Six Fundamentals Every Entrepreneur Needs to Succeed
July 22, 2013 Editor 0
As an entrepreneur who founded and runs a successful and growing business, Getaroom, I see many entrepreneurs with great ideas but no clue how the business will be profitable. For certain websites or apps, if the idea is good enough you can get lucky and sell the business after you get a spike in interest. However, most companies require considerable planning and need both a competitive advantage and a solid business plan in order to succeed. For my company, I focused on a big market and found a profitable and attractive niche.
If you’re thinking about starting your own company, here’s my advice:
Set realistic expectations.
While enthusiasm and faith are needed when planning out your business, you do want to temper those thoughts with realism. Your projections for the business should not be wildly optimistic so you can manage your expectations and those of any partners. Consider the type of business and industry. Are you selling a lower margin product that will take time to gain traction? Or are you taking a shot with an app that might be a dud or might attract 100,000 downloads a month? Plan for a realistic amount of sales and interest so you can conservatively manage your finances. Are you counting on advertising to bring in customers? Remember that most advertising simply does not work, and you’ll need to attract customers through other channels and the power of word-of-mouth referrals.
With Getaroom, I understood the lodging market is massive and knew a niche player could capture a large amount of revenue, but my initial projections were modest and I watched expenses closely.
Have a clear value proposition.
Your product or service should offer true value. The value assessment has to go beyond your own biased opinion. You’re invested in the business, so of course you’ll feel it has value for your customers. Gather some outside counsel to be sure the value is clear and easily explained to your targeted audience. Envision someone referring your service to a colleague, saying “You need to get Service X because it will help you do A, give you B, and offer you insights into C.” If the value proposition is unclear, then you’re likely setting up the business for failure. Getaroom.com’s value proposition is based upon superior pricing and service. In an environment with rate parity such as in lodging, companies that can offer consumers reduced prices and exemplary service are able to really stand out as valuable.
Offer unique attributes.
Does your intended service or product bring something new to the consumer? If they already possess what you are offering, can get it for free, or can an easily acquire it from myriad competitors, then how do you expect to stand out? Will customers be able to identify and discuss your competitive advantage? Getaroom stands out because it presents a new model for hotel room booking. It features an unpublished rate program which gives consumers typically 10 to 20% (but up to 70%) off standard rates at thousands of partner hotels who want to move room inventory. What is markedly different about the company is these rates are only available through the Getaroom.com call center. The model is also different because we tell the traveler the name of the hotel, but not the actual rate until they book, while other models offer the rate but not the hotel name. We serve a clear segment of travelers who are looking for deals, but who also want to control where they stay. That sets us apart from our competitors. What attributes would set your venture apart from the competition?
Find your niche in a sizable market.
Knowing your clear value proposition and your unique attributes will help you determine where you fit in the market. We don’t offer every possible hotel, but we do offer unpublished rates for tens of thousands of the very best. Lodging is a $500 billion annual business, so for Getaroom, we don’t require too much of a share of that market sum to reap considerable rewards. Travel is a good market for entrepreneurs, but it’s not the place for copycats. You can’t compete with big booking sites unless you have an angle. Several of the large online travel agencies have a model of offering access to all hotels in every location; their angle is the sheer breadth of coverage. Others travel sites outsource their call centers overseas and really push all interactions to be electronic.
At Getaroom.com, we are a deal and value site, where we use pricing and a well-trained call center to stand out. We built a U.S.-based call center staffed with highly trained agents so they can offer enhanced services and act more like a travel agent than just a process person.
In large and expanding markets, there is always a value proposition to be found with niche players who can provide a compelling service. In travel, there is always someone looking to help research it, track it, or provide services for certain areas or class of travel. As long as the niche service has a true value proposition and a reasonable market audience, it can pull in profits.
Design a sound business model.
An entrepreneur can have the most unique product offering, one that offers tremendous value, but if her underlying business plan is not sound she has nothing. A quality plan is the key “how” of a business: how you are going to move forward with your service while keeping costs down? How do you ensure there will be demand for your product that can be reasonably sustained over the long term? How will you market your product or service to the intended audience on a reasonable budget? You need to be a hawk on the bottom line and ruthlessly manage top line expenses. The hard truth is that most businesses fail, and not always because the idea itself was not sound. A well-constructed economic plan does not of course guarantee success, but it is necessary and can turn a failure into a learning experience instead of a catalyst for personal financial ruin.
A sound model doesn’t mean you can’t deviate from the model and innovate when it is the right call. For instance, we instituted flash sales, where travelers have a limited amount of time to book, typically up to 24 hours. We usually offer these sales at 10 to 60% off, which creates an incentive for immediate action. This model is also a great driver for traffic to the site, as these sales are not pre-announced, but just pop up whenever the timing is right.
Pull in customers cost-effectively
Once you have the product or service and a solid plan lined up, you need to drive customers to make purchases. As I mentioned before, advertising typically does not work. Look at inexpensive promotions or contests and your social media strategy as cost-effective ways to attract consumers. Encourage conversations about your brand by asking for reviews or finding a way for consumer-created content that shows off your product’s unique features.
While none of this advice may seem particularly surprising, I’m always amazed by how many entrepreneurs have neglected to do this homework before they launch. If you want to beat the odds, make sure you’ve carefully thought through these non-negotiables before you start your business.
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