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I was on the phone yesterday with an entrepreneur from Texas who has a great business idea. Or, so he thought.
He emailed me about 6 months ago and we’ve been corresponding back and forth. I always love hearing from my readers and passionate entrepreneurs and try to help whenever I can.
However, there is a very big difference between a great idea and a great business idea.
For example, a great idea is coming out with black and brown band-aids. Why not have band-aids that match black and brown people’s skin color too?! But that’s not a great business idea. Companies like Johnson & Johnson and P & G would eat your lunch.
They already have the distribution and the factory and the deep pockets to launch this product virtually over night. Creating a company that is going to produce brown and black band-aids is not a good business idea. But it’s a good idea.
So as we started talking I sensed his enthusiasm and was really excited for him. However, I asked him how he intends to make money.
“Well, I’m not sure,” he said. “I’ll figure that out later.”
Sorry but that’s wrong!
If you’re starting a business, especially as a younger entrepreneur, you need to focus on your revenue model. Please note: I’m not saying you shouldn’t focus on serving your customers/clients. I am obsessed with client service. But I’m able to make money by obsessively servicing my clients. I knew how that was going to happen from day 1.
I love his idea. It’s fantastic. I’m always interested in investing and helping very early stage companies with a great idea but you need to know how you’re going to make money. And before I’d ever invest in a company, I’d want to know that they’ve, at least, made $1.
The most important dollar you’re ever going to make is your very first dollar. You know someone is willing to (and wants to) pay for your product.
Unless you have extremely deep pockets you can’t afford to run a business that’s not generating revenue. Before you bet the entire farm on your business make some money. Crawl before you walk!
My latest magazine column for Millionaire Blueprints Teen is exactly about this. Check it out:
The PDF is attached here.
And to my man from Dallas, we’ll get there. But first we’re going to focus on crawling and we’ll be running in no time!
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Comments
08.15.08
Hi Adam,
This is definitely a poignant subject for Gen Y-ers, because we're so idealistic, and have lofty dreams.
What if you're business is a website, and you plan on offering a service? However, you need viewers and a lot of traffic before you can even begin thinking about offering this service.
I just started a website (meaning I just made it live this week), and it's currently only some really well organized and intriguing blogs and and forums. I'm making some money on ads and affiliates, and I'm starting up with promotions, and marketing, etc to get traffic to the site. I have big plans to develop a specific service through the site once I'm getting enough traffic.
Is it a bad idea to wait to create a business plan, and model until I have a better idea of the traffic? I feel like I pretty much can't figure out specific numbers until I can make a more well-informed prediction about the popularity of the website.
08.15.08
Hi Tiffany,
Thanks. If you'd like, I have no problem helping you out and giving you my input.
Email me though my blog if you'd like. I trust that you can find it. :)
-A
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