How and why not to rush capital into your company

Perhaps the biggest question one faces when starting a venture for the first time is “How will you afford it?” That question goes both for leaving one's day job and finding capital to support the company. While for the first-time entrepreneur, keeping the day job is a good option that will spare him quite some worry – we've been there – finding fresh capital might be something to hold off for later. Two major streams of increased financial stability and decreased need for borrowing are savings and postponing spending altogether.

The reason saving is so important to success lies in future's uncertainty. If I rely on inheriting a large sum of money at some point in the future and thus neglect my work, my chances at wealth go down every minute I choose to daydream instead of writing a business plan. If a firm's prospect depends on a single angel investor that might or might not show up, I have to suspect that the firm will not live for long, either.

Therefore, if financial injections are inevitable for a venture, it's best to conjure them from personal savings. A borrowing-free approach will make the firm that much more attractive for outside investors later on. It will eliminate the burden for repayment to outside parties. It will relieve a firm from outside controllers. Napoleon Hill said it well in his Law of Success: forming the habit of saving is the only way to independence.

And yet, in most cases, one does not even have to resort to spending his savings for a company to enter its blooming season. A manufacturing firm's need for packaging is a good example of a situation where being thrifty can result in a better costs-to-profit ratio than developing an original spending plan. I'll admit it: Developing and manufacturing new packaging is a fun, creative process. And yet, today's world could use less boxes, bottles, and double cellophane wraps. Instead, one can use that which has already been made. Look, the humanity is looking to reduce the speed at which it fills its landfills. Not to be preachy or to point it out, but yes, great opportunity for some truly socially responsible innovation. Saves money, too.

An even richer source of increased ROI that doesn't require any spending are the intangible assets that inhabit our planet. We humans have things like knowledge, experience, and imagination. Those who have already passed on left us with some pretty good intellectual and physical infrastructure. Those who are still here have not yet reached their full life potential. So, 21^st century entrepreneur, go out there and make use of what other people are more than happy to offer. They will thank you for that.

Quickly before you go catching the wave of free underutilized opportunities, leave your comments and subscribe to the NVSBS blog. We hope you have a blast this weekend.

How to bring Frankenstein's creature to life and then profit from it

Mary Shelley's infamous protagonist Victor Frankenstein knew it from the moment his creature saw the world: Victor's principal venture was going to bring an ROI that even the most optimistic business plan could not predict. Whatever happened there? Victor invested his college years into developing a clear goal, and, before too long, his vision materialized.

Now, I hope that those of you who've read the book realize that I'm joking. NVSBS would not wish the outcome of Frankenstein's actions for anybody. But a part of the story's moral still holds true: With enough persistence and the right idea generation mechanism, one can reach any ambition, including bringing the dead back to life - I'm not even mentioning generating simple everyday sales. Later in the article, I've posted a video that showcases how entrepreneurs would employ Frankenstein's creature in a more desirable way. The video is an excellent example of innovative thought that allowed the German company that made it distribute an extraordinary advertisement by word-of-mouth. I strongly suspect that the reason behind this project's success at going viral rather quickly lies in five concise concepts behind idea generation.

1. Ask questions. Tom Szaky, the founder and CEO of TerraCycle, has said in a presentation I attended earlier this year that the whole idea behind his upcycling business started with the question: "What is garbage?" Often, inquiring beyond the matter of fact leads to either greater understanding of the world or to discovering plentiful pathways for innovation, like it did for Tom Szaky. If you make electronics, ask your neighbors about how their lives could be more convenient, and your research and development will see genius coming through. If you are a freelance writer, ask questions when reading the New York Times and your opinion pieces will flourish, and so on.

2. Welcome the unusual. The "unusual" is unusual because people have not recognized its value. What that means is that everything obscure holds abundant wealth for the person who sees its value first and then shows it to the rest. Early adopters also get to indulge in the benefits of welcoming the unusual before the crowd follows. Maybe it's risky, but also it's the only path to successful idea generation: everything that's no longer unusual already holds too many entrepreneurs to support any new business.

3. Embrace the obstacle. Life's troubles are the entrepreneur's biggest assets. Once you think of a way to overcome a hurdle and make life easier for everybody else, you will be able to harvest lots of advantages from your findings. Apple does this by eliminating bulky hardware. Blackberry does this by putting your e-mail account into your pocket. MS Outlook does this by combining the functionalities of multiple professional software packs under one roof. You get the picture.

4. Link unconnected areas. Being an expert in more than one area or just thinking about several topics on a daily basis can bring your idea generating abilities a mile closer to those of celebrated polymaths like Michelangelo and da Vinci, whose expertise ranged from engineering and anatomy to writing and sculpture. With that said, broad interests can put a small business owner at significant advantage because of the immense innovation possibilities that reaching into multiple fields keeps. If your firm is a computer repair store, and you minored in art in college, one day you might as well come up with the idea of gold-plating your customers' MacBooks as an extra service.

