The Next Big Thing?
This is the first in a series of articles where I can spend a little time highlighting some areas where businesses should focus their efforts.?This is also meant as a nudge to those in the business support eco system to challenge businesses.?That includes accountants and banks etc.
A Value proposition or why a customer would want to choose one businesses product or service over their competitors is a good place to start. This is closely aligned by identifying the size of the market which I covered in my post last week.
By addressing a customer's pain points a value proposition highlights why a business will succeed in a competitive market place.?These pain points can often include one or more of the following:
·??????Price - their current solution costs too much;
·??????Time - their current solution takes too long;
·??????Efficiency – they are looking to reduce internal costs;
·??????Aftersales – They are looking for more efficient after sales support.
The Market Size (UK & global)
Often a business has no or little evidence about the potential size of the market at the necessary price point.?Often, they do not consider overseas markets and as a consequence fail to protect in lucrative overseas markets.?If this is done properly the support is out there to help.
I spoke to someone who had come up with an idea for a mechanical paint brush cleaning device.?His initial research had revealed that there was nothing like it (this consisted of an online search in DIY retailers which of course is not of any real value).?They were excited about their product and when I asked what the market size was, the reply was that everyone has a paint brush that needs cleaning at some point, don’t they??Finally, I asked about the intended price point.?They had a rough idea that it would cost about ￡40 to make a unit and so envisaged selling through a distributor to retail and would be on the shelves for ￡80.
These figures in the commercial world as described above don’t of course add up, but I asked them who was going to spend ￡80 on a paint brush cleaning device.?They pondered for a moment and said then admitted they did not know.?I didn’t know the answer either but personally I think the chances of these units being sold at this price point would be a big ask.?The point is that research would clarify the position.
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To balance things, I did meet a person who had come up with a device.?They had literally gone out in the street and did a survey of people over a period of a month.?They simply asked if the person they interviewed had experienced a particular problem and if the answer was yes, they would ask a follow up question along the lines that if there was a solution in the retail marketplace which cost ￡x would they buy it.?This meant there was no disclosure but this basic information gave them the overwhelming answer that people would buy at that price.?
To cut a long story short, the appropriate IP was applied and the product was quickly picked up by a company through a licence and the product is successful in the market.
Due diligence (Risk mitigation)
This is often overlooked but should be addressed as soon as possible.?In my experience this is not undertaken or if it is looked at, it is not done in detail.?In reality it should be a systematic review of the business proposition in order to identify and mitigate risks and uncertainty where ever possible.?This should be applied to every start-up.
The review through an IP lens should cover searches of designs (for the look of a product, patents (technical innovation) and often overlooked brand (trade marks and copyright).
There are free searches on the IPO web site which is a good place to start but two common areas which are not understood well enough are:
Names – registering a name at Companies House does not necessarily give the right to trade with that name and in addition the name could infringe another party’s trade mark.
Websites/labels and drawings are automatically owned by the creator unless they assign those rights. I have worked with a large number of businesses who where unaware of the above.?I met a company who were selling software and on reflection it appeared that they did not have a trade mark and the name may potentially be infringing someone else’s trade mark.?They did not own their website, logo or the software are they had all been created by third parties and no agreement was in place.
It is also worth noting that if there are a range of other knowledge-based assets such as trade secrets, know how/show which should be secured within the business.
It is true that due diligence can be time-consuming and can attract costs and this why founders may not pursue this area however a failed due diligence process can significantly devalue a start-up or even mean the business closes.?Perhaps this is one of the reasons for start-up failure in the UK. Please add your comments.