- William
You and Your Big Idea
You or your loved one has a brilliant product idea that you’ve rolled over in your mind for months, perhaps years. You might have sketched it out on paper and run the idea by anyone who cared to listen to you about it. Or, it may be such a potent idea that you’ve kept it a dark secret. You often examine a product on a store shelf wondering how it got there and if you could be successful making your own idea a reality.
When You Come to a Fork in the Road, Take It.
- Yogi Berra
Denial ain't just a river
- Mark Twain
The first objective of this book is to stop you making an expensive choice if it simply doesn’t make business sense. That might mean going 30% of the journey but only investing a small amount to find out if, indeed, your product idea never had legs to begin with.
Everything is theoretically impossible, until it is done.
- Robert A. Heinlein
The second objective is, if it does make sense to build your product, to take you all the way to producing product that a customer can buy at a level that is profitable for you. Commitment Management means not having to invest in a particular stage until you must, keeping your least expensive exit options open for as long as possible. Commitment Management is not a way to discourage you at every turn from following your dream, and I will point out the biggest ingredient of business success is persistence, but rather, it is being sensible about some of the expensive mistakes you can avoid by holding onto your precious resources for as long as possible.
It’s not too late if you start today
- Barbara Sher
We have all heard the phrase “if you could get off a ship in a storm, no ocean would ever have been crossed”. Or you might have heard about some English king or other who scuttled his ships on the coast of
You've got to jump off cliffs and build your wings on the way down.
- Ray Bradbury
If you ask me, all that do-or-die stuff is bad advice. It’s easy for Ray Bradbury to recommend jumping off cliffs. I’m guessing he doesn’t worry about a mortgage, and he won’t be there to help you with your wings after you jump off your cliff. The rest of us mortals struggle with mortgages and grocery bills, so we have to be much more careful than rich, famous people.
I prefer the saying: He who fights and runs away, lives to fight another day or the Irish proverb that goes never ask a man who’s paid off his house what the value of money is.
Most ideas we humans come up with are not viable. We hear about the big successes, the guy with the big house on the hill, how he got filthy rich, and the fledgling product that got snatched up by a multinational for a cool ten million dollars. We don’t hear about the aging retiree who wore his knuckles to the bone in a business venture that ate his retirement. Nor will anyone talk about the 90% of businesses that fail in their first year. And no one wants to hear about the collateral damage to health and relationships affected by a struggling, failing or failed start-up.
It is a good idea to test your assumptions before you commit money, not to mention your life savings, to your idea. We inventor types often lose sight of that. We follow an idea that has no right to exist because we engage in wishful thinking. Aqualocks is the third company I started and even with everything I have learned, I know there is huge, invisible risk with starting any company. Only people who have had good luck tell you there is no such thing as luck.
In this book, I underscore the denial surrounding your business idea as much as possible, and as early as possible.
Try to complete the questions at the end of each chapter. Write the answers on a piece of paper if you must, but do write them down. If you have the courage of your convictions, show the questions and answers to your significant other or someone else who cares about you. The simple act of completing those answers will help you to be more honest with yourself.
When I began this journey, I did not know all the steps I would have to take to get my PondSecure product manufactured, but I do now. From all the books I read on the subject, I probably learned about 10% of what I needed to know before I started. The experience itself taught me the other 90% and some of my mistakes were expensive. Most of my mistakes centered on not knowing the industry. Looking back at the last 18 months, I could beat myself up by saying the mistakes were stupid, but they weren’t. They were a result of my ignorance of how plastic products are manufactured. When you are green to an industry, you do not know where to look, so you look everywhere and everything looks the same. However, many important issues don’t stand out like they would for an expert in the field, so it takes the novice a lot longer to cover the same ground.
- Despite the burden of ignorance, if your product idea has genuine merit, it is just a matter of persistence and you can learn what you need to learn to make it a success.
What does “if your product idea has genuine merit” mean? As soon as you can, you need to work out how much your product is going to cost to make and how much it is going to cost to sell. If you can sell enough of it for more than that, you have a product with merit. Let us look at some theoretical costs and sales price of your product:
- Cost of making one unit (manufacturing): $5
- Cost of selling one unit (ads, etc.): $10
- Other variable costs [1], broken out per unit: $5
- Revenue you can get from selling one unit: $35
- Estimated net profit: $15
So, if you make a net profit of $10 on every product unit you sell, to pull a salary of let’s say, $40,000 a year, which might need closer to $55,000 when you include payroll tax and medical insurance costs, you would have to sell 5,500 units of your product at that $35 price. You would have to sell 15 units every day. That’s every one of the 365 days that are in a year. Some days people just don’t buy stuff, so other days you have to make up for the shortfall. You might have to sell 20 or more units on many days. That is just to secure a salary of $40,000 a year. It doesn’t cover the cost of growing your business to include, for example, a second product.
