Sunday, June 17, 2007

The Market Gap Analysis

When you are forming a business concept the Market Gap Analysis is one of the most powerful tools known. As the name implies a Market Gap Analysis is used to find gaps in the marketplace that are not addressed by either a product or service. It is best if these analyses are not done by one person unless he is very good, rather it is better if it is done as a group. This would include a group of people having expertise in several different disciplines. A particularly powerful combination is engineering, marketing and sales personnel.

In use a Market Gap Analysis is a double edged sword, and must be carefully controlled, or it may get out of hand. To give you an idea of how powerful a Market Gap Analysis can be: A large corporation conducted one, and the results almost wrecked the company.

What they did was to hold the Market Gap Analysis in a seminar like setting at a corporate retreat. They combined the different disciplines that were endemic in a corporate body. This included the trio engineering, marketing and sales. The results were that they uncovered eleven viable market gaps capable of $100,000,000 in sales. Twenty-six gaps capable of $50,000,000, and so many smaller gaps that they didn’t even bother counting them. So many gaps were found that the corporation became paralyzed for months trying to decide which gap to address. This analysis resulted in several spin-offs as various key personnel quite the corporation to address many of the uncovered gaps themselves.

In actuality, the Market Gap Analysis is another name for a brainstorming session. In this case the participants are looking for a product or service their business can address. In setting one up a set of parameters should be followed. The first of these parameters should be the size of the gap; say your gap is capable of generating $100,000,000 in sales. The other parameters might include engineering, marketing, sales, accounting, and manufacturing. It can also include any other discipline you might want to add.

This device is useful for not only starting a business, but can be used by established businesses as well. The one thing that you must observe is keeping it under control as it is extremely powerful.

Saturday, June 9, 2007

What is Our Business?

When one is planning a business this is the most important question for them to answer. Unfortunately it is a question that all to often is not answered. This is all to often to the detriment of the entrepreneur. By not answering this seemingly basic question tends to make your best efforts wander into fields you didn’t intend to go. When you are planning to go into business this is the first question you should answer.

It is not to say that your plans are written un stone, but at least by answering this important question at least you will find yourself set on the right track. It will cause you to focus on one goal rather then many goals. Too often in planning a business we tend to use a shotgun approach rather then a single goal rifle approach.

Another name for this process is, “Mission Statement.” This can cover a larger space in business planning then simply saying our business is, “Building homes.” The mission statement is often used in the corporate world by companies having more then one division. A good example is a large Japanese corporation hiving several divisions. Each of these divisions has a separate mission statement that is keyed to what each division does. There is also a “What is our business” statement for the whole conglomerate that describes the individual mission of each division.

I too am guilty of running a business or businesses without a clear statement of what we were doing. Very shortly I found myself running around trying to operate two businesses at once. The result was predictable, I was unable to give either of the businesses the time they needed. Consequently, both businesses suffered. I operated these two businesses for several years, and finally decided to get rid of one of them. The decision was based on a rather simple basis; which one paid the most for the least effort. The other business was sold.

It isn't Luck!

Many people think that starting a business, and having it succeed is just luck. It may be because the perception that it is. The real truth is that setting up a business, and making it succeed puts you in a state of mind that will make you grasp opportunities as they come along. This is quite true of a large construction company in my state that was on the brink of catastrophe when nature provided the area with a disastrous flood in August 1955. The three brothers who owned this company were in a position to capitalize on the disaster. Although the were on the brink of going out of business the disaster provided their company with a plethora of new business that they were able to take advantage of. Today, 52 years later this small construction company is one of the leading construction companies in the US. The three original brothers who were there in 1955 are still alive, and have turned the operation of the company over to their son’s and grandson’s.

There is no doubt that they had some really good luck in being able to take advantage of the disaster when it came their way. The real truth though is they were in such a mindset that when disaster came calling they were able to use it to their advantage.

Although the company was founded by their father in the early 1920’s it remained dormant for many years until the three brothers got out of the service at the end of WW II. They reformed the company after the war and for many years it staggered along. This was a period when they were forced to borrow machinery a,d equipment from other contractors to keep their heads above water.

I can remember one episode very vividly because it involved my own family. My father was going to swing some iron in conjunction with a factory building he was building a year before the 1955 flood, and the founders came to him to see if they could get the job. My father gave them the job. When they showed up on the jobsite I didn’t see their name on the crane they would have too use. Instead there was the name of some other construction company painted on the crane.

Sometime after the flood the three brothers got to fighting among themselves. They got into such a row that they wound up firing each other. Then they thought about what they just did, and realized that no one was running the company. With that they cast about for a consigliore, and came up with one of the two brightest people I have ever known. They tasked this man with operating the company which he has done ever since. It wasn’t luck that they came up with their consigliore it was more mindset between the three brothers.

This mindset was also sufficient for them to hand off the day-by-day operations of the company, and changed the roll of the brothers from forming policy to that of forming long range strategy. It has been an extremely successful company. For a company that probably has over a billion dollars in revenue per year it is still privately held.

Give me a Founder who isn't Rich

Give me a founder who isn’t wealthy, and I’ll show you a man who is likely to succeed. Wealth can be a distinct disadvantage in a startup because the tendency in there to make money do the work of inspiration. Nothing beats pure inspiration. If money itself were important a certain hotel heiress wouldn’t be going to jail.

In a startup situation being poor puts you into a state of mind where you can’t tolerate failure. In its greatest essence the hungrier you are the harder you will work. You’ll make every dollar you have do the work of ten dollars.

Most of this work is accomplished by leveraging what few dollars you have. I can’t but help to think of what a flaming disaster my first venture was. I had plenty of money available to finance this venture. The problem was that I thought that having this money that it would do my work. That isn’t what happened! Murphy’s Law took effect, and all I will say is Mrs. Murphy is a mother. I lost every cent I put into the venture, and then some. So you learn by your mistakes; so what!

My next venture started with a can and a flashlight. What was I doing I was picking nightcrawlers. In case you don’t know what these are; they are large worms that come out on a warm, wet night. What did I do with them? I hung up a sign on the side of the road that said bait. I sold them!

It wasn’t too long before I was making so much money from bait that I felt like I was paying more taxes then Donald Trump. I started with nightcrawlers, and before I was dealing in all kinds of bait, but fishing tackle as well. I finally sold the business for a handsome profit. But, not before I had started another venture.

This nest venture was another that I got into with a total expense of $499.98 and my wit. I have stayed with the new venture ever sense. The only thing is that the original business expense allowed me to have a fleet of airplanes and helicopters.

Not bad for not being wealthy!

Starting with Nothing

If you wait until you have enough money to start a business, you never will. One of the most common misconceptions about starting a business is that if you don’t have enough money behind you; you will fail. The truth is that with any startup it is far better to be broke. Being broke immediately gives you a truly tremendous advantage. It makes you think for yourself. By giving your startup the advantage of being broke will also make you work that much harder to make it succeed. One might say truthfully that the sinews of war aren’t gold; they are effort.

If you don’t think that starting a business is like starting a war you should read the 6th Century BC book by the Chinese General Sun Tzu; The Art of War. The lessons given in this book are ageless, and apply to making war or equally starting a business. During the Gulf War in 1991 Norman Schwarzkopf and his generals used Sun Tzu’s book to plan the Hail Mary Run that outflanked the Iraqi’s. It is also fodder for many of the military academies around the world. A translation of this book can be found on the internet. Read it before you start anything!

Another very good book you should read is “The Prince” by Nicolo Machiavelli. This book was bedside reading for two of the greatest tyrants of the twentieth century: Adolph Hitler and Joseph Stalin. This is a fifteenth century treatise on political science, and although it was written over 500 years ago its message is also timeless. Its real message is that it will tell you about human nature, and that hasn’t changed for thousands of years.

Now that I have armed you with two of the greatest treatises in warfare, or business, now is the time to form your own business. First things first though you should have immersed yourself in the lessons of these two books. Write down on paper exactly what you intend to do. This is also very important because it focuses your thoughts on the business, and when your thoughts stray as they will; you always have a reference point to go back too.

Starting a business is like getting married. You do it when you are prepared, not when you are ready. In the same vein you should have a woman who is also committed to your plans. If you don’t, God help you. The relationship between man and woman has smashed empires let alone businesses.

About starting with no money, well you get up in the morning don’t you?

Just remember that capital is wealth, it isn’t necessarily money. The things you already have will be enough to start with; the rest will come to you with time anyway. A very wise man once said, “Money is worth a nickel a bushel.”

Tuesday, June 5, 2007

Environmental Site Assessments

What they are:

An environmental site assessment is an investigation of a property that is either commercial or industrial in nature to see if they have been environmentally compromised. They take place in three phases. The first phase develops a history of the site to see if there have been any releases of hazardous materials on the site, and its prior uses. Generally, you are required to develop a history of the site dating back to 1940. We investigated one site that required us to go back in history to 1763 as there had been a tannery on the site then. Just about the last thing you would want to own is a former tannery no matter how old. The second phase investigation takes place when on a phase I investigation you discover that indeed a release of hazardous materials has taken place, or is suspected because of the nature of previous usage. A third phase investigation takes place if indeed there is evidence that a release has taken place on the site.

A phase I investigation is the least complicated of the three phases as all that is required is a written report concerning the site. This report would include: The owner’s name, the location of the site, prior usage, the site is located on a topo map showing its location, a report on the bedrock geology of the site, a report on the surface geology of the site, the ground water classification of the site, the source of potable water, if there are any nature preserves close by the site, an thorough examination of local, state, and federal records concerning the site, you also report on findings and conclusions concerning the site. The best conclusion is one that simply states that no further environmental work is required.

A phase I investigation is the least expensive of the three. From here the price increases dramatically depending on how much work is required on the site.

A phase II investigation is instituted when the phase I investigation has uncovered the undisputable fact that a release of hazardous materials is suspected or is documented on the site. This consists of taking soil and water samples off the site, and subjecting them to a certified laboratory analysis. If a hazardous material is detected on the site, it is necessary to go on to a phase III investigation.

By the time a site is discovered to be contaminated the buyer has taken off as fast as he can go. The site at that point usually becomes a Brownfield. This is a property that is known to be contaminated. There are special laws concerning Brownfield’s.

A phase III investigation is pretty much open-ended as far as its price goes. You never know what you are apt to discover, or where your investigation will lead. In your report you have to give a concise report on the extent of the contamination, and its effect on the health of the environment. At its basics it requires considerable sampling of both the soil and ground water present on the site.

From a phase III investigation you are lead into a remediation plan, which is the most costly of all, and they can amount into millions of dollars.

Sunday, June 3, 2007

Being an Entreprenuer

Anyone with the requisite authority

Anyone with the requisite authority can commence a war, but he can’t end the war he started. All war is like a crap game once you have cast your dice; you don’t know what is going ro happen. Most wars start off being fought like the last war, but they soon take on a life of their own. They use different weapons, and swiftly develop different tactics.

A good example of this is the French and British at the beginning of WW II. Both of them imagined that the war would be fought like a continuation of WW I. This didn’t happen during the years separating the two wars Germany developed a set of tactics designed to be swift. The allies on the other hand relied on their concept of a static war. Look what happened; the French were outflanked possessing one of the finest fortifications in the world the Maginot Line. The British who anchored the line against the Belgium border eventually got run out of Europe having to be evacuated from Dunkirk.

A lot of war is strictly based on posturing by the combatants. There is nothing better in a poker game then a good bluff, and outmaneuvering your opponent. Two good examples of this were the Invasion of Inchon during the Korean War, and the Hail Mary Run by Norman Schwarzkopf during the Gulf War.

Today we are faced with yet another war that we had apparently won in May 2003, but because of outside influences, mainly Al Qaeda we have seen this war dragged out for the next four years with no end in sight. George Bush is not to blame for what happened after it was thought we had won. If there is any blame it is because of these outsiders.

It does not help anyone except our enemies to have our country so divided over the war. On one side we have a faction that wants to continue with the war, on the other side we have a different faction that wants to end the war. It is a good thing that we are able to afford to have this controversy, but there is also the issue of giving aid and comfort to the enemy.

What is not apparent to the American people is that this is not a usual war where both sides square off, and have at it until one side or the other wins. Instead since the other side is completely outgunned by us they have had to resort to guerilla tactics. This is the most difficult kind of war there is to fight. The other thing that the American people fail to recognize that this is a religious war the other side thinks they are fighting to save the world. They are trying to save their world as they perceive it to be. Perception is everything!

We can win this war if we win over the common people on the other side. Without a population that they can swim in the guerillas have no place to hide. Cut the base out from under them, and they are finished. But, that is very hard too accomplish.

It reminds me of a comment made once by an Indian mine owner. He said, “It takes a certain amount of patience to operate a mica mine.”