1. Commit yourself to a market solution, not a pet idea.
Derek Pedersen says the impetus to create Goal Tracker, which sells record-keeping software for special-education needs, came when his business partner’s mom, a speech pathologist, asked her son to create software that would help do her job. Pedersen says focusing on a specific problem, not a pet solution, helped the company find success.
Mark Loschiavo, executive director of Drexel University’s Baiada Center for Entrepreneurship, says this can be a stumbling block for entrepreneurs with strong domain experience but no business experience.
“Domain experts often fall so much in love with a product they’ve created, they become blind to criticism or correction, and they’re not flexible in terms of modifying their product in order to meet the needs of the marketplace,” Loschiavo says. “They need a passionate belief that there’s a problem out there that needs to be solved, and need to be flexible about the solution to it.”
2. Choose your industry wisely.
Loschiavo says entrepreneurs should consider entry barriers beyond just startup costs.
For example, those with little business experience may want to steer clear of industries with regulatory hurdles, requirements to hire a sales force or other staff, or a need to navigate vendor relationships.
He says Web 2.0 companies may be well-suited for those with scant business experience: viral marketing using social networks like Twitter eliminates the need for direct-marketing prowess, and the online format eliminates the need for a large staff or a brick-and-mortar location.
3. Build street cred.
According to Loschiavo, even though he was a pro at software and technology solutions when he left IBM to start a business offering tech solutions for contractors who install audiovisual systems, “I didn’t have any street credibility,”
“I wasn’t embedded in the industry, and I really needed to be,” he says. “If no one in the industry knew who I was, the fact that I’d been with IBM and had co-founded another tech business in a different industry didn’t carry a lot of weight.”
So he started by launching a retail business in the field, learning the industry’s nuances and developing relationships with vendors, contractors and retailers before launching his big idea.
Similarly, Ericson spent two years meeting with and learning from bike-sharing companies around the world to determine the best industry practices, gather information for industry reports and otherwise prepare to open a bike-sharing consulting firm.
“Before we started CityRyde, there was very little general knowledge available about the industry,” Ericson says. “So we went out and obtained that knowledge directly from the vendors to find out what they needed to be successful in this growing industry.”
4. Rely on free resources.
Pedersen says he spent “hundreds” of hours reading all the available literature on his industry and hundreds more networking with other entrepreneurs.
“There were so many free networking tools in the Greenville, S.C. area, we were able to meet people who had been in the industry for many years and get great advice from them at no cost to us,” Pedersen says.
Ericson says a similar networking group in Philadelphia has provided CityRyde invaluable feedback. “These are people who are not afraid to pick your idea apart,” he says, “which is exactly what you need.”
Loschiavo says universities can also be an affordable resource for new entrepreneurs, offering free or low-cost coursework, books or seminars.
5. Know when to seek outside help.
When Evan Solida founded Cerevellum in early 2009 to sell the digital rearview bicycle mirrors he’d designed, he tried to save money by using internet resources to create business plans and draft legal documents.
Solida says he ended up paying for professionals to help with both tasks, making the little money he spent online “a complete waste.” Cerevellum recently received its first round of grant funding and investment dollars.
“I know this isn’t what entrepreneurs starting on a shoestring budget want to hear, but a lot of stuff I was doing in the beginning trying to save money cost me both money and time in the end,” Solida says.
6. Put your strengths to work.
Loschiavo says entrepreneurs’ most important tool when branching out to an unfamiliar industry is knowledge of their strengths and how to apply them.
For example, he says, Vernon Hill started Commerce Bank based on the business principles he learned in quick-service retail.
“He didn’t understand why banks were only open during business hours, so he made sure his banks were open earlier and later, when people are available,” Loschiavo says. “He understood retail and customer behavior, and translated that to the banking world. Most business skills transcend multiple industries.”
Ericson says he and his business partner kept their strengths in mind when they expanded CityRyde to include two software programs for bike-sharing companies.
“In the early days, to be honest, it didn’t seem like our experience translated much at all,” Ericson says. “But by really entrenching ourselves in the industry, we found a gap that seemed to call for exactly our skills and experience to fill.”