Sainsbury Management Fellow, Chirag Shah, is a serial
entrepreneur. A Londoner born and bred from a family of medical
doctors, he studied Engineering at the University of Cambridge. He completed his Engineering
apprenticeship at Rover Cars where he worked as a Production
Manager before gaining a scholarship through the
Sainsbury's Management Fellows to pursue an MBA at INSEAD Business
School in France. Following a short spell in management
consulting, he started his first business at the age of 28.
His entrepreneurial ventures include TradingPartners (a business
services company), écurie25 (the largest
chain of Supercar Clubs in the world), MarketMaker4 (an internet
software company), and Assassin Live (an iPhone application
game). He is also active as an angel investor.
Most people think the biggest obstacle to getting started with a
new business is coming up with a really great idea. But this
generally isn't the case. Ideas are all around us and mostly come
from finding solutions to our problems.
Unless your name is Jesus and you can simply perform miracles
whenever you hit a problem, we generally tend to address problems
by tolerating them or avoiding them. The key to successful
entrepreneurship lies here. Instead of living with your
frustrations, take the extra few seconds to challenge the issue and
explore how you might solve the problem. The answer could be
your business idea!
In my experience, the much more challenging aspect to getting
started is turning the idea into a viable business proposition. To
illustrate, I'm going to use as an example my 19 year-old cousin -
who has half a dozen more new ideas every time I see him. He'll be
a great entrepreneur one day but first he needs to overcome what I
call the "CARD-test". In order for an idea to become a successful
business it needs to be Commercial, Aligned with
resources, Relevant (to you) and Defensible.
An idea my cousin had when we were 15 was the concept of having
a rotating sunlounger. Just like a sunflower, the lounger would
turn slowly during the day saving the users from having to get up
and move the lounger themselves.
Commerical
Applying the "Commercial" test, the key question is: "can you
make money from the idea?" If one manufactured the product, would
there be enough sales to offset the manufacturing and distribution
costs and still leave some profit leftover? In the case of the
rotating sunbed, I'm not sure 'enough' users would pay the
necessary sum to avoid getting up and turning the lounger
themselves.
Aligned with resources
Another idea he had was to build a field of
solar panels and sell the electricity, whilst growing some
vegetables in the shade. In the right circumstances this idea can
meet the Commerciality clause, and indeed there are such
implementations around the world. Alas, for my poor cousin, he does
not have enough money to implement this idea nor could he hope to
raise sufficient funds from other people given his lack of previous
experience as a farmer or energy consultant or similar. So for my
cousin, this idea falls down because it is not 'aligned' with his
level of resources. [A particular frustration of mine, and a reason
why I think the green energy movement fails to reach breakthrough
levels of adoption is that so many innovative projects very quickly
require significant levels of capital to bring them to market and
hence remain the remit of larger institutional sources which are
inherently more risk averse than your average entrepreneur. Compare
this with the Internet revolution where the cost of starting a
business is very small and new business concepts dominate.]
Relevant (to you)
As a general rule of thumb I tend to advise budding
entrepreneurs to focus on businesses that they actually know
something about - by way of their prior work experience, or
background, or specialist product knowledge, etc. From the
businesses I have seen people starting up around me, I would say
your chances of success are less than 20% if you know nothing about
a particular product or market, and probably closer to 80% if you
have worked in that sector, already have relationships with
potential customers, and are familiar with your competition. If you
have a great idea in a sector you know nothing about, then getting
a job in that sector is a great way to start.
Defensible
Defensibility, or Barriers to Entry as the academics would call
it, refers to how difficult or easy it is for others to copy what
you are doing. Patenting or copyrighting an idea is an important
consideration but don't assume that just because an idea is
patented it cannot be replicated or if an idea cannot be protected
that others will definitely copy it. In any case I mention this
criterion with lower priority than the others because a business
lacking defensibility is not necessarily doomed to fail.
As you will see in later posts, how well and how quickly you
execute your idea can play a much larger part towards its success
and having imitators can even be a good thing. There are benefits
to competition in terms of growing the size of a market that can
outweigh the downsides of competing for business. For example, one
of my own companies, écurie25 Supercar Clubs, is
the global market leader for enthusiasts wishing to share the costs
of owning a Ferrari but I actually wish we had more competitors
because the sector would grow from the resulting greater awareness
of such clubs. And I would rather have a smaller market share of a
larger sector than a large share of a niche market.
Now that you have your idea in-hand and you've vetted it with
the CARD Test, it is time to get started. In my next post,
I'll give you some tips for making sure you de-risk your venture as
much as possible before you commit too much.
