Establishing Your Own Enterprise

Once you’ve decided to go into business for yourself, a number of critical decisions must be made. You’re certain you want to be your own boss, but you’re unsure of the type of business to start. Here are two distinct approaches to this question.

The Business “Production Model”

The majority of us begin our businesses by employing what we might refer to as the “production model.” Each of us is capable of performing certain tasks — cutting hair, cooking food, framing houses, repairing teeth, and designing buildings, for example — and we set out to sell these services. We inquire of ourselves “What am I to do? We begin by asking, “What are my skills?” and then, “How can I sell these skills?” What products can I create that leverage these abilities?”

Numerous individuals believe that the production model is the only viable business model. They believe Kevin Costner was expressing an important truth in “Field of Dreams” when he said, “If you build it, they will come.” They simply rearrange the words:

“If I open a restaurant, customers will come.”
“If I begin manufacturing bird houses, customers will flock to my store.”
“If I establish a lemonade stand, my neighbors will purchase some.”
“Surely, if I learn to fly an airline, someone will hire me.”

And, on the whole, this works. Individuals attend school to become dentists, engineers, or teachers, and they become dentists, engineers, or teachers. Other people enjoy cooking or making bird houses, and as a result, they open restaurants and craft shops, and miracle of miracles, their establishments are successful.

However, this oversimplification of the marketing process distorts the reality of what occurs “on the ground” when a new business is launched.

One significant reason that trained dentists establish successful practices is that the dental market is tightly regulated to ensure that the appropriate number of dentists graduates each year.

And we can point to successful restaurants and bird house businesses because we are examining them after they have achieved success. What about all the failed restaurants, construction firms, and land development conglomerates? Their proprietors were almost certainly equally skilled and as enthusiastic about cooking and serving the public as the next guy. They constructed it, but nobody – or at least not a sufficient number of people – came.

Clearly, starting a business is not as straightforward as “If you build it, they will come.” There are some variables that we cannot control or predict. And once this is recognized, we are compelled to seek an alternative to the “production model.”

A Case in Point

Allow me to provide another illustration. I had a client in the music business many years ago, long before the internet existed. This company had been around for many years and had developed into one of the largest publishers of certain niche musical products in the country. These were primarily aimed at the music-in-schools market and included sheet music, children’s music, and specialty record albums with a stable of relatively obscure artists.

As with most businesses, this one had developed a set of “skills” and tailored products and services to market demand. There was only one issue. Market conditions had shifted, and the company was now losing money. My role was to assist them in increasing their product sales.

At times, being a “outsider” is detrimental. To me, it was obvious that the market was changing, that sales of their tried-and-true products were destined to decline rather than increase, and that the long-term solution to their problem was to develop new products in response to new demands, rather than flog the old ones. It was difficult for me to be a “true believer” in the company’s long-term success. I had the impression that we were fighting a losing battle.

Naturally, this marked the start of the end of our relationship. As I previously stated, my role was to assist them in selling their products, not to reorganize their business. Most businesses struggle with shifting gears, and they certainly don’t want to hear about it from some young whipper snapper who knows next to nothing about their industry. We lost the account within a few months. And within a year or so, the former client declared bankruptcy and was forced to downsize to approximately 25% of its previous size.

This is not unusual, in my opinion. Numerous businesses – probably the majority – are successful for a time before encountering difficulties and being forced to change. My point is that the “production model” will eventually fail and we will be forced to consider alternatives.

The Most Clearly Contradictory Alternative is the “Marketing Model.”

When confronted with these self-evident facts of business life, the majority of marketers invoke the theory taught in Marketing 101. “You must begin by conducting a market analysis, determining what people are likely to purchase, and then developing products accordingly.”

In other words, the marketing guy (predictably) advocates for an inversion of the marketing / manufacturing process. Marketing should be used to determine which products are most likely to succeed in the market, not to bring in products after the horse has bolted. Marketing should take precedence over production, not vice versa. Do not be concerned with the skills you possess. Skill sets can be purchased or rented. Consider the products you can sell. And then devise a method for producing them.

Nowadays, the marketing model is most pure in its application in internet marketing. Consider Ken Evoy’s instructions in the Site Build It manual on how to select a marketing “niche.” The procedure is as follows:

1. Identify four or five potential areas of interest. These are the candidates for your “website concept”   the types of businesses you should consider entering.

2. Then, evaluate each of these website concept candidates in terms of potential traffic generation, product sales, and so on.

3. Select the one with the greatest potential for sales.

This appears to be an entirely reasonable procedure. However, it is rather revolutionary for the majority of non-marketers. “Do not begin “production” until you have made some critical decisions about what people are likely to buy,” they are told. In a nutshell, this is the “marketing model.”

Constraints on the Marketing Model

There is one obvious flaw in the “pure” marketing model. It presupposes that we are all seated around a table as consultants with an infinite number of options and infallible knowledge about each of them. The model appears to imply that we can simply feed information into our decision-making machine and receive an answer to the question “What should I do?”

Even the most devoted marketers understand that this is not how it works. Each individual or organization has unique preferences and dislikes, and is generally adept at some tasks but not so adept at others. Ken Evoy’s procedure addresses this by stating, “Be certain to select an area of interest that you are passionate about.” He probably should add “…and make certain you’re good at it as well.”

Consider it similar to one of those industrial food processing units where you fill the funnel at the top with a variety of items and it spits out products at the bottom. Not only do we feed our business idea processor statistics about products, markets, and prices, but we also feed it information about our own preferences, abilities, habits, and experiences.

Additionally, we must maintain the proper proportions of all ingredients entering the top of the machine. It is not simply about what people will purchase. And it’s not just about our abilities or interests. It is about all of these things concurrently.

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