« The MBA Education And Other Oxymorons | Main | Private Means Private or How To Avoid Dropping Trou »
Small Ideas, Big Benefits
By Uncle Saul | August 23, 2007
When viewed from The Fringe, the world is like a cash booth from a bad 1950’s TV game show. Just like in the game show booth, in the real world, you can count on various exogenous factors to generate some proverbial wind that will swirl the cash around and force you to work a bit for the money. However, in the end, all you really need to do is reach out and grab the cash. When you position yourself on The Fringe, you will quickly see that money making opportunities are all around you.
One way to grab some cash and learn valuable entrepreneurial skills along the way is to launch mini-ventures or Venturettes. Such ideas require little-to-no capital, usually last for a relatively short duration and are of nominal size.
If you just ask yourself, “then why bother?” - read on friend, read on.
Once the Ball Starts Bouncing, You Never Know Where It Will Stop
Brownian motion is alive and well in business. You may remember from 8th grade science class that Brownian motion describes the random movement of atomic matter, caused by collisions with molecules of the surrounding medium. Once an atom begins moving, it randomly sets other atoms into motion, causing a domino effect, similar to ripples in a pond. Entrepreneurs create opportunities by creating ripples, and mini-ventures are great ripple creators.
The next time you are part of a large gathering of people, think of how many ways you could monetize the situation. For instance, if it is a hot day, you could sell bottled water, soft drinks, etc. If the crowd is gathered to see an entertainer, you could sell T-shirts, posters, etc. I am not suggesting that you become a sidewalk huckster, just that you begin to open your mind to all the legal ways you can slip your hand into peoples’ pockets and purses and pull out a few bucks.
Three examples of mini-ventures carried out by me and my fellow Wharton classmates are described below. Note that I am not purporting that these are particularly amazing or unique ideas. They merely serve to illustrate how easily you can turn pedestrian opportunities into profitable Venturetts.
Pop Quiz: See if you can guess which one was my mini-adVenture.
Fashion Show
Two Wharton students needed new suits for the dreaded MBA interview season. Rather than schlep downtown and pay retail, they went to one of the most expensive tailors in Philadelphia and offered to host a fashion show at Wharton, featuring the tailor’s suits, in exchange for two free suits each.
The fashion show was a huge success. The students were given valuable dress for success tips, the tailor sold a significant number of suits and the entrepreneurial students got free duds.
It’s Called Business
One Wharton student was too lazy to take notes during lectures. With the first test looming, the entrepreneurial student borrowed notes from three rather scholarly students, consolidated them into a single document and sold copies to other students for $5 each.
The student scholars whose notes were used to create the consolidated document were given a complimentary copy (and thus the benefit of the notes from the other two students). The scholars also enjoyed the prestige of having their notes included in the consolidated document, as it was a clear indication of their intellectual prowess – a status highly valued by the legion of Wharton overachievers.
This enterprise netted the entrepreneurial student a nice fistful of bills before each test. In fact, this mini-venture was so successful that the student continued to sell such consolidated notes for the remainder of the student’s Wharton tenure, earning a number of hefty fistfuls of beer money.
At one point during the second year of this enterprise, the entrepreneurial student was approached by an indignant Wharton Professor who tried to shut down the note selling operation, which was taking place outside of the Professor’s classroom. When the Professor asked, “What do you think you are doing?” the smartass entrepreneur replied, “It’s called business. Last I checked, this was a business school.” Rather than shutting down shop, the student simply moved the operations down the hall and continued satisfy the brisk student demand for the consolidated notes.
Nostalgic Graduation Poster
Another Wharton student contracted with an undergraduate art student and paid him a nominal sum to draw a caricaturized map of the Wharton campus, showing the proximity of all the bars, hangouts, etc.
The entrepreneurial student then had a couple hundred of the maps printed, framed a few dozen, and set up shop in front of the business school. All the prints were sold in a matter of hours, at a profit of $30 each. This mini adVenture did so well that not only did the student earn enough money to travel to Europe after graduation, the entrepreneur franchised the idea to a lower classman, who then sold the same prints the following year and split the profit with the entrepreneur who originated the idea.
From Small to Tall
In some cases, Venturetts morph into substantial ventures. I was once on the Board of such a company.
This mini adVenture began when the Founder agreed to remotely manage a server for a friend as a favor. To make his job easier, he created some security tools to protect the server against hacker attacks. He then showed his security toolkit to a colleague, who laughed at the user interface, built a better one in his spare time, and unwittingly became a Co-founder of the mini adVenture.
The two Founders then offered their security software for free on the Internet and it quickly became one of the most popular open-source security solutions on the market. These free downloads were intended to be solely for personal use. Within days of releasing the personal version, the Founders began receiving inquiries regarding the price of a commercial version of their product. One such inquiry was from the Salt Lake Winter Olympic Committee. With no idea what a reasonable price might be, the company agreed to provide enterprise-wide security to the Salt Lake Winter Games for a few thousand dollars. The Founders were thrilled to get paid for what had previously been a hobby and the Salt Lake folks were happy to pay tens of thousands of dollars less than they had budgeted for such services. For more discussion of entrepreneurial pricing, see “At What Price?”
