- Joined
- Oct 9, 2012
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I've had my fair share of experience launching businesses that I was really excited about and certain (along with my cofounders) would be both 1.) easy to do, and 2.) immensely and rapidly profitable. All ended up being extremely difficult, and most of them lost far more money than they ever made and ended up having their plugs pulled.
At the same time, I've also watched friends plunge into business as first-timers and make lots of money in a hurry. I'll try to list out what I see as the general differences between the failures and the successes of niche / product selection for starting a new business:
Failures:
Successes:
Put differently, I'd differentiate this as:
Failure: has a random and sudden idea, gets excited, plunges right into it with zero research.
Success: idea slowly percolates up after years of exposure to the market, and begins to realize a specific need is not being met by any of the existing players. Delays starting business for a while, because busy, or not certain the opportunity is right, but the idea doesn't go away, and keeps seeing or hearing over and over again how much this one thing is desperately needed.
A good rule of thumb is, if you think you're sitting on a GOLD mine, and you're feeling super excited, you don't know your market anywhere near well enough.
Conversely, if you think you'll be able to eke out a living for a while and maybe turn this into something solid a little later on down the road once you've got traction and business experience, you might have something.
Paul Graham has noted that the single largest quantifiable difference that yCombinator sees between successful founders and unsuccessful founders is persistence. I'd argue that's only part of it, though; founders with deep domain knowledge and background in the market are a lot more likely to persist because they know what the market needs, and they're able to adjust fairly easily by making small tweaks and get on the right path. Founders without deep domain expertise go in completely ignorant, only to realize once they're elbow deep that they know nothing and are going to have a very long, slow climb to competency.
My past failed businesses have been the latter; we've charged in, saying, "This is such a wonderful idea!" and then a few months in you find yourself saying, "Holy crap, I had no idea how well-established the competitors are," or, "All right, NOW I see why no one's doing this business," and not only is it demoralizing to realize how poorly you chose your business idea, but how long the slog is to get to even a tenth of where you thought you'd be at by a few months in.
It IS possible to choose a niche well that's profitable not too long into doing it. You've just got to be smart about how you do it, and make absolutely certain that you're choosing a market you know. If there's a market you want to do business in, but you don't know the market that well yet, go spend a year participating in forums or working for a company in that market. Don't worry; there will still be business opportunities a year later. And after a year of exposure, you'll have a MUCH better idea of exactly what those opportunities are, and how to tap them.
Chase
At the same time, I've also watched friends plunge into business as first-timers and make lots of money in a hurry. I'll try to list out what I see as the general differences between the failures and the successes of niche / product selection for starting a new business:
Failures:
- Stumble across some random idea, think it sounds great, resolve to do it immediately
- Little or no previous familiarity with the market. Assume that there must be lots of demand and few or no real competitors
- Realize only too late that the reason there are no competitors is because there is no market / product is impossible; OR
- Realize only too late that there are TONS of competitors, and most of them are actually quite good
- Not following any specific method for launching a business; mostly just pulling ideas out of the air
Successes:
- Carefully choose an idea after having spent a great deal of time in the market, surrounded by customers and acutely aware of a large, unmet need
- Tons of familiarity with the market - they know exactly the state of the market, and who all the big players are
- If there is no competition, they know why with a high degree of clarity (market just opened up due to regulation changes, etc.)
- If there is competition, they know exactly what those players' strengths and weaknesses are, and precisely what will attractively differentiate them
- Following a specific, step-by-step method for starting a business copied from a competitor, another industry, or a business "guru" who knows his stuff
Put differently, I'd differentiate this as:
Failure: has a random and sudden idea, gets excited, plunges right into it with zero research.
Success: idea slowly percolates up after years of exposure to the market, and begins to realize a specific need is not being met by any of the existing players. Delays starting business for a while, because busy, or not certain the opportunity is right, but the idea doesn't go away, and keeps seeing or hearing over and over again how much this one thing is desperately needed.
A good rule of thumb is, if you think you're sitting on a GOLD mine, and you're feeling super excited, you don't know your market anywhere near well enough.
Conversely, if you think you'll be able to eke out a living for a while and maybe turn this into something solid a little later on down the road once you've got traction and business experience, you might have something.
Paul Graham has noted that the single largest quantifiable difference that yCombinator sees between successful founders and unsuccessful founders is persistence. I'd argue that's only part of it, though; founders with deep domain knowledge and background in the market are a lot more likely to persist because they know what the market needs, and they're able to adjust fairly easily by making small tweaks and get on the right path. Founders without deep domain expertise go in completely ignorant, only to realize once they're elbow deep that they know nothing and are going to have a very long, slow climb to competency.
My past failed businesses have been the latter; we've charged in, saying, "This is such a wonderful idea!" and then a few months in you find yourself saying, "Holy crap, I had no idea how well-established the competitors are," or, "All right, NOW I see why no one's doing this business," and not only is it demoralizing to realize how poorly you chose your business idea, but how long the slog is to get to even a tenth of where you thought you'd be at by a few months in.
It IS possible to choose a niche well that's profitable not too long into doing it. You've just got to be smart about how you do it, and make absolutely certain that you're choosing a market you know. If there's a market you want to do business in, but you don't know the market that well yet, go spend a year participating in forums or working for a company in that market. Don't worry; there will still be business opportunities a year later. And after a year of exposure, you'll have a MUCH better idea of exactly what those opportunities are, and how to tap them.
Chase
