- An Idea
- Some Money
- A Salable Product
Can you spare 20 hrs. a week in the short term? More time is better, less time may be too little. At the start of doing an online business, you’re going to need learning time, start-up time, experimentation, follow-up. These all feel like lost time, but they are foundational. You wouldn’t build a house without a foundation, would you?
You don’t need an original idea, but you need a solid idea. I always look at Google. It entered the crowded search market and dominated. It had a strong idea, not an original idea. You need a solid idea behind what drives your business.
Likewise, you need to make some important distinctions with your idea:
- Is a physical product involved? Lots of the junk in your inbox is connected to products. There’s a reason: online pushing of products makes a lot of money.
- Are your charging for access? If you do this from the ground up, it may be tricky to open the door with for-fee service, but it’s been done. Fremium is terrific way to give away some access and charge for the bonuses. This is a model followed by Flickr, SurveyMonkey and most of the Facebook games out there.
- Are you going to make money from advertising? This is my preferred model, but it’s tricky because you must have a massive amount of traffic to make it viable. A general rule of thumb: 1000 hits equals $0.75 of revenue.
Don’t spend your last dollar to start off your business. Anyone who says “start a business with $0” is completely lying: registration fees, banking fees, business cards, website hosting, advertising– You need a minimum of $1000 to get a business going. That’s the guerrilla amount required; if this is going to start as a side venture. If this is going to be your full-time gig, then you need at least six months of living expenses in the bank– more is better.
A Salable Product
A product is what you’re after in the most abstract version of the concept. This isn’t necessarily a box you ship; or even something you sell for cash. Your favorite TV show is a product; as is Facebook; and a box of cereal. How you get your product to your customer is very different from product to product, but you are always creating a product.
Use these points as sliders. More money, more time and you can have a more auspicious product. Less money but a lot of time and you can dote on the product as long as the costs of innovation are not too high. For example, we recently started up KR8 (aka “Crate”– get it?) to shorten and share urls. I’ve been programming forever (well, 29 years) so whipping up an application is easy. I didn’t need a lot of time to pull it off. Hosting came as part-and-parcel of what I use through Varial hosting. Domain registration amounts to $10-20 per domain per year. So, for a weekend of coding plus $20, I had little business idea ready to launch. My day job with Game Boyz involves an upcoming massive and complex web application. It’s going to take many months of coding, so it’s going to need a lot of money to pull off. But this is meant to be a very salable product, so the time and money is commensurate.
Knowing the product gives you a chance for the very important litmus test: the market study. Does your online venture have legs? See if friends and family would use the service. See if the market is saturated. Look at Groupon: a nifty idea that was immediately copied by about a dozen other sites. Your idea has to take a market leadership role or be able to swim in a big pool. If the pool– the potential for business– if it’s big then you can find your niche or make for some aggressive pricing or just be cooler than the other cats.
Once you set on a course, be committed to do one of two things: get the vessel (your idea) to port or sink it (yep: walk away). If you launch your idea then veer right or left with each piece of feedback, you may either get a venture built by committee or it might sink. If the idea is a dud, don’t keep flogging it. Be ready to be mercenary and pull the plug.
The “pulling the plug” may seem like a huge downer, but good ideas and good elements can go back into the hopper. Flickr started out as an online game and they tacked on a way to upload and share photos. Paretologic, an anti-virus maker, wanted to sell their wares and needed a good affiliate system. They launched RevenueWire and it took off like gangbusters. In both cases, these were outgrowths of their core business.
Your idea can evolve after you establish what evolutionary branch the idea is climbing.