(This is a snapshot of my old weblog. New posts and selected republished essays can be found at raganwald.com.)
Wednesday, October 05, 2005
Business basics
Okay this post sounds suspiciously like something I ought to write backwards on a post-it note, stick it on my forehead, and read it every time I look in the mirror. It's advice for people starting a business.
But really, it's advice for evaluating a business idea. And if you're thinking about joining a startup, before you evaluate the equity compensation, you ought to decide for yourself if they're onto a good thing.
Here's Don Dodge with a few basic hints:
Okay this post sounds suspiciously like something I ought to write backwards on a post-it note, stick it on my forehead, and read it every time I look in the mirror. It's advice for people starting a business.
But really, it's advice for evaluating a business idea. And if you're thinking about joining a startup, before you evaluate the equity compensation, you ought to decide for yourself if they're onto a good thing.
Here's Don Dodge with a few basic hints:
Never get too far ahead of the market. Creating new markets, new business models, and value propositions is very difficult and takes lots of time and money. Pioneers are usually unsuccessful, the fast followers make most of the money.
Understand who your customer is, what problem you solve, and how much they are willing to pay for it. Sounds simple enough but you would be surprised how many start-ups get excited about their technology innovations and forget about the basic business proposition.
Never start a business focused on solving a big company’s problem. They don’t know they have a problem…and they are probably right. That is how they got to be so big in the first place. The record labels didn’t know they had a digital distribution problem and were not interested in our solution to it.
Test your assumptions before spending lots of money. Interview your potential customers. Understand what their top 10 problems are. Don’t try to convince them that you have a solution to a problem they don’t know they have. Take a survey of 100 potential customers. Ask them to list their top 10 problems, without prompting from you. If you don’t see your problem area listed…move on to another problem.—Don Dodge, "Napster - the inside story and lessons for entrepreneurs"
