This Is the Biggest Mistake Made By People Who Want to Start a Business
Avoid This Mistake and Improve Your Chances of Success
I have a favorite story I like to tell people who want to start a business. Recently, some friends asked me for business advice and I had the opportunity to tell the story. They got it and it will hopefully save them a lot of money. Let’s see what you think. (True story by the way)
The Great Sunflower VentureThe sunflower is a very useful and fast-growing flower. The seeds make a great snack food, wonderfully healthy oil, and a primary ingredient in many bird feeds. That’s only a few uses of this hard plant. I can grow in climates with short growing seasons and it requires little water. The soil doesn’t have to be great and the plants can grow so close together they choke out weeds. In short, sunflowers are cheap to grow and can be very lucrative because the demand is strong for the seeds.
Sunflowers take their name because they look like a cartoon sun. And, if you hadn’t noticed, the flower will track the sun in the course of a day. You can virtually see the flower move. It the morning the flower faces where the sun comes up and that flower will face the sun as it tracks across the sky. It’s that ability to follow the sun which makes the plant grow so fast and to produce so much calorie (nutrients and oil) per flower. This is one very efficient solar panel!
What if you had a place where the sun never set? The plant could grow for 24 hours per day rather than just 10-12 hours. a little math and we see that we could get 2 or maybe 3 full crops in a single year—even in a short season. But where is that place? One group knew and they raised a lot of money to buy a lot of cheap land to grow a lot of sunflowers. They planted several thousand acres in Alaska and waited to hit the jackpot.
Seems the positive characteristics can turn negative under certain conditions.
The entire crop failed. Can you guess why?
No, it didn’t turn cold too early even though they were in Alaska. In fact, they had an ideal summer in terms of weather. No, not too much rain.
They did have problems with big animals grazing but they solved that with fencing.
So what went wrong?
In Alaska, in the summer, the sun doesn’t set. That was planned for and the main reason the site was chosen. But remember that the flower follows the sun? Once the plants got big enough to produce a flower, those flowers followed the sun in a circular pattern across the sky. The sun doesn’t just rise one day and stay there. The sun moves in a circle around the sky but never setting. As the plant tracked the circle, rather than follow its typical left to right pattern, it slowly choked itself and it twisted round and round. All the plants died before the flowers produced seed. Sad story.
As I finished the story, the people gasped and said, “why didn’t they try on a small scale first?” Well, there you have one part of what is normally a 2 part mistake. Indeed, they should have tried this on a small scale first.
So many people ‘know’ they have access to a high demand product so they dive in with their savings, credit cards, and borrowed money. They launch a doomed venture because they fail to try a small scale first.
But that is just part of the problem. Step 1 isn’t finding a source for a product (like a big farm?). It’s not getting licenses. Step 1, before any of the other stuff is to find and then define your market. The definition of the market for a new venture should be very, very narrow. You should not enter the sunflower market with a plan to move a billion pounds of sunflowers until you know what you are doing. Find and define your market, then build your business plan.
Creating a narrow plan will keep your new venture on a narrow and tight budget. Yes, your victories will be small. But your mistakes, the mistakes that everyone makes in business, will be small too. You won’t lose your life’s savings. You won’t fall deep into debt. And you will not lose Dad’s retirement money.
The biggest mistake people make when starting a new business is the failure to find and define their market before they chase wild ideas and suppliers happy to take their money.
Make sense? If you want help thinking through your business idea, please call me. I’m happy to help.
Chris Reich, TeachU