Incidentally, setting up a business: Develop the right business concept - 2 X 4 tips


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Text comes from: Das Feierabend-Startup: Risikolos gründen neben dem Job (2017} by Erik Renk, published by Münchener Verlagsgruppe (MVG), Reprints by friendly permission of the publisher.
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Even if you are only an entrepreneur on the side, you should still give your business concept enough thought. Because the way you make money is critical to your success.

Incidentally setting up a business: Develop the right business concept - 2 X 4 tips

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Erik Renk is a serial entrepreneur.

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New concept: Xerox became successful through a new business model

What can a business concept achieve? This is clear from the example of Xerox. Xerox invented leasing in 1959 with the 914 printer. The printer weighed a ton and cost $ 2.000 to make, which was a lot of money at the time. The selling price was a multiple of that.

It never occurred to anyone to buy this expensive device. Xerox changed the business model and introduced leasing in 1959, with a stake of $ 95 a month and 2.000 free copies. From that point on, Xerox increased its market share to 97 percent and turned over a billion dollars. The decision to change the business model to monthly leasing instead of selling the printers was what made Xerox so successful.

How do you set up an after-work startup and the processes?

As you can see, it can be the same product or the same service. The question of “how” is always crucial: How do you set up an after-work startup and your processes?

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The most important question that should be asked right at the beginning of the after-work start-up is: What problem do you want to solve? You have probably already found possible starting points, forged ideas and brainstorming with friends and acquaintances. There are two things to watch out for: How has the problem been solved so far, and how many people are affected by the problem?

Mass market or niche?

If you want to offer solutions for the mass market and align the business model accordingly, the following can happen: You successfully develop the solution, but it turns out that it only benefits a few people. The product works, but the business model does not, because the offer only pays off with increasing sales. With the question "Who has the problem?" you can avoid such mistakes from the outset and better assess the niche.

A good example is the development of laser television. A great idea that should revolutionize the home theater market. The point is that the image is projected from behind onto the back of the screen. So nobody can walk through the picture and produce a shadow.

Avoid expensive flops

Since 2009 there has been a solution from Mitsubishi on the American market that never reached the mass market, but was celebrated by some hardcore film buffs. The Sony Aibo, a robot dog that has been in dog robot heaven since 2006, is also a good example of fabulous flops. The price of 2.088 euros was probably a little high, because the robot couldn't do much more than pick up a stick.

Another example of how you can miscalculate if you don't ask yourself how the problem has been solved so far and whether customers are willing to switch to the new solution is an invention of the Bic Group. The Bic Group is the largest manufacturer of disposable lighters, ballpoint pens and disposable razors.

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When customers aren't ready to switch

The gentlemen in the development department found that disposable panties were a logical successor product, without thinking about the fact that customers are not ready to abandon the current simple solution, namely washing underwear. The same applies to the willingness of customers to switch from a known, established provider to a new, unknown one.

For example, it is an enormous hurdle to motivate Apple fans to change products, since mobile phones, computers and cloud form a common unit and a change is very exhausting for the customer. Hardware, software and service form an integrated system. If you try to integrate another, third-party device into the system, nothing may work at all.

Be self-employed or an entrepreneur?

The basic question you should always ask yourself: Do you want to be self-employed or an entrepreneur? I know how great the temptation is, especially at the beginning, to exchange time for money, like the self-employed. In the short term, it is easier to make money from than to bring a working concept or product to market that generates long-term returns.

What's the worst that can happen with the time-for-money approach? You can compare it to a visit to the casino where you were successful and made a profit of € 500 from a stake of € 1.000. They think you can do the same thing over and over again. If you are making a good income from self-employment, you will quickly be caught in a treadmill. It's hard to let go.

Exchange know-how for money

I know self-employed people who answer their e-mails on vacation or who have a heart attack when they open their mailbox afterwards. The more sustainable way is to come up with a business concept with a great product behind it. Because that is exactly what you do as an entrepreneur; You are not exchanging time, but rather your know-how for money.

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Your knowledge can take various forms and is reflected in the development of your products and your business concept. In development, the journey is the goal. Over the years I have discovered in myself how my business concepts got better and better.

In the beginning we did not include the customer in our considerations and developed our business concept only for us in our ivory tower. We made the product available to the customer only after it was completely completed. We had to find sobering that we hadn't thought of many things. If we had included the customer from the start, that would not have happened to us. Thus, large amounts of resources have been wasted.

3 business concepts at a glance: What would you like to be?

As an entrepreneur, there are various business concepts open to you. An overview:

  1. Manufacturer: Smart processes are necessary here in order to create good products with little financial investment, especially at the beginning. What are your options? Find a cooperation partner with a company in whose production you can build a prototype. Rent a so-called makerspace in order to save on building an expensive factory. A makerspace is a workshop that you can rent for a short time to tinker with. Would you like to develop a new bread? Why not ask a baker who only uses his production facility at night until the early hours of the morning? Other possible products can be hardware or other technical devices.
  2. Retailer: As a retailer, you do not have to manufacture a product, but obtain it cheaply from somewhere and reach the target group. The retail sales monopoly has broken down. Today anyone can sell products on Amazon, eBay and Alibaba. Many manufacturers even offer white label products. You can have your name, logo or any other design printed on it at low cost. A good example is Spreadshirt. There you can have your own design printed on the products and include them on your website. Spreadshirt takes care of the rest. May I introduce: Amazon FBA. FBA stands for Fulfillment by Amazon. Fulfillment is a service from delivery of goods, storage, repackaging and repackaging to shipping. In this case, Amazon takes over the entire process for an after-work startup. There are other fulfillment providers as well. Just enter “fulfillment” on Google.
  3. Expert: How do you build up an expert status? I answer this important question in the field of marketing. With this goal it is particularly important that you invest in scalable products. The difference between speaker and trainer makes it clear: The trainer or coach has to accept mandates again and again and work off assignments for strangers. The speaker, on the other hand, works on his books and e-books and speaks in front of a large audience. It scales over the number of participants. He usually earns more in 45 minutes than a coach in several trainings.

4 busness methods at a glance: Do I have to reinvent the wheel?

But how do you get your business model? In fact, there are also three different business methods:

  1. Transferring ideas: You can transfer existing, successful ideas to new fields. This method is by far the most commonly used. The transfer to other industries can make sense. For example, Airbnb has pioneered the provision of housing that has not been used. Uber was able to use this successful example to offer a private taxi service. Almost everyone has a car and thus the possibility of transporting someone. This solution is much cheaper than a normal taxi. Because with Uber you can choose whether you want a single "taxi" or whether you want to share the costs with people who want to go in the same direction. An algorithm calculates the optimal route. Unfortunately, the taxi lobby in Europe has so far stopped Uber's progress and thus prevents people from getting to their destination cheaper. Always keep an eye out for interesting and good business concepts. The business concept of Dr. Günter Faltin loved it, and I transferred his idea to another area.
  2. Create: This is by far the highest and by far the rarest discipline, as it involves the greatest unknown and therefore the greatest risk. This is about creating a completely new concept and opening up new markets. A good example is the sharing economy. With this concept, multiple and intelligent use reduces costs. The smartphone and the development of strong marketplaces have created a new business model. Successful CompanyRidesharing, DriveNow, CartoGo and Uber are developing this market. These companies have the first mover effect on their side. The first mover effect is the advantage a company has when it comes to being the first to enter the market. At this moment the company has no competition, but also no experience. Due to the lack of experience, the errors and undesirable development costs can be very high. There are always two sides to the coin.
  3. To repeat: In this case you are an impersonator. This is very annoying for founders who have created a new business concept. Although the first mover effect is missing, you don't have to make all the mistakes yourself and see what has already proven itself in the market. The pioneers in this area were the Samwer brothers who founded Rocket Internet, Zalando, Hello Fresh and many other companies. In the beginning, they imported successful business concepts from America and raised the same model under a different name in Germany. In 1999 they founded the Ebay clone Alando. The company went on sale in March 1999 and was sold on Ebay in May for $ 43 million. Other founders of Alando were Max Finger, Karel Dörner and Jörg Rheinboldt. However, I doubt that copying business ideas is still promising. The Samwer brothers have also changed their strategy, and the creation of a copy cat, as this process is called in technical jargon, is no longer the focus.
  4. Combine: You can also combine different business concepts. For example, in Hamburg many small boutiques also offer coffee, cake and other delicacies. One business attracts customers for the other, and rental and ancillary costs can be shared. As you can see, there are a ton of different approaches to business models. There is no such thing as “THE business model”. Rather, these different strategies are intended to serve as inspiration. If you want to delve deeper into the subject of "developing business concepts" or are looking for additional literature, I can recommend the book Business Model Generation. Recommend a handbook for visionaries, game changers and challengers by Alexander Osterwalder and Yves Pigneur.

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