Thursday, July 15, 2010

Developing Business Ideas

In the last article I discussed natural talents, hobbies and skills as the basis for a thriving business. The crux of the discussion was that if you are to go into business, make sure that business is aligned to your talents and hobbies, because only then will you enjoy running the business. If the business is based on your skills or on what other people have been doing (meaning you just copied their ideas), you may make money but you may not be satisfied because it goes against your nature. If you ask seemingly successful business people, they will tell you that they still feel there is something missing in their lives. Their real interests (talents and hobbies which give them real satisfaction) lie elsewhere.

Let me give you an example. PNG has recently witnessed a boom in motels, lodges and guest houses, both in rural areas and in the main centres. This has been a response to the shortage of reasonably-priced accommodation in the hospitality industry. All the hotels have priced their rooms out of the reach of the majority of clients, so small lodges and guest houses have sprung up to meet the needs particularly of ordinary Papua New Guinean travelers, small business people, public servants etc. Many families in urban centres have converted their houses or parts of them into guest rooms which they charge on a nightly basis instead of renting the houses out for monthly income. A four-bedroom house can be rented at between K500 and K1,000 per week depending on location, but it can also make between K80 and K150 per room per night. In this instance, the owner has the potential to make between K9,600 and K18,000 per month (assuming 100% occupancy) instead of just K2,000 and K4,000 per month by renting the house.

I have been doing a bit of travelling lately. As a small business person, I cannot afford staying in a hotel, so I have been staying in lodges and guest houses, most of which are run by families. What I have noticed in many instances is that even though the location of the place and the rooms are okay, the atmosphere is not inviting. Sometimes people do not greet you; some are rude. You can feel that the people who run the business are only interested in money, not you as another human being. If you look into the lives of such people, you will invariably find that they are not naturally generous and hospitable people. They are running the place just to make money.

A family friend recently established a lodge. The man and his wife are very compassionate and generous people. They have looked after a lot of other peoples’ kids over the years. You can sense love in their hearts when you talk with them or visit them at home. Their lodge is always full of guests, so they are making a lot of money. But for them, the lodge is not merely a money-making venture. It really exists as an extension of their hearts of hospitality and generosity. It is an avenue for them to meet people and show them acts of kindness. You can sense generosity when they give you a free complimentary breakfast. Their meals are also very generous. You get more in terms of quality and quantity than you can get from a hotel. For me, this family is in the right business. They are doing something that aligns well with their nature and the kind of people they are.

What Business Should You Start?
As you may recall, I have defined a business as a system established to solve problems or meets needs of society. When we see a business in operation, our minds immediately go to the money that is made. But money is only a reward. The main purpose of the business is solving problems and meeting needs.

If you think of a business in this way, you will realise that the sky is the limit when you start thinking of what business to start. This is because whichever way you look, you will see problems to be solved or needs begging to be satisfied. Most people see these problems and needs as just that: problems and needs. But people with entrepreneurial minds see problems as business opportunities. They believe that problems and opportunities are opposite sides of the same coin.

So if you have been reading the articles in this column and have been wondering what is the best business to get into, I encourage you firstly to open your eyes and see the needs that are out there, and secondly, to see how best you can marry or match those needs to your special set of talents, hobbies and skills. That is if you want to do something that is novel or completely new and unique, something different from what everybody is doing.

I have been emphasizing this because I believe that your chances of success are greatest if you are the first to spot an opportunity and establish a system to take advantage of it. When you do something new and start making money from it, other people will definitely copy what you do. But being first in the market gives you the advantage of establishing contacts and developing a client base which newcomers may have a difficult time winning over.

The next best thing you can do is to look at what other people are already doing, and introduce a product or service that is somewhat differentiated from what is on the market. Or if you live in a centre where nobody is doing what you have seen people do in another place, you might introduce exactly the same product or service if you have the means to do it. This is in fact one of the main ways the majority of businesses have been started. That is why the majority of businesses are similar, with only a few differences in the way the businesses are conducted or the products or services are packaged and delivered.