When checks started arriving at their condo (they were running the part-time business, from their spare bedroom), the Founders realized that the dogs were eating the dog food and it was time to quit their day jobs and focus on turning this mini adVenture into a full-fledged startup. The company thrived for several years, generated millions in revenue and was eventually sold to a substantial software security company.
Track Record
Investors invest in people, not ideas. Thus, you become a more attractive investment once you have a proven track record of executing – even if the ideas you executed were relatively conscribed.
Venturetts can demonstrate to an investor that you know how to make something from nothing. Generating profits, even in a mini-venture, is a good proof point that you can replicate your mini-success on a larger scale.
In addition to providing you with valuable entrepreneurial experience, mini-ventures can also generate enough cash for you to safely exit your day job at Big Dumb Company and strike out of The Herd (see “The Fringe”). This supplemental cash will lower your risk of failure, as you will have some wind under your wings when you make your base jump and thus reduce the speed of your freefall. This will give you more time to build your parachute in mid-air (see “The MBA Education And Other Oxymorons”).
Smooth Operator
Mini-ventures allow you to demonstrate that you can pull together disparate resources and bring multiple parties to the table by creating and then delivering a viable value proposition. Such ventures also demonstrate that you can effectively negotiate with multiple parties and craft mutually advantageous deals. In short, Venturetts prove that you can effectively sell yourself, your idea, your product and your startup’s overall opportunity.
For instance, the students who put on the fashion show had to sell the idea to the retailer, and then plan, market and orchestrate the show. The student who sold class notes had to convince the smart kids that they were getting adequate value by giving up their notes for free (i.e., getting the consolidated notes in return) and the entrepreneur had to negotiate a fair price with the students who purchased the notes. The entrepreneur also had to deal with an exogenous, regulatory factor in the form of a meddling teacher who wanted to shut down the student’s profitable community service.
Exercise: Weekly Business Idea
Force yourself to identify at least one venture idea each day for one week, and then one idea per week thereafter. Looking for small ventures will help you open your eyes to the myriad of opportunities that surround you. See the Weekly Venture Idea worksheet for specific guidance regarding this exercise.
Vincent Van Gogh was clearly a man who saw the world from The Fringe. In his long walks through the countryside, he would come upon a hill, a windmill or a tree and see an intrinsic beauty that compelled him to feverishly paint, even though thousands of other people had passed the same hills, windmills and trees without giving them a second thought. If you carry out the weekly business idea exercise for one month, you will start to see the world in a different way and eventually you will become an Entrepreneurial Van Gogh who can identify opportunities where others see nothing.
However, unlike Van Gogh, who died a pauper, your new perspective from The Fringe will allow you to enter the cash booth and scoop up some cash by identifying and executing mini adVentures.
Answer to Pop Quiz: As you can likely guess, I was the smart-ass kid who told the Professor that I was running a business. Although I am slowly maturing in this regard, when it comes to people trying to meddle with my ventures, decorum is not my strong suit.
When working on your venture ideas please consider the following:
Structure your idea in six categories
- 1. Product Name
2. Customer Problem/ Pain Points
3. Execution
4. Market
5. Personal Applicability
6. Feasibility
1. Product Name
- State the anticipated name of your product/service
2. Customer Problems/ Pain Points
State the problem/ pain points of the customers clearly.
Are there any companies out there which already address these problems/pain points?
- How do those companies do it?Are they successful?How would you be different from them?
3. Execution
- How will your product/service look like?
How will your product/service address the market?
State clearly how it will differ from existing products/services that already address the same market as yours
4. Market
Use a bottom up approach when you identify your market. Don’t just state “it’s huge/gigantic”!
- Who is the customer? End-User? Retailer?
What is the market? How does it look like? How does it work?
How can you approach the market?How many customers can you serve reasonably?
5. Personal Applicability
- Which position will you hold in the company? Why? (Be honest)Which qualifications do you bring into your company?Which qualifications have to be fulfilled by your team members?
Which additional intelligence do you need to start the venture?
6. Feasibility
- Is your idea feasible? (It’s ok to say ‘no’)Give reasons. It is important to state why you think it is reasonable or not. E.g. if your research has shown that the actual market for your idea is too small, then your product/service is probably not very feasible.
Would you be able to find/hire your team?
Can you implement your idea with personal money or do you have to raise money?
Final Mark:
Would this idea be good enough to perform a thorough feasibility
study?
Yes No?
Topics: Fundraising, Launching Venture, Strategic Planning |
August 26th, 2007 at 5:35 pm
Great Post! Lots of ‘big’ companies started out as ’small’ ideas. The main thing is to get in the game.
October 21st, 2008 at 10:31 am
[…] stands are great mini-ventures for mini-entrepreneurs. As described in Small Ideas, Big Benefits, the basic issues involved in running a successful lemonade stand are highly transferable to a […]