- Decide what your minimum salary expectation is and work out how much you have to sell to make that figure.
Many small product businesses have low fixed costs. That is, you can avoid many of the costs that bigger businesses must incur. For example: you don’t need to rent an office, hire an office manager, or maintain laptops and servers like bigger business must. With a small, one-person business you can cut out many of the costs. If you can also cut out the need to pay yourself a salary, you may be able to continue your path to product success for a long, long time, even if it is at a much slower pace. That is why it is a great idea not to give up your day job until you have to.
- Don’t give up your day job until you have to.
If you cut out salary needs, and remain diligent about not incurring fixed costs, your daily unit sales needs might be just one or two products a day, perhaps even two or three a week. In our theoretical example, your fixed costs might be $50 a week, so you may need to sell five units a week to cover those costs. Getting your business to break even is an incredible achievement, and proves out so much about the viability of your business. Again, if you can reach that point without giving up your day job, you will have taken most of the business risk out of it up that point
And so, the big question you should ask yourself is, Should I make the investment? That is, the investment in time and money to follow this dream of yours. When it comes to this kind investment, you must consider your other commitments in life, like spouse and family, mortgage, health needs and vacations. The answer to this big question is a function of several other questions about the cost of making your product and the cost of selling it. If no one will ever buy your product, then the “cost of selling it” is infinite and you have no business. If the costs to manufacturer it are three times what someone will pay for it, it can never be profitable and you have no business. To answer both of those questions, the former of which is a marketing question and the latter largely a manufacturing question, you need to answer other questions. For example, should I manufacture large quantities or small quantities?
How can I prove my idea will work (or not work) without spending much money?
Will I be able to sell it for a profit?
How long will it take to see the first product?
How much work and what skills do I need?
Do I have to go to
How do I protect my designs?
It doesn’t take a genius
Everything in the world we want to do or get done, we must do with and through people.
- Earl Nightingale
By the time I had production quality pieces in my hands, I looked around me and saw many elements of my one-person business that were of better quality than I could produce. Although I was capable of producing a website, my website was done by a chap who was much better at website creation than I was. The different parts of my product were so finely finished, anyone who looked at them collectively thought I must have been a genius. I am not.
You will rely on perhaps dozens of other people to help you turn your idea into a success. Always keep your ears open and ask your trusted friends for their opinions and perspectives at every stage. Collect and respect a cadre of people who are interested in what you are doing and keep them abreast of developments as you progress. Get good at listening and don’t get defensive about criticism, even if someone makes you feel like a fool. An effective way of listening is to take notes as you listen. Take what they have said and use it to improve your plan, not to prove them wrong or to prove yourself right. Making your business a success is not about being right. When you have absorbed a year’s worth of contributions from the people around you, your product plan will be better than you alone could ever have made it.
What does success smell like?
Success doesn’t smell like you would think it should. The interesting and rewarding opportunities reveal their rewards “late of an evening” (as my father might put it) and in the first few months, they don’t look promising at all. They look unpromising because big things take time and you are an early stage. Those opportunities that hand over the reward early are usually a flash-in-the-pan. Remember, of course, that not all ugly ducklings turn into swans. You, the inventor must feel the value of your invention deep in your heart. Then it does not matter how ugly the duckling looks to everyone else.
When can I give up my day job?
If your idea has potential, turning it into a product is a long and difficult path, for which you will need staying power. More staying power, in fact, than you ever needed to hold down a regular job. Successful entrepreneurs think positively, recover quickly from defeat and unpleasant surprises, and no matter what challenges they face, they continue to seek a way to achieve their goals. They are not necessarily “book-smart” or have a high GPA from an Ivy League college, and they don’t take injury personally. They may have significant support from their loved ones and friends, but their real driving energy comes from within them. They are stubborn self-starters, independent thinkers who do not recoil from confusion or ambiguity, which they see as a muddy broth of opportunity. Many folks find entrepreneurs irritating because they often show irreverence for authority and the “accepted facts”. When you ask an entrepreneur not to stick his finger into the socket because of the risk of electrocution, the entrepreneur thinks first about sticking his finger into the socket. An entrepreneur’s greatest teacher is his own long history of mistakes that he sees not as reflections on his stupidity, but rather, a foundation of valuable lessons on which he will build future success.
Let the games begin.
[1] Web hosting, credit card transaction, phone, many other costs of running a business.
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