A common mistake that young entrepreneurs make is unwittingly starting highly cyclical and highly risky businesses, when it hasn't been all that long since the Great Recession in the U.S. was declared over by the National Bureau of Economic Research in June 2009.
These cyclical, risky businesses operate on the premise that we are going to experience an economic boom or that we are in the midst of one. Instead, the younger entrepreneur must be more traditional with his or her start-up plans.
This means that they can't hope to base a business off of marketing cool, cutting-edge products, or towards the consumer market rather than the B2B market.
Or, just as bad, the prospective buyer can live without the product or service comfortably for a prolonged period of time. Sometimes, selling something that is not absolutely necessary is riskier than it was 20 years ago. When the economy turns, buyers may remember and still be scared by the economic hardship we saw in the past several years.
I would venture to guess that the Great Recession has forever changed at least this generation of consumer mentality on frivolous spending. Will our buying psyches remain unscathed or will we always be doubtful of the stock market and the volcano that is the U.S. economic system? John Steinbeck would argue the latter.
"The bank is something more than men, I tell you. It's the monster. Men made it, but they can't control it."
From The Grapes of Wrath (1939) by John Steinbeck, who won the Pulitzer Prize in 1940 and the Nobel Prize for Literature in 1962. The story, as many an AP English student can tell you, focuses on economic and familial hardship during the Great Depression told through a poor, victim-of-circumstance farming family from Oklahoma.
If the prior years of economic hardship have prolonged perverse effects on the buyer's mentality, how does this affect the younger aspiring (or any age for that matter) entrepreneur choosing which business to start?
An entrepreneur searching for the "next huge thing," or just looking for a business to start, must ask these 3 questions to help determine the right path.
How much do companies feel that they need my service right now?
You may feel as if everybody needs your product and you're probably correct, however it makes the sale a lot easier when your target market feels that they can put you off for 60+ days and still not feel pressed to buy.
When choosing which business to start, remember that the more urgent your target market's needs are (their perception), the higher your success probability will prove.
If you're selling consumer services through the web, how set is that consumer on the "Big Guys?"
B2C marketing is done via repetition, repetition and more repetition. You have to have your product or service right in front of the buyers' faces all day long or you're not going to succeed in gaining their respect as a business and their trust in your ability to deliver.
For instance, if you open up an online travel company or a stock trading platform, you must now compete directly with Expedia and E-Trade. I would have gotten crushed years ago if I had to rely on stealing the clients of Heidrick and Struggles.
I don't think a consumer services web-based start-up is the best idea for the aspiring entrepreneur for two reasons