Developing A Meaningful Value Proposition – Why Better is Never Enough

Now it is time to consider one of the most important questions that every entrepreneur must answer. What problem does your product or service solve?

Are you saving your customers time or money? Are you providing a convenience or making life easier for someone? Does your product provide the user with something that they never had before? As a general rule, the bigger the problem is that your product solves, the more successful your company will be. Developing another flavor of jellybean, for example, doesn’t necessarily result in millions of dollars.

There are three very important reasons why doing something better is never enough. First of all, it requires a considerable amount of time, money, and effort into creating a new company and developing and providing a new product. Your product or service must generate enough profit to pay for this new investment. If a product or service similar to yours is already available, it will be very difficult for two products to succeed in the same space. For that reason alone, your product or service must be much better than your competition.

The second reason why doing something better is never enough has to do with switching costs for the user. In 99% of the cases, your potential customers are already using something to solve the problem you propose to solve. Even an invention as significant as a television had to compete with radio for the entertainment focus of families across America. Most families already had radios. Many of them had favorite radio programs and knew what time their programs were on. They had developed strong habits that would routinely draw them to their radios at a given time on a given night and they would anxiously await to hear the latest events of their radio characters. Switching to a television set held several significant barriers that the consumers must break, including the following:

· The real (and in this case, expensive) cost of buying a new television set

· Slowly breaking the habit of listening to the radio program

· Developing a new habit of having to watch the program instead of just listening to it (many people listened to the radio while they worked in the house, did the dishes, or performed sewing or other chores.

· Radio listeners would have to say goodbye to many of their favorite characters and may be quite reluctant to give up programs that they had grown accustomed to listening to on a regular basis

· Radio listeners would also have to pay a considerable price to spend the time to develop relationships with new characters on new programs. It may happen that many of the characters they liked so much don’t look so great on television.

· Finally, new customers will have to deal with change in general. Many people do not like change and will put up some kind of resistance no matter what benefits may be in store for them.

For all these reasons, consumers do not like to try new things or buy unfamiliar products, especially if the solution they are used to is doing a reasonably good job. Change for any consumer requires some amount of effort, even if it is simply breaking a habit of looking for the same packaging on the same shelf in the same aisle.

In order to make new products as successful as possible, entrepreneurs must focus on the strengths and benefits that only their product can provide. An introduction of a new digital camera may not entice owners of current digital cameras to buy the new model just because it has improved from 3.5 megapixels to 4.0 megapixels. Such a small incremental increase is also unlikely to convince owners of conventional film cameras to switch to the new product either. However, a larger multiple (say from 3.5 to 10 megapixels) will definitely gain attention. Likewise, new features such as wireless transfers, dramatically reduced pricing, or interoperability with lenses from film cameras may be enough to entice potential customers to make the switch.

Copyright 2007, Brian Acord

It Pays to Start Your Own Business this Summer – Free Business Idea #1

Okay, so you’re thinking of getting a job this summer to make a little money. But what you really want to do is start your own business but you’re not sure what type of business or how to start it. You might even wonder if it would be worth all the effort. Well, if you’ve been keeping up with my newsletter, you’ll remember that I promised to share a new business idea each week between now and the end of the school year. Well, here is the first idea for starting your own business this summer. (If you don’t currently receive our electronic newsletter, sign up here.)

Let’s start by talking about money and compare what you are likely to make with a part time job and starting your own very simple summer business…mowing lawns. (I know, it sounds kinda boring but making good money is never boring so try to stick with me.)

PART-TIME JOB

Let’s look at the expected outcome of finding a summer job. Based on recent discussions with students from West High School, the students felt that they would probably have to spend about 12 hours pounding the pavement, filling out applications, interviewing, etc. before they could even land their first job. They also hoped that they would be able to earn $8/hour and work 30 hours a week. Over the course of a 12-week summer, they would work a total of 30*12 = 360 hours + 12 hours to find the job = 372 hours. They would hopefully earn 360 hours * $8/hour = $2,880 which would give them $2,073.60 after taxes for a real average income of $2073.60/372= $5.57 per hour.

START YOUR OWN BUSINESS 

Now let’s consider something as simple as  mowing lawns. My 13-year-old son mows lawns for $20. A high student at West High School says he charges $30 per lawn so let’s average the two and say that mowing a single lawn takes about 45 minutes including cleanup and makes $25 per lawn or $33/hour. Granted, you probably can’t mow lawns for 30 hours a week, but how many lawns would you have to mow over the summer in order to make the same amount as your part-time job?

During the 12-week summer the part-time job made $2,073.60 after taxes. Taking that number and dividing it by $25/lawn rate of mowing lawns ($2,073.60 / $25 = 82.94) means that you would have to mow roughly 83 lawns over the course of the summer. This amounts to 62.2 total hours worked over the whole summer and means that you would have to mow roughly 7 lawns per week or basically one lawn per day. If you wanted to fit it all into one day you could mow 7 lawns in 5.25 hours and be done for the week!

By the way, every lawn you mow beyond the magical 7 will earn you an additional$300 over the course of the summer. So if you were able to mow 10 lawns a week, you would make an additional $900. To beat this with a part time job you would need to find one that paid $11.42 per hour.

KEY TIPS

• Just because you need to mow 83 lawns over the summer does not mean that you have to find 83 clients. You really only need to find 7 of the right kind of clients and mow their lawns every week.
• It may be difficult getting an adult to trust a teenager with being dedicated enough to do a good job and show up every week so expect to find a way to overcome this hurdle.
• Combine these previous two points as part of your sales pitch. You might want to let the potential client know that you are really only looking for 7 (or 10, or 12) clients who want you to mow their lawns for the entire summer. To show them that you are serious, you could offer to mow their lawn the first time for $15 (half the price you normally charge). If they like the job you do the first time, then you would like them to sign up for the entire summer service. And if they commit to the entire summer, you can save them $60 by charging them your summer series rate of $25 instead of your normal $30 rate.
• You might also want to consider a combination of summer job and summer business by taking a part time job AND mowing lawns one day a week and you would double the money you could make this summer.

To start this business you would have to go through the following very challenging tasks:

1. Find a lawn mower you could use.
2. Talk to enough people to find 7 lawns to mow. (Walking the neighborhood can provide a good indication on whose lawn needs to be mowed. Usually they are homes without teenagers, traveling parents, or rental houses.)
3. Be dedicated enough to show up every week and mow lawns and do a good job.

Almost equally important is what you don’t need to start this business. You don’t need a business license, a website, flyers, business cards, employees, startup capital, a good idea, or even your own lawn mower. Like all successful entrepreneurs, the only things you really need are the courage to start and the determination to stick with it.

(P.S. Your vehicle, lawnmower, fuel, and marketing expenses are also tax deductible.)