Thoughts on starting a new business. Part 2

This post is part of a series. Click here to read the previous post. Click here to read the next post.

Using the funnel method to find a niche

Ideas_Funnel

Most people’s idea of starting a new business revolves around an invention. A better mouse trap. The elusive canned bread. Something no one else has ever come up with before. An idea so revolutionary, they can’t ever discuss it with anyone and must apply for a patent immediately before the first prototype is ready. That, however, is the old way of launching a business.

We know that it is very likely for new businesses to fail. The statistics are somewhere around 8-9 out of 10 that are slated to fail within their first 10 years. We also know that good ideas don’t come by easily too often and often the seemingly good idea an entrepreneur comes up with is in an industry where he or she has absolutely no experience in. This is very much like putting the cart before the horse. You are focusing on a niche and then considering the market/industry afterwards. A visual representation of this is like that of an upside down funnel.

wrongwayThe downside of coming up with a new business idea this way is that it is counter-intuitive and can easily make the entrepreneur miss an opportunity to evaluate other niches he or she may be more adept in.

Thankfully there is a better way to come up with startup ideas. Just turn the funnel upside down!upsidedownWith this methodology of brainstorming for a startup idea, the entrepreneur begins by choosing the industry he or she already possesses work experience in. After deciding on the industry, the next step is to drill down further into the larger markets and then finally identifying a niche that is under-served and has a potential for growing and sustaining growth.

Here’s a quick example of how it works and how powerful this methodology is. Utilizing information from S&P’s NetAdvantage Industry reports, an entrepreneur can quickly compile data on various industries, their recent performance, factors affecting growth now and in the future, as well as come up with a likely outlook scenario based on historical data.

Industry Recent Performance Factors Affecting Growth Outlook
Banking[1] Trailing four-quarter profits for the US banking industry through the third quarter were $153.1 billion, up a robust 15.9%. Regional banks are performing strongly, as loans grow and interest rates rise. Pockets of strength have emerged, such as auto lending, a highly profitable business for banks. (see Exhibit 1) -US ECONOMY GROWTH RATE -HOUSING MARKET ACTIVITY -NET INTEREST INCOME GROWTH RATE -FINANCIAL REGULATORY REFORMS: THE DODD-FRANK ACT, THE VOCLKER RULE The next 12 months for these banks will likely depend on the growth of the US economy, housing prices, the length of the low interest rate environment, and regulatory costs.
Computers: Software[2] SaaS revenues grew from $29 to $36 million from 2012 to 2013. However many software companies see about one-third of revenues coming from each of the three regions (the US, Europe, and Asia). Accordingly, software companies tend to be exposed to global economic trends and, overall, the US met expectations, Europe was a bit weaker than expected, and Asia was mixed, with results varying by country. (see Exhibit 2) -SaaS BUSINESS MODEL -DEVICE PROLIFIRATION OF SOFTWARES INTO EVERYDAY HOUSEHOLD APPLIANCES. -BIG DATA -CYBER SECURITY -MERGERS & ACQUISITIONS OF IT COMPANIES Overall as an industry, S&P believes that the companies are right-sized due to the M&A’s that occurred during the recession and are prepared to make the most of any upturn in end markets.
Healthcare: Facilities[3] In 2011, the S&P Health Care Facilities subindex declined 20.8%, versus a 0.3% drop for the S&P 1500 Super Composite Stock Index. However, in 2012, the subindex advanced 29.1%, versus 13.7% for the S&P 1500. Year to date through December 6, 2013, the subindex was up 46.8%, compared with the 27.1% increase in the S&P 1500. (see Exhibit 3) -RISING HEALTHCARE COSTS -2% MEDICARE RATE CUT DUE TO SEQUESTRATION -OPERATIONAL VOLUMES (SO FAR REMAIN WEAK) -LONG-TERM REIMBURSEMENT OUTLOOK REMAINS TENUOUS -PENALTIES TAKE EFFECT FOR HOSPITALS NOT LOWERING READMISSION RATES -UNCERTAINTIES DRIVING MERGERS & ACQUISITIONS Rates paid by managed care organizations (MCOs) to hospitals will remain steady, rising in the mid-single-digit range for both 2013 and 2014. This would be generally in line with the increases experienced over the past several years.
Retailing: Specialty[4] Those fortunate enough to have jobs continue to spend at a modest pace. To maintain their current standard of living, consumers have also dipped into their savings and increased the borrowing on their credit cards. While we don’t think this behavior is sustainable over the long term, total retail sales (in nominal terms) increased 5.0% in 2012. While this is a solid number, it is also the lowest rate of growth since 2009 (by comparison, retail sales grew 8.0% in 2011). We expect sales to decelerate further in 2013, given the additional pressure placed on consumers with higher taxes and anemic wage growth. (see Exhibit 4) -UNEMPLOYMENT -RECENT PAYROLL TAX LEGISLATIONS -STOCK MARKET GAINS -FALLING U.S. SAVINGS RATE -HOME IMPROVEMENT AND HOME FURNISHING RETAILERS CONTINUE THEIR RECOVERY -CONSUMER ELECTRONICS FIRMS SQUEEZED BY PRICE COMPETITION Home-Improvement and Pet-Supply stores will continue to gain momentum and increse their revenues while office supplies and consumer electronics retailers’ future is predicted to be rather bearish according S&P.

