Father’s day is approaching and what do you get the guy who seems to have everything? For my dad it’s pretty easy, although he lives 2,000 miles away we still talk each week and a couple of ideas quickly come to mind. He’s a big fan of the television show 24, and he likes to golf so I went to the store and I quickly found episode three of 24, a golf shirt, and a card that connected to a memory of when he would say” I’m not sleeping, I am just resting my eyes”.
My wife however struggles each year with father’s day as her parents were divorced when she was very young and she has little if any communication with her dad. Each year she gets frustrated while shopping for a card as they all say things like; “to the best dad in the world”, or “for someone who was always there”. So I offered to find a card for her to send to her dad this year. (How hard could it be?Just go to Target and buy one right?)
I started looking at funny cards, yet they referenced time together. I looked at serious cards; however they expressed a deep message that did not seem appropriate. (Why did I volunteer for this mission?) This was becoming very difficult to find a card that basically says ; “Happy father’s day, although you choose not to be a part of my life I love you unconditionally and I am thinking of you this day, and although you forgot my last birthday, I want to thank you for helping to bring me into this world and it’s never too late to build a relationship”.
Having launched a number of new products over the years, my mind started racing…this is an unresolved market problem: Cards for children who wish to connect with their parents who are absent from their lives. ( I am reminded of the scene from the movie Night Shift when the actor gets out his tape recorder and says…I’m an idea man, for example; stop the garbage problem by having edible paper..yes, I have a tape recorder too)
Then that familiar little voice in my head said; I should start a company to fix this problem…..
Not so fast… does it pass the 3 step acid test discussed in the book Tuned In? Is the problem; urgent, pervasive, and are people willing to pay to have it solved?
Is this an Urgent problem? I would say yes every father’s day, Mother’s day, birthday, and holiday.
Is it pervasive, do a number of people have this problem? Again, I quickly say “yes” as this is a problem for my wife.( and therefore becomes a problem for me) I need to be sure however before I take funds from my home equity it will work. Very quickly I start extrapolating( justifying why I should do this); the divorce rate in the US is around 50%, so this problem could touch ½ the US population. So I remember reading somewhere the US population is around 290 million so ½ would be a potential market size of 145 million, sounds good so far. Not all parents that are divorced are absent from their children’s lives. However I do hear quite a bit in the news about deadbeat dads…so let’s assume 10% of divorced parents are absent from their child’s lives…so the market size is now around 14 million per occurrence, and there are at least three occurrences per year per person
Are people willing to pay to solve this problem? I would say yes again. After all I would pay more than the average cost of a card if it perfectly solved this problem, and I would not have to search so hard for the right card.
So we have an unresolved market problem, as far as I can tell. We have children of absentee parents who wish to communicate with them on special days and holidays. So let’s try to size this opportunity ;(three times per year kids need cards ) X(my market size of 14 million) X (retail price of the card, say $3.00). This would be a nice $84 million business right? Well no, my guess is the gross profit margin Target realizes on greeting cards is around 50%, so now the opportunity is $42 million.I need to write a business plan, go get funding and launch this puppy before anyone else thinks of it….again,maybe.
The above scenario happens to me mentally each day, many times per day as I find unresolved problems. The problems feel urgent, pervasive, and I am willing to pay to solve them…and that’s where most people blow it, because like me you assume and guess without market data.You may very well be willing to pay to solve this problem with a perfect solution designed just for this specific niche, however at this point you really do not know if others would be willing to pay to solve this problem. You really do not know if others feel this problem is as urgent to them, and therefore it may not be nearly as pervasive as you once thought. It may very well be an awesome idea and because we know this problem intimately we would be the perfect person to solve it.
I have helped a number of startups who saw unresolved market problems that were so crystal clear they felt they would be a fool not to launch a solution to solve this problem before someone else did. About 6-8 months into missing their positive cash flow projections they hire me to “fix it”. Sometimes they find problems in markets they know very well. Most of the new companies launched today were started by someone who was working for someone else at the time they discovered a problem. However some entrepreneurs fall into a trap; I’m a pretty smart guy, I have done ——-, and ——-, and I believe I can turn this into a nice business quickly that I can then sell to a market leader for millions, buy matching Bentley’s and never have a care in the world again…right? Again, Maybe…
I did a little research not long ago and found that at any given time 6 out of 10 US adults are thinking about starting their own business. The disturbing statistic was the majority, between 80-90% who do launch a new business fail within 18 months. Why? They launch without a thorough understanding of the market, they lack a business plan, and grossly underestimate the cash needed to build and grow the business.Of those that fail, 50% declare bankruptcy.
There are a number of great on line tools for how to write a business plan. You can Google “how to write a business plan” and you will find sites like; My own Business, and many others. Before anyone takes equity out of their home, or borrows from their 401K or loved ones I highly recommend you do research and write a business plan. When you write a plan, you will be forced to answer hard questions, and you will need to go into the market and do research and not just rely on your gut and mental extrapolations of market size. Based on my experience,when you estimate the cost to start your business pad it by +25%, and when you estimate your timeframe to positive cash flow add 8 months to your forecast. You still in the game?
You may vary well have the next great new product, and when you complete market research and build a business plan you may validate that opportunity. Once the plan is written show it to at least 5 trusted advisors and ask their opinion of the opportunity. Ask them if they would loan you the money to start this business and listen to what they say.(many will say it’s a great idea as to not hurt your feelings, however the true test is would they back it with their checkbook?) If these advisors say you have a winner, meet with a number of people who would be representative of your buyer persona and ask their opinion of your solution. What you must determine is ;does your solution perfectly solve their problem? In addition, you will be asked to create a SWOT analysis for your plan. In doing so make sure and review competitors in the space, as well as competitors adjacent to the space you wish to participate in. In this case I would be up against American Greeting and Hallmark to name a few. Far too often entrepreneurs launch great solutions to unresolved market problems but they underestimate competitors already in the space, or adjacent to the space.
If you find an unresolved market problem, and you find the problem to be pervasive and buyers are willing to pay to solve it, do yourself a favor and do some additional research and write a business plan.
Oh, and as for my hunt that became a three hour quest to find a father’s day card for my father in law…the card pictured worked just fine. Was it a perfect solution…no, but it will do.