producing their own products. Retail stores are lined with products produced by others. And yet producing your own innovative product can also be one of the most lucrative businesses. Cre-ating a product that speaks to people, fulfills a market need, and becomes a necessary and useful item is a rare sort of business home run that companies live for.

And yet there is no shortage of obstacles to creating the magic product. Whether it is finding the money to produce the product or convincing consumers that they need to have the latest cutting-edge gadget, turning innova-tive ideas into great products is no easy task. The first step in this process is determining if there is a market for the product.

Test Marketing

Every year, thousands of entrepreneurs face challenges similar to yours. Will their product sell? At what price? To whom will they be selling? Re-searching your market will answer these key questions for you. Before you in-vest a lot of time and money into producing your product, you need to sit

Market Researching Your Product

Step 1: Begin with your potential customers. You need demographic data about them. The answers to the following sorts of questions will help you figure out to whom you will be selling your product:

•   What is their age, gender, and marital status?
•   Do you know their income level and occupation?
•   Are they conservative or trendsetters?
•   Do they have political, religious, or environmental beliefs that will influence their buying?
•   Do they spend money freely and demand top quality, or do they shop for bargains?

Step 2: Meet with potential customers. Hire a market research firm or con-duct the research yourself. Find out what they like and don’t like about products similar to the one you will be producing. Devise a simple survey and give people a reason to fill it out. Find out what similar products they buy and what products they would like to see from you.

Step 3: Scope out the competition. Which products are similar to yours?

How can they be improved? How can your product be made less expensive?

Step 4: Analyze the data.

  down and look at your market to make certain you will be targeting the right buyers and offering products they want and can afford.

Market research is what Pete Meyers, founder of Pete’s Beer (name changed by request) in Sacramento, California, did. When Meyers came up with a new product idea last year, he didn’t hire big-name consultants to do market research. Instead, he tapped M.B.A. students at a local university busi-ness school. “My partner and I needed to know if retailers and consumers would be receptive to the product,” Meyers says. Over four months, they gath-ered information, and the deeper the students dug, the better the idea looked. Meyers paid the school $2,500 for what he estimates was $100,000 worth of research and the students received an invaluable, real-world education.

Other options for inexpensive product research include:

•   Interviewing prospective customers at shopping malls or other busy retail areas
•   Conducting a telephone survey
•   Asking your friends, neighbors, and colleagues what they think of your idea

Once you are convinced that you have a viable product, the final step before an all-out rollout of your product is to do some test marketing. Get your product into five or ten stores and see if it sells. Test different prices and displays to see what works best. After a successful test market run, it is time to mass-produce your product. The whole idea is to learn as much as you can about your new product before throwing a ton of money at it. Although all of this homework will take some time and cost some money, it’s a lot better than producing on a hunch.

Producing Your Product

There are two ways to produce your product—either you can do it your-self or you can outsource it and have someone else produce it for you.

Producing Your Product Yourself

Make a list of what tools and machinery will be needed to produce the product. Which of these do you already have and which can you afford to buy? If you can’t afford to buy the necessary equipment, consider leasing what you need.

As you go about setting up your production facility, make sure that you have enough room to expand should that (hopefully!) be necessary. Also keep in mind:

•   Your facility needs to be safe for employees, and may have to meet safety regulations required by your city or state.
•   Producing pollutants will require that you be able to dispose of them properly.
•   A testing facility (such as Underwriters Laboratories) may be required to certify the safety or quality of your products.
•   Bar codes may be required to sell your product in various stores.

The key thing to producing your own product for sale is that you can create it quickly, safely, and inexpensively without sacrificing quality. If you can’t, then you need to hire someone to create the product for you.

Hiring Someone to Create Your Product

Tool and dye shops, machine shops, wholesale producers, artisans, seam-stresses, plastic molders, and a host of other wholesale manufacturers are available for hire in most cities and they already have many of the tools nec-essary to produce your product.

