When an entrepreneur thinks about starting a business, there are two distinct concepts critical to success:


Passion was described best by Steve Jobs -

“…Because the people who are crazy enough to think they can change the world are the ones who do.” 


When we understand reality, we understand the problems, limitations, and constraints associated with any undertaking. As Thomas Edison said,

“A vision without execution is hallucination.”

Good ideas are a dime a dozen. Your best friend might have the next million dollar IPad App idea.  Ideas are great and they are the true engines of innovation.  An entrepreneur, however, needs to determine whether he/she can execute the idea and ultimately make enough sales to make money. It is excitement and energy that drives a start-up.  A new business frequently fails because small yet critical issues are often overlooked.

How can entrepreneurs balance Passion and Reality?

Entrepreneurs are often superb when describing how they perceive their company as different.  Typically, the best sections of many business plans are the description of the product or service and the expertise the members behind the business bring to the overall team. On the other hand, the weakest sections of the same business plans are usually the competitive analysis, the market research, the marketing plans, and the distribution plans.

With these key elements lacking in specificity and sophisticated analysis, no wonder so many start-ups fail.  To avoid these pitfalls, it is vital for entrepreneurs to examine these three key elements critical to starting a business:

Three Key Elements Critical to Starting a Business

One - How is your business different?

Think of a variety of products like purses, bagels, donuts, coffee, cars, cell phones etc. Why do you buy the one you do? Some people can go on for hours about the value, differences and advantages of different styles, prices, marketing etc. This exercise will illustrate both how people perceive differences and what is important to them. By the way, except for exceptions like bottled water and designer purses, price or perceived value is generally more important than we give it credit or customers admit.   

Two - How can you communicate your difference to your target audience?

This is one of the most difficult tasks of launching a new product. We all get excited about our differences but does anyone understand them. An obvious example is numerous technical advances which few people can explain or understand. Similarly, salespeople and even web comparisons are notoriously uninformed or unhelpful. Even Apple sales people who are generally excellent, seem trained not to compare Windows products with Apple products. Ditto Prada and Gucci and forget about cars all together. The list goes on.

Three - Do enough customers care about your difference to change their behavior?   

We generally hate change as evidenced by the following quotes:

“...if it isn’t broke, don’t fix it.  Another is, “we have always done it this way“

I am amazed my middle age kids still sit in their seats when they visit my house and complain when my grandkids sit in their seats. Similarly, we use the same products and visit the same stores because we just get into habits and need a real reason to change. 

Cognitive Dissonance & Planning Your Business

Cognitive Dissonance is an extremely valuable concept for developing new business strategies and taking into account the above elements just examined. One obvious characteristic of communication is the perceptions of the presenter and the environment within which the presenter performs his/her communication. We all know but seldom acknowledge that our perceptions of a presenter typically have a dramatic effect on our understanding and acceptance of the communication.  The theory of “cognitive dissonance” articulates this concept and has been affirmed through years of research.

Simple examples of cognitive dissonance in play are:

  • The differentiation (particularly over the last decade) of red and blue states in politics where 80-90% of the population has predetermined views and elections are focused on the remaining 10-20% who may change their mind.
  • Better appearance, clearer communication, more pleasant environment and respect for the presenter affects the audience’s acceptance of communication. Here lies one of the rationales for using celebrities or experts in advertising. 

Knowledge of “cognitive dissonance” can also be used to enhance your start-up efforts with regards to the following examples  :

  • quality
  • image
  • culture
  • packaging, and
  • customer service

You expect a consistent meal every time you walk into a McDonalds whether it’s located in Times Square or West Texas.  You expect the best in customer service every time you shop at Nordstrom’s.  These factors evolve from the culture of the organization—their core values. 

Anyone can put product in a store or pictures on the internet and attempt to sell. It is the differences in service and other factors that separate successful companies from those that fade into obscurity.

For example, customers don't care what your product or service does, they only care what it does for them.

Similarly a proven rule of marketing is to network with customers you know, keep loyal customers happy and learn to relate to potential and existing customers with even simple statements that would include: please, thank you and how are you.

In contrast, dissatisfied customers can be your highest costs. Late deliveries, internet complaints, poor service, defective products etc., can just kill businesses. For example, I helped to market a great new headboard that inflated like an air mattress, was covered with great fabric and leather covers and retailed for around $100.  The product could either be taken home or mailed in a small box rather than shipped with an expensive delivery. The air mattress, however, leaked after about one month which literally deflated the whole concept.   

Today the Internet is a critical aspect of almost any entrepreneurial pursuit.

One of the key realities of starting a business is the Internet and its newest related body attachment, the mobile phone. Consumers today rely on their mobile phones for virtually everything, e.g., information, research, purchasing, networking, and communication. For example, the internet is a great tool for information but remember the vast majority of your customers are also using it for information comparisons, promotions and purchasing.  Having a website, social marketing, and an e-mail campaign are critical elements of most marketing plans-- even for services and industrial products. Selling on the web is also becoming an important element of many programs and a great inexpensive way to start and test.

Will you make money?

It’s easy to get caught up in product development and marketing. Early in the process, entrepreneurs need to project when their product will start to make money. Without steady revenue streams, businesses often stall before they can even really get started. 

A preliminary marketing plan that outlines channels and target markets is absolutely crucial. One of the most frequent red flags for potential investors is a business plan projecting multi-millions in sales with minimal marketing expenses. Also, assumptions made about issues like pricing, costs, and revenue needs to be understood and intricately explained.

There are several aspects of making money every entrepreneur needs to consider:

  • As a rule, most businesses take six months to a year to even start. Have you detailed the startup expenses and investment costs to start the business? Those include expenses, equipment salaries, web-site development, product development, administration; pre-payments (rent deposits etc.).
  • Initial product and sales expenses need to be included:
    1. inventories,
    2. marketing, and
    3. sales expenses.
  • While sales are typically accrued (from an accounting perspective) at the time of the sales, there are numerous deferred issues: receivables, letters of credit, etc. that can affect cash but not the business’ Income Statement and must be understood.
  • Upfront marketing, promotions, public relations (P.R.) and development costs can affect income and cash on hand.   

Can you deliver what you sell?

Operations and logistics are frequently viewed as secondary functions that can be outsourced. In reality, they present a huge opportunity for a business to become more efficient and differentiate itself.

  • Balancing and managing inventory to serve demand and reduce closeouts can be critical to success. Even in service businesses, scheduling staff to meet demand and avoiding time and money wasted can be critical to success.
  • Reducing lead times, improving flexibility, and planning can improve effectiveness and lower costs.
  • Many operations experts have shown that 80% of sales are derived from 20% of offered products or services.  Entrepreneurs waste time, money, and frequently add confusion by adding too much complexity to their business models. When and if possible, always go the KIS Method (Keep it Simple).

Starting a business is an exciting and potentially profitable effort. However, it takes time, analysis, capital, and commitment. Entrepreneurs must allow their passion to drive them while staying vigilantly in touch with reality

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Passion, Reality and Starting a Business