A Guy and His Start-up Idea
I recently met with a potential client to discuss his new website project. Now, I meet or take phone calls on a daily basis with potential clients who have a web based business idea. Its a mixed bag of good, bad, and terrible ideas for the next big Internet sensation. In the spirit of anonymity I’ll refer to this client as Guy.
So, Guy and I casually began discussing the general idea of how he wanted his website to work. The idea was to connect high-school athletes with professional coaches. He had around 20 professional athletes (coaches) who had verbally committed to listing on his site. His revenue model charged coaches an annual subscription fee to be listed on the site. In theory the coaches would fill up their schedules via the website and pay a nominal fee to do so.
In the span of about 20 minutes a lot of flaws were immediately apparent to me. First and foremost Guy had an unrealistic expectation of the costs associated with building his website. In addition, he was not very keen on making adjustments to the scope to bring the project within his budget. I’ve been in this business long enough to know immediately that he needed about 20-25k to execute the project he had in mind. He wanted to spend less than 10k. I could see a clearer path for the project that could be achieved with a smaller budget, but he wouldn’t have any of it. So, he was already on the path that leads many small businesses to failure, undercapitalization, or simply underestimating the costs with starting a venture.
Frustrated that Guy had walked into a Lexus dealership with the budget for a Carolla I fired off some very simple questions.
“How many paying customers do you have at this moment?”
He responded, “None, but 20 have say they are interested and want to be listed on the site.”
“How much is each customer willing to pay?”
“I”m going to charge each coach $200 a year for a subscription.” He said.
Here lies another obvious flaw. He didn’t know how much a customer was willing to pay. He only know how much he wanted to charge.
I didn’t need a calculator to figure out that even if he had 100 paying coaches he would generate 20k in the first year and this does not account for the cost of acquiring those 100 coaches and the cost of building and maintaining his website, his time, etc. The math didn’t add up.
He was so focused on minute details of the website that he hadn’t considered costs other than the initial design and build of his new site. When I inquired about PR, Marketing, Sales, and basic economics of his business idea he said he hadn’t figured that out yet.
Your idea may be the best one you have ever thought of, but there needs to be a market for your idea. Guy didn’t seem to understand that he had an idea not a business. The first 6-12 months would prove or disprove his concept.
Why Hire a Business Consultant?
The dictionary defines a consultant as “an expert in a particular field who works as an advisor either to a company or to another individual.”
Many people who initially approach me about a start-up fail to understand that they are starting a business not a website. The website is only one piece of a larger picture. Starting a business takes a lot of resources, both time and money. The Internet does not circumvent this process. In other words, a web based business is exactly the same as starting any traditional business, it’s a lot of work and a website is a component of the start-up equation not the entire equation.
One must still consider marketing, PR, payroll, manufacturing, rent, revenues, accounting, billing, financing, and most importantly customers.
Often founders are too close to the problems to identify them. That’s when a the benefits of a consultant can save the day and your hard earned money. Hiring a consultant could save a lot of wasted time and money on a poorly planned or managed project. In fact, the best advice might be don’t start the business at all.
So, if you are considering a new venture it is in your best interest to bring in a consultant in some capacity. A good consultant provides an objective, fresh, and knowledgeable viewpoint, which provides your venture a greater chance of succeeding.