5. Use the resources on hand. Maybe neither you nor I hold millions in the bank vault, and getting capital in this economy might not be the easiest task either. However, you do have plenty of other assets that are already free. Not to limit you down, but here are some examples: public domain art, the local library, tap water, your congressman's ears, the ocean, the sky, your friends and family, and, importantly, your knowledge and experience.

Now let's look at the real Frankenstein's creature and why innovative thought is not nearly as scary as Mary Shelley dared to depict it.

Let us know in the comments what you thought about the video and how soon you could tell the monster's identity. And, finally, don't forget to subscribe; it's good for you.

How to invent a bicycle

Every now and then, an idea will stick to my mind and will not let go so easily. The invention will materialize in my imagination in different shapes and forms, and sometimes the idea will be so pervasive that I will put effort into making it happen. This "bug" may be a completely new thought or just an improvement on some previous development, but in any case, I predict that most readers here are not immune from the inventor syndrome either. From personal experience, I can say that the brain children of plenty of inventors, entrepreneurs, designers, and artists go through the following life cycle that I'd like to call instinctive idea generation:

1. An image of a final product suddenly pops up in the thinker's mind
2. The image goes through some massaging and development as a thought
3. The owner of the image puts it down on paper
4. A model of the conceptual product goes through tests
5. A final version of the product comes out into the markets

Realistic or not, this sequence is a recipe for creative disaster. It can work with aesthetic creations, but with anything else, the five-step system above fails to ensure that the product meets a need or serves any sort of purpose. Therefore, even if the final product manages to reach the point of launch, its best chance of success will be to become a fad, and then quickly die out. That resonates with the idea that instinctive idea generation may create a cool-looking object, but consumers will quickly realize its lack of meaning and abandon it to the creator's despair.

Nevertheless; I plead thee, innovator: Do not despair. Things are not so hopeless for the creative thinkers out there. The best way to ensure that a project fulfills a purpose is to start with a question or a problem instead of a ready image. As an illustration of a successful innovation-based venture, Artemy Lebedev Studio published overviews of the creation process for each of their designs. For them, every project starts with a clearly formulated goal. Then they proceed to the fun part of thinking and creating. The results are stable and sound.

We would love to hear about your experiences with innovation and creative business models. Furthermore, NVSBS strongly encourages innovative thinking and is here for any visionary who might want some advice about the practical side of it all. We look forward to seeing new comments and subscriptions, and you will hear from us on Sunday! Have a good Friday now.

The hidden side of the holiday industry

The boys dress up as vampires; the girls dress up as princesses. The older siblings walk them around the neighborhood, and the adults hand out sweets at their doorsteps. This seemingly rigid, family-rooted structure, give or take pumpkin carving, has long been a staple of American childhood, but has been somewhat corroded by commercialization in the past few years. The October 31 industry, according to Selling Halloween magazine, is nearing five billion dollars in contribution to the national economy.

Now hold on there, a Selling Halloween magazine? Yes, there is an entire magazine dedicated to this very seasonal business. Granted, it does come out only about once a year, but their 21-year history only proves the stability of this very temporary field. Another standing testimony to the money-making abilities of Halloween is the Halloween Industry Association with its 5 day-long international Halloween show right next to Manhattan's Madison Square in December.

To me, this looks like a sign that there are some opportunities to take in the holiday market. The HIA and Selling Halloween are live examples of seasonal B2B, a space that might hold some potential work. Furthermore, there is a number of trends in our society that I could identify into which the 10/31 industry yet has to reach.

Does not doing homework sound like a good idea?

Ideas can be pretty amazing tools. At certain points in time, great ideas laid down the foundation for great inventions, remarkable commercials, masterpiece paintings, and every single book at your local library. Does that mean that every idea is good enough to seed your next victory? Maybe not. In fact, all the novels lying in publishers' slush piles without use, and all those projects that send well-established corporations into the red, also have the ideas of well-meaning individuals behind them. Nevertheless, the mere possibility of failure should never discourage you, especially considering that market research can significantly lower a project's riskiness.

So what is research? On the easy end, it can come down to a simple Google search for the information you need. On the other extreme, you might need to spend hours in a lab, hire test subjects, or conduct a survey at a mall. Take our word on it - there are many ways to go about researching and testing a business idea, and it is therefore important to know about the attributes of effective market research for a successful venture.

The main goal of it all

Setting the right goals is paramount to a useful outcome. These do not have to be too detailed if your project is just at its beginnings, but specificity helps get the project started on the rightest foot possible.