Let me give you a simple example in the PNG context. Consider the market for live chickens. In Goroka where I live, 8-week old chickens used to be sold for K20. Today, demand is such that chickens are sold for between K25 and K30 at ages ranging from 6 to 8 weeks. You can easily sell 6 week old chickens for K25. Most farmers buy day-old chicks in lots of 50 at a time. They then feed the chicks for 6 weeks before selling. After sales they buy another 50 chicks for fattening. So their sales regime is 50 chickens every 6 weeks. Assuming that all the chickens live and get sold, their gross income is K1,250 every 6 weeks. Half of that income would cover costs, with the other half being profit.

If you wanted to get into the live chicken business, you could do it a bit differently as follows. Instead of buying 50 day-old chicks, you would buy only 20. After 2 weeks you could buy another 20, and another 20 the following fortnight. In this way you would have a constant supply of 20 chickens to sell every second week.

Let us consider your income potential under these two regimes. If you sell 50 chickens every 6 weeks, you would work with 9 batches in a year. Your gross income would be K25 x 50 chickens x 9 batches = K11,250. With 20 chickens every week, your potential annual gross income would be K25 x 20 chickens x 26 batches = K13,000.

The advantage of selling 20 chickens every second week is not so much the money you make. Of course you are in the business to make money so money is important. But what I want you to see beyond money is the need for live chickens that you would be meeting. No matter where you are, there is a big need for live chickens. There are always different kinds of parties, celebrations and ‘mumus’ going on. In PNG society traditional ceremonies take place almost every weekend, even in urban centres. And people prefer live over frozen chicken.

What I have noticed is that many farmers do not have chickens to sell on a consistent basis. Most of them tell clients that they have run out of chickens or that the chickens are not ready for sale. Not many have chickens to sell every week. So their incomes are sporadic, not constant.

If you came up with a plan to sell batches of live chickens on a fortnightly or even weekly basis, you would have a beaten path to your house, because buyers would know that no matter what day or time they come looking for chickens, you would not turn them down. You enable them to meet their needs, and they happily pay you. The word would also get around that you are a serious farmer who has chickens to sell every day.

You could start with 20 chickens a fortnight, then to 20 a week and maybe increase to 50 or 100 a week after you gain experience and establish an efficient management system. At that level it would be a business turning over thousands of kina in a year.

I am sure that you can think of several other businesses people already run which you could improve on and make a comfortable living from.

Brainstorm Several Ideas
It is better to consider between 3 and 5 ideas instead of locking yourself into just one idea. The more ideas you consider, the more likely you are to zero in one that works. Don’t limit yourself. Be open-minded, and don’t be afraid to even consider ideas which seem crazy.

I have discovered in my own life that ideas in my mind come to me in a different way when I speak them out and hear myself express them. I therefore like discussing with people, not to get their opinions but primarily to use them as my sounding boards. All I need for them to do is to just listen and allow my words to bounce back from them. The more I speak, the more new ideas come to me in ways I never thought of initially. It is based on this experience that I also like listening to people talk about their dreams and aspirations. They need me as their sounding board. They need to get their ideas bounce of me and return to them in a new ways.

It is for this reason that I normally advise young people and students to establish what I call ‘success councils’ made up of like-minded people where they can generate and share ideas. Some people call them ‘master mind’ groups. Most young people get into groups to talk about their boyfriends and girlfriends, or sports, politics, religious beliefs, etc. While these may be important subjects, I propose that it is even more important to talk about business ideas in such groups.

Many large corporations which are progressive have such groups where they encourage employees to talk about ideas to take their organizations forward. They are already successful but they don’t rest on their laurels, because the business world is becoming increasingly competitive. In order to survive as well as to make progress, they generate new ideas through the ‘master mind’ groups.

I have read that an increasing number of educational institutions in America and elsewhere have been encouraging students to form such groups and start businesses even while studying, in recognition of that fact that paid jobs are scarce. Many universities now boast student entrepreneurs as a result of these business brainstorming programs. This is something for our institutions of higher learning to consider.

The subject of today’s discussion is obviously extensive and I know I have only scratched the surface. The two possible ways to develop ideas which I have highlighted are firstly to consider starting a business which is completely new by tapping into your talents or hobbies and matching them to the problems and needs around you. Secondly, to take ideas which are already working and make improvements to them so as to make your business stand apart from the rest.

I hope you have gained some insight into how you can develop a business idea.


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