How to Start a Business with No Skills Down (Except One!)

I've been absorbing a lot of wisdom of late. If I had to name drop, and let's face it, in this day and age it's the only way to prove your paying attention, here are a few voices that have been filling me with inspiration of late - Dane Maxwell, Sean Ogle, Tim Ferris, David Risley, Sam Ovens, Rosalind Gardner...

I could go on.

What's become apparent is that there are two approaches to building (starting) a business : stick to what you know and follow your passion/hobby, and forget what your passions are and find a market with problems to service.

Pro-bloggers, for example, tend to fall into the former camp. Dane Maxwell and The Foundation fall clearly into the latter, and then take it one step further by pointing out that the real money is in just finding people to consume services (i.e. lead generation.)

I'm sitting on the fence, and boy is it uncomfortable.

I understand that people want to follow their passion, but I also understand from watching Shark Tank, Dragon's Den, and The Apprentice, as well as listening to the wisdom of those who have gone before me, that not everyone will share that passion. It's also possible (even likely) that not enough people share your passion to make a business out of it.

So, what do you do when you find that the market wants something that falls outside your skill set?

Easy - outsource! Tim Ferris started me off thinking about this, and Dane Maxwell backed up my initial hunch that the most successful businesses are going to be those where the entrepreneur isn't doing everything themselves, and uses skills of others to help them achieve true greatness.

Plus, by outsourcing everything, you remove yourself from the business, meaning that it will happily run along without you, needing only a firm hand on the tiller from time to time.

For most of us, this is great, because we have the attention span of butterflies, and often find it tough to concentrate on the same thing for any length of time. If all we have to do is manage a bunch of outsourced processes, we're happy as can be.

The main message this - don't worry about not knowing (for example) how to write good copy, or how to create an app, or produce a membership based web site and software as a service (SaaS) offering. There are people who can do all of these things.

All you have to worry about is finding the right partners, at the right price, and then managing them. As an entrepreneur you've likely got the skills to be able to do these things, all you need to do is unlock them!

Is My Business Idea Any Good?

Working out whether a business idea is any good is a tricky proposition. There’s the tried and tested ‘overnight test’ where the entrepreneur can leave the idea overnight and come back to it at a later date to see if it still holds water (and if they still want to do it!) However, as regular Dragon’s Den viewers will attest to, there are three key questions that often crop up.

Firstly, many investors, banks and Dragons included, will want to know the ‘margin’. This is the difference between the price of the product (usually wholesale) and the cost of manufacture; in the case of services, it is the difference between the cost or provision and price placed upon the service. In both cases, it is often quoted as a percentage, but it’s useful to know the actual numbers as well.

This becomes evident when the second question pops up : is the business idea scalable? In other words, are the processes, knowledge, and business activities replicable to the point that a decent return can be had, in terms of the margin? Does the business scale such that the return increases, at least in line, and preferably better than proportionally to the units sold?

A scalable business is attractive because it elevates the business from something that could make a living for one person working out of their own home to a profitable business that could make money for investors, employ staff, and perhaps go on to become a household brand. For example, if all the skill required to produce the product is non-transferable, it isn’t scalable, and therefore isn’t really an investable business.

Whether that matters or not will depend on the needs of the business owner – but even a scalable business needs to react to one final question : how big is the market? One person with a talent and a hungry market can make a living, but it needs a hungry market and a repeatable income generation process to become an investable business.

So, investors need all three to line up – the margin has to be interesting, the business scalable, and the market has to be big enough for it to scale into at those margins. Of course, there’s flexibility in there : higher margin products (houses) need a smaller market to generate the same amount of money as, say, biscuits.

Individuals such as human cannonballs who have a talent that is in demand, can only satisfy a finite market, and so are not examples of scalable businesses, even if they manage to build a profitable income for themselves. To become scalable, they would have to find a way to transfer that talent (stage schools take a similar approach) to others, and build a business that way.

If a business satisfies the margin, scalability and market criteria, and would be attractive to an investor, then it’s half-way to being a good idea, and certainly worth some additional thought!