Here are some example questions for an entrepreneur researching his idea of a new vegetarian restaurant in St. Paul, Minnesota:

"Do humans enjoy vegetarian food?"

"How much money do people in St. Paul, Minnesota, spend on eating out every week?"

"How many St. Paul residents adhere to a strict vegan diet?"

This short list of things allows the entrepreneur to arrive at the ultimate goal of his research, and that is whether the market for vegetarian dining in St. Paul is big enough to support a new restaurant. Once he is able to answer this question, he will know for sure if his idea of a vegetarian diner is viable.

Beware of the confirmation bias monster

The same way the parent of a human would tend to see his child's accomplishments as signs of genius and dismiss his child's flaws as unimportant, the parent of an idea is predisposed to view his project favorably. So, idea parent, beware: The confirmation bias is out to get you. Ways to combat it include hiring an independent party to conduct the research, blinding all parties so that no participant in research is aware if its ultimate purpose, or just constantly reminding the ultimate aim of market research to yourself.

Questionnaires

Surveys are relatively simple to arrange. Thus, if you decide that this is the tool of your choice, it's important to keep some survey questions open-ended to allow for unpredicted responses. Other things to keep in mind are the various biases that can arise from question wording and from the order in which questions are asked.

Focus Groups

Focus groups can serve as a source of rich material, but are difficult and costly arrangements that require skilled moderators. Before setting one up, consider the following ways that these groups can go wrong: participants influence each others' reactions, and no response is genuine; the moderator intimidates the group into his way of thinking, or the participants do not take their job seriously. These pitfalls see a variety of researchers break their informational legs, including large corporations like Apple.

Market research is a fundamental task that goes into new product development and management. Ideas generation, another major task in the new product offering field, will be the next topic for discussion on the NVSBS blog.

SEO vs. AdWords: The winner is not that obvious.

We’ve heard it on numerous occasions; we know it well: a space on the first page of a popular Google search is the Christmas gift of choice for 99.8% of corporate websites. The other 0.2% already happily appears among the top ten, and is not very willing to move down. If you are the owner of a website that wants to be in the top ten for its keywords, your options come down to search engine optimization and AdWords. While both of them have the potential to let your web page reach its goal search engine position, there are distinct differences between them that lead some people to be “SEOers” and others to be “AdWorders.”

To many, the benefits of SEO are rather obvious. However, investment in search engine optimization is yet to become wide-spread:

• Better brand credibility. While SEO makes it possible for the website owner to deliberately get on the first search page, customers still perceive “natural” page promotion as more trustworthy than sponsored links.
• Offline services. It is slightly more importat to avoid pay-per-click in the first place if your customer will at one point or another interact with your firm outside of the Internet, be it a straightforward phone conversation or a full-fledged visit to your office.
• Long-run cost effectiveness. Once SEO gets your page onto the top, maintenance costs are practically absent. In the long term, investing in SEO brings enormous return on investment and thus makes a lot of sense.

On the other hand, some say that AdWords contradicts the nature of search engine marketing. They thus ignore pay-per-click as an option in the first place, to which I say that AdWords are not all that straightforward:

• Instant results. With a paid advertisement, you can generate immediate traffic to your webpage. AdWords is a relatively simple technology, the biggest prerequisite of which is your willingness to pay per visitor’s click.
• Ease. Showing up among the first ten for competitive keywords is a lot easier with a pay-per-click campaign than through search engine optimization. Again, one should only be willing to make a monetary investment into the program.
• No search algorithm changes. With pay-per-click, the need to spend time keeping up with changes in Google’s search algorithm evaporates because Google administers AdWords itself.
• Online services. Promoted searched are generally more appropriate for online services that do not require the customer to interact with your company anywhere outside the net.
• Only monetary investment. Finally, unlike SEO, AdWords does not require you to hire a specialist or study any literature. Like I mentioned, its technology is rather simple and anyone familiar with the Internet should be able to conquer it. Furthermore, by choosing to learn SEO, you give up the time that would have otherwise gone into improving the quality of your firm’s offerings, or making follow-up calls. Opportunity costs are looming.

It’s up to you whether you choose the one, the other, or both. Your choice should largely depend on the nature of your business. However, internet marketing is also a matter of personal choice that reflects your professional personality.

Check back for a fresh update on Thursday. Comment, subscribe, and have a remarkable week.

The results are in!

We are very proud to announce that the first NVSBS Weekend Business Challenge is officially over! Give yourselves some applause, because everybody who participated (even if they didn’t send in anything) should be proud. We thank you for being with us to witness the Weekend Business Challenge’s first step.

This week’s topic was the Pareto principle, or the idea that an average endeavor gets eighty percent of its results from only one-fifth of the time and money investment that it receives. This 80-20 rule concept is fairly simple. However, we asked you to think of additional applications for it, and think you did.