The important thing is to find a manufacturer who will be able to af-fordably produce your product according to your specifications. Shop around. Prices and quality vary widely. Get samples and references and check up on the company. Find out how reliable they are and assess the level of quality of the goods they already produce. In some instances, hiring a production facil-ity in another country may be the best, most affordable way to produce your product. An Internet search will produce a variety of manufacturers who may fit the bill.

Finding a distribution channel for your product is critical. Entrepreneurs often take all the necessary steps—developing a great product, creating a pro-totype, patenting their ideas, and producing an initial batch of products— without considering the final step—how the product will be sold.

How important is this step? Consider that after Jeff Hawkins invented the PalmPilot, he had a very hard time getting his new product onto store shelves. His company finally decided to partner with (and eventually be bought out by) U.S. Robotics because that company had a distribution chan-nel that Palm could tap that lead to it becoming a huge success.

But you need not go to such lengths to distribute your product. Here’s a simple method you can use to get on store shelves. First, find a retailer who sells products similar to yours and ask from whom they purchase those prod-ucts. Once you find out, contact that distributor, sales representative, or wholesaler and ask them what kind of deal they typically offer product man-ufacturers such as yourself. It is important to realize that both the distributor and the final retailer will want to mark up your product, so you have to price it accordingly from the outset. After you have spoken with one distributor, finding others should be easier. There may be dozens of wholesalers or dis-tributors that distribute products similar to yours. Once you have spoken with a few, you will have a much clearer idea about which one may be best for you, as well as how to price your product properly to get it to market and begin generating some sales.

Product Innovation

Product innovation is one of the most sought after and talked about at-tributes in business. But all too often, innovation is more theory than practice because initiating and implementing an innovative product is rarely easy. It often takes a genius idea, total commitment, and plenty of money before the breakthrough product is accepted by consumers.

How then do you create a great product? Here are seven lessons for product innovators:

1. Think of things that never existed and ask, “Why not?” Bobby Ken-nedy’s famous motto is an apt description of the first ingredient necessary to create a great new product. Terrific products come from in-spired ideas. When George de Mestral took an annoying burr from his sock and placed it underneath his microscope, creating a break-through product like Velcro was the last thing on his mind. He spent the next ten years trying to duplicate artificially what nature made effortlessly.

2. Tap the power of one. The second lesson in product innovation is that one person can make a difference. Look at almost any product and you will invariably find that there was some man or woman be-hind it who was steadfastly committed to its success. Ed Lowe was nothing but a young, ambitious veteran with tons of unsold clay when he decided that he had an idea for a better cat litter. Crisscrossing the country in his old car, bartering his way into cat shows, and changing cat boxes one at a time is what it took for him to make Kitty Litter a success.

3. Keep it simple, stupid. No, no one is calling you dumb. Rather, the rule—keep it simple, stupid—and its acronym KISS are great ways to remember the third lesson of great products. If you are going to offer something new and improved, make sure that it is simple and does one or two things very well.

4. First is best. Getting your product to market first can often mean the difference between having a winner and being a loser. Post-it Notes were first. Tupperware was first. Pampers were first. Barbie was first.

5. Try, try again. The path of the innovator may not follow a straight line, grasshopper. Getting a product right often takes trial and error, followed by a few mistakes, a couple of bonehead moves, and only then, maybe, a home run. When Dr. Percy Spencer noticed that the chocolate bar in his pocket melted after standing near a magnetron tube, he realized that something unique had occurred. Yet it would take almost 20 years of trial and error before Raytheon could turn that into a microwave oven that could be used by the public.

6. It’s risky business. Creating a great product and getting it out there often takes everything an entrepreneur has to offer. The financial risks involved, not to mention the emotional toll, are considerable in-deed. When two auto designers in California created a secret budget and dared their German superiors to take a risk on a car their bosses associated with Hitler, they were risking their careers. And when Volkswagen agreed to produce the New Beetle, it risked being perceived as a backward-looking company. Great new products require risk; it is as simple as that.