I was on the phone yesterday with an entrepreneur from Texas who has a great business idea. Or, so he thought.
He emailed me about 6 months ago and we’ve been corresponding back and forth. I always love hearing from my readers and passionate entrepreneurs and try to help whenever I can.
However, there is a very big difference between a great idea and a great business idea.
For example, a great idea is coming out with black and brown band-aids. Why not have band-aids that match black and brown people’s skin color too?! But that’s not a great business idea. Companies like Johnson & Johnson and P & G would eat your lunch.
They already have the distribution and the factory and the deep pockets to launch this product virtually over night. Creating a company that is going to produce brown and black band-aids is not a good business idea. But it’s a good idea.
So as we started talking I sensed his enthusiasm and was really excited for him. However, I asked him how he intends to make money.
“Well, I’m not sure,” he said. “I’ll figure that out later.”
Sorry but that’s wrong!
If you’re starting a business, especially as a younger entrepreneur, you need to focus on your revenue model. Please note: I’m not saying you shouldn’t focus on serving your customers/clients. I am obsessed with client service. But I’m able to make money by obsessively servicing my clients. I knew how that was going to happen from day 1.
I love his idea. It’s fantastic. I’m always interested in investing and helping very early stage companies with a great idea but you need to know how you’re going to make money. And before I’d ever invest in a company, I’d want to know that they’ve, at least, made $1.
The most important dollar you’re ever going to make is your very first dollar. You know someone is willing to (and wants to) pay for your product.
Unless you have extremely deep pockets you can’t afford to run a business that’s not generating revenue. Before you bet the entire farm on your business make some money. Crawl before you walk!
My latest magazine column for Millionaire Blueprints Teen is exactly about this. Check it out:
The PDF is attached here.
And to my man from Dallas, we’ll get there. But first we’re going to focus on crawling and we’ll be running in no time!
Adam I 100% agree with you. That has always been my biggest complaint about a lot of young entrepreneurs. They see these startups with VC funding and think I just need a great idea.
If you have millions in VC funding then you are right. Most likely you don’t and that means you are a citizen of “reality” and need to make money and lots of it to cover your many expenses as a business owner.
Start small and build up until you are ready and have the funds to expand to a full fledged endeavor.
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Aaron
Aaron, thanks for the comment!
-A