What Is a Viable Business Opportunity?
Lots of business opportunities exist, but that doesn’t mean they’re all viable. To qualify for that, the opportunity must lead to a sustainable business. And a business is only sustainable if it’s 1) profitable (that is, it brings in more money than it costs to run), and 2) those profits are of sufficient volume to meet your financial goals. There are a lot of business ideas that simply can’t be made profitable, or that are profitable but don’t generate sufficient income to support a single person, much less a family or group of employees. This is frequently the case for solo inventors, who may create a small and much-needed product or service but find the market for it too small to generate enough revenue to make producing it worthwhile.
CASE STUDY
Toxair: Necessity as the Mother of Invention
In Spring 2003, Dave Srebro had just been laid off from his job with an environmental contractor that had finished a project cleaning up a waste site outside Chicago when he had his “Aha” moment. As a part-time real estate agent, he was attending a training class required as part of his continuing education for keeping his license up to date when he began hearing about the very serious mold problem that was plaguing a lot of area homes. “I hadn’t realized it was such a big problem,” he says. “A light bulb went off.” Toxair was born.
Srebro went home and began tinkering with a prototype of an inexpensive attachment to a standard vacuum cleaner that could be used to perform air sampling in the home. Says Srebro, “I ended up inventing a scaled-down version of what the professionals use.”
The Airhound air sampling system is Srebro’s brainchild. It’s a long molded plastic tube that attaches to a vacuum cleaner and provides detailed information about the air in a particular room. It not only determines the presence of contaminants such as mold spores, carbon dioxide, dust mites, and carbon monoxide, but it also tells users the amount of contamination that exists. Srebro markets the Airhound as an inexpensive way for people to test the air in their homes before buying an expensive high-efficiency particulate air (HEPA) cleaner. He sells solely over the Internet, from his website (www.toxair.com).
As a one-person operation with very limited funds, Srebro needed to leverage his time and energy. Since he was attending graduate business school at the University of Illinois at Chicago when he was building Toxair, he paid a fellow student to draw up the engineering diagrams for his invention. He then asked around and got the name of a Chinese manufacturer that would do plastic injection molding at a price he could afford. “I didn’t want to go offshore,” says Srebro, “but U.S. manufacturers were just too expensive.” As it turned out, his experience outsourcing to China was only positive. “They did a really good job. First they sent samples, which I was able to check over for errors and tweak. Then they delivered the final product right to specifications.”
Srebro is in the middle of applying for a patent for Airhound, and he says one of the things he learned that other entrepreneurs should be aware of is that many lawyers will do pro bono work for new cash-strapped businesses. “Sometimes their law firms require it, sometimes they just want to give back to the community, but it’s a tremendous resource,” he says. “I got pro bono help with my patents, which amounted to thousands of dollars of advice. I couldn’t have applied for my patents without it.”
His other advice: become friends with your business associates. “Go beyond the business relationship to a personal relationship. Believe in your dream, and surround yourself with people who believe in it, too.”
Success Factors
There are a number of factors that can contribute to the viability and success of a business:
■ More innovative. You deliver something to the market that is either new or improves upon an existing offering. Sometimes this involves finding a new use for an existing product or service (or category of product/service). Sometimes this means deploying new technology. In the case of Tom’s of Maine, it meant taking a “mature” product category—toothpaste—and innovating by using all natural ingredients. Voila! A successful entrepreneurial venture is launched—and sometimes later sold. In 2006, Colgate-Palmolive Co. bought a majority stake in Tom’s of Maine for $100 million.
■ Higher quality. Offering a product or service that is of noticeably better quality than what others currently offer can create a very valuable business opportunity. Being dissatisfied with what’s out there now is a good sign that an opportunity is waiting to be discovered. Steve Ells, the founder of Chipotle, loved Mexican food but was struck by the fact that so much of it was simply not healthy. He thought others might want to enjoy this cuisine without the guilt and used the techniques he’d learned in cooking school to create great-tasting burritos and tacos using only fresh and natural ingredients. His instinct was correct: Today, there are more than 600 Chipotle restaurants, and the eatery was at the forefront of new trend in the prepared food industry—that is, providing the same high quality of food that’s found in full-service restaurants in fast food environments.
■ Lower cost. Being the low-cost leader is a time-honored strategy. But be aware that if your only key differentiator is that you provide a cheaper product or service, it is fairly easy for someone else to beat you at your own game. Unless you have some sort of strategic advantage, such as a unique source of supply or arrangements with partners that make your own expenses consistently less than anyone else’s, this can be a strategy that is difficult to sustain in the long term.
■ Better service. A number of very successful companies recognized and seized business opportunities made possible by the less-than-optimal customer service being offered by competitors. For example, JetBlue has built its reputation around providing flyers with more amenities—not just in first or business class but also in economy. Likewise, clothing retailer Nordstrom is famous for accepting returns of merchandise, no questions asked. Providing customers with personal attention and superior service is generally the way that smaller firms attempt to compete with larger ones that have more resources.
■ More convenient. Making a product or service available in a more convenient way for customers can create a viable business opportunity. A neighborhood hardware store might have higher prices, but its location means that customers don’t have to travel to one of the big box retailers. Likewise, a mobile pet grooming service might provide the same basic services as a storefront, but because it goes directly to customers’ homes, will carve out a very profitable niche for itself.
business Buzz
words
“key differentiators”
What makes your product or service truly different from competitors? Is it price? Is it quality? Whatever it is that makes customers want to choose you over others—that’s your key differentiator.
■ Easily available. Frequently the fact that a given market is underserved by a particular kind of business can be the basis for a successful enterprise. For example, a masseuse wanting to open an independent practice could look for a town or city in which the demand currently outstrips supply and build a very lucrative client base that would be difficult to establish in an area already saturated with massage therapy businesses.
Degree of innovation
Innovation can take many forms. There is a whole spectrum of possibilities for how you can innovate to exploit the opportunities you see around you:
■ Tried and true. Sometimes you don’t need to innovate at all. You can simply recognize that there’s room in the market for another doctor in private practice, accountant, graphic