[1] Enk Oja, “S&P Capital IQ Industry Surveys – Banking – January 2014”

[2] Barbara Coffey, “S&P Capital IQ Industry Surveys – Computers: Software – August 2013”

[3] Steven Silver, “S&P Capital IQ Industry Surveys – Healthcare: Facilities – December 2013”

[4] Michael Souers, “S&P Capital IQ Industry Surveys – Retailing: Specialty – September 2013”

Now that you know how to use the funnel method, it is time to start talking about a business plan. Read more about it here.

Questions and comments are welcomed as always.

The best Android Smartphone. Part 1

A very brief synopsis on Smartphones and their history

phones

Smartphones have become an unavoidable part of doing business. Ever since the introduction of the Palm Pilot PDA device, Personal Digital Accessories have made near instant inroads into the lives of business executives.

Palm launched a plethora of personal digital devices in the late 1990’s that sported its Palm OS operating system. The devices were very well recieved in the business world and the company became wildly succesful, at one point breaking into 2 companies, one focusing solely on hardware and the othet on OS development alone. All of Palm’s devices relied on having a stylus for menu selection as well as for taking notes. During the turn of the century, Palm’s new rival, RIM – maker of the BlackBerry – took advantage of the changing technology landscape and mobile data services and launched a device that boasted its instant messaging platform that many still believe is the best to this day. Palm was left bleeding customers and could not muster a counter punch.

Palm’s last savior was the Treo 650, a colored touch screen phone with full qwerty keyboard and a stylus that was launched in 2003. It remained very successful among the Palm die-hards within a rich eco system of applications, written for the Palm OS platform over the years.

Fast forward a few quick years, along came iPhone and the rest was history. Palm quickly lost the last of its supporters and BlackBerry also suffered massive losses in the United States market as customer flocked to a brand synonym with the revolutionary iPod and one that was well known for delivering quality products that stood the test of time better than most of its rivals.

Fast forward a bit more and Google announced that it was throwing its hat into the smartphone ring and the Android was born. All of this happened in a timespan of less than 20 years with companies going from bank to bust left and right in the process.

Smartphone of 2015 vs smartphone of 2000

Needless to say things have changed dramatically in the last 15 years as far as what consumers and business executives are looking for in a mobile device. In circa 2000 smaller was always better when it came to phones and having a company mobile and a personal one had its own charm and novelty value. Today a 2 inch screen phone has virtually no place in the mobile device market. Bigger screen is the way to go. Having a company issued device like the old BlackBerry is also the trend of the past with more and more companies embracing the Bring Your Own Device (BYOD) culture of unifying and streamlining communication. Business executives want a single device that can answer all their needs from being an alarm clock to providing turn by turn navigation to meetings with clients.

Business Android Smartphones roundup

In this review, we are focusing specifically on the best Android smartphone hardware. Apple products running IOS and Nokia devices that run Windows are also not included in this review.

Our simple test was to use these devices ourselves and also interview our colleagues and clients and guage their experience with the devices. Unlike what is done on other review sites, we are not so concerned with immaterial details like screen size difference of 0.2 inches or amoled vs super amoled screen resolutions. Our focus is on the overall ease of use, added value of the prepackaged software, and the synergy between the OS and the hardware.

We use 2 very simple criteria to judge our smartphones:
1) Hardware layout and positioning of buttons, jacks, ports, hardware communication features like NFC, and removability of battery.
2) Ease of use of the ROMs that the phones come with and the level of integration of various software functions within the ROM.

You can read the full review of each device in our upcoming post here.

Thoughts on starting a new business. Part 1

Seize the Opportunity 

Starting-a-Successful-New-Business-in-2013

Everyone dreams of starting his or her own business some day. To be the boss and have more or complete control over our own financial future certainly appeals to many of us.

But like everything else, starting up your own business can very daunting by its very nature. Add to that the prospect of entering a market which already has well established competiton in it and the initial level of hope is cut down by half. Being that this is the year 2014, you can also pretty much rest assured that there isn’t any market left that hasn’t already been explored, expanded into, or exploited by someone else.

The key is, however, to come to the realization that there is always room for improvement. Regardless of whether your competition is Apple, Microsoft, BP, Tata or Tom’s hardware down the block. There is always a seat at the table when the general public is invovled.

Customers want variety and brand loyalty is never permanent. To drive this point home let’s look at an example that many of us can relate to. We either know someone who fits this category or are ourselves in it. A few years ago there was nothing better than a Sony electronic appliance on the surface of this earth it seemed. Sony’s Walkman and CDMan (If that’s indeed what it was called!?) were the stuff of legend. But look what is happening today. Customers who were once loyal to the Japanese brand of Sony televisions for decades – like Samurais were to the Shogun – are now switching over to Korean brands like Samsung and LG in droves. The reason? They do not want to be tied-down by a single ecosystem of just one brand.

Likewise, more and more companies are outsourcing and utilizing third-party vendors for many aspects of their businesses to reduce cost and also for diversification purposes. Most large companies in the U.S. today have close to or well over a dozen software packages that are in use daily ranging from ERP, CRM, reporting modules, financial modules, payroll modules, commission modules, sales modules. Name a business function and there is an off-the-shelf module for it available!

It is the very basic nature of people, especially those in the management realm, to diversify and follow the mantra of never putting all their eggs in a single basket. It sounds great on paper but in reality diversification also often-times leads to problems stemming from mismanagement.

As frequently as new business are formed, they close down. The generally accepted statistic that only 1 in 10 businesses makes it past 10 years is very real and its effects can cause major issues to companies who rely on a business model that doesn’t adapt well to change.

Being in the unified business solutions business, this is essentially what keeps our company in business. Often times we get calls from customers who are working on systems designed by companies that are no longer in the business or from customers who need to migrate data over to a new platform because the vendor will no longer support their outdated piece of software.

Business landscapes change all the time with new emerging technologies. The internet revolutionized practically every business. If not in the operations realm then at least in the marketing one. Tablets have replaced PCs and smartphones are slowly but surely replacing landlines and even computers in many instances. This entire post was composed on an LG G3 via the WordPress app (more on that later) for instance.

So the first thought about starting up your own business is to always remember that there always have been and always will be opportunities out there for your business. The key is to be at the right place at the right time, be able to adapt with the changing times, or in some instances be able to hold on long enough for the right time to present itself. More on that in our next blog post here.

Comments and questions are always welcomed.