Entrepreneurs Start with a Customer

I am often asked about resources to start a business.  Too often the startup entrepreneur is asking the wrong questions and looking at the wrong issues.  Before starting a business, a prospective entrepreneur must answer the marketing questions.

The most important issue around starting a business is the customer.  Let me say this again: THE MOST IMPORTANT ISSUE AROUND STARTING A BUSINESS IS THE CUSTOMER! Who is the customer?  What need (product or service) are you satisfying that they are willing to pay you?  Why is no one willing filling that need now?  Or are they?  How much are they willing to pay?  What makes your product or service superior to the alternatives?

Many entrepreneurs focus on financing, building, location, etc when starting a business.  Instead, they should answer the questions honestly before looking at anything else.  The #1 need of entrepreneurs at all levels is customers.  Without customers, you have no business.

When I started Gasper Corporation, I benefited from the business classes I took at Wright State.  The most important were marketing and accounting.  I used the concepts of target marketing to make the business viable and effective.  So here is how I answered the marketing questions.

Who was the customer? The 500-1,000 Automatic Teller Machine (ATMs) departments in banks worldwide.

What need did they have? The ATM industry was in its infancy and availability (uptime) was not considered thoroughly when ATM networks were designed.  The cost of downtime hurt their profits and bank image.

Why was no one filling that need? The startup industry offered the opening.  Competitors offered offline manual products while we had a chance to offer online monitoring and management.

How much were they willing to pay? We developed a pricing model based upon the size of the network.  Larger networks paid more as their problems were larger.  Our pricing model also reflected a payback based upon two values that our product offered.  1.  Our product reduced labor costs, so that savings was part of the price.  2.  Our product increased revenues from higher availability.  We factored that into our price.

What made your product superior? I started my career as an ATM programmer.  I understand the sensors and status signals better than others who designed management systems with no ATM experience.  I also understood the specialized switches (such as Base24) that processed ATM transactions.  Finally, conventional wisdom at that time did not believe that personal computers could process online transaction.  From my programming efforts in 8080 assembler and low level code of personal computers, I saw that was not true.  PCs were the wave of the future with more power in smaller boxes for less cost.   This specialized knowledge allowed Gasper Corporation to create unique position.

So we picked a small limited market with little competition that we could dominate. We stayed very focused on that small target market of 500-1,000 customers.  We could have created monitoring products for many other markets.  In doing so, we would have been wiped out by large competitors such as IBM, Hewlett Packard and Computer Associates.  Instead, we chose to target one specific market and be the BEST in that market.

The rest is history.  So, before you go looking for start up funding, answer the questions above honestly.  If the answers are not satisfactory, then FIX them with the right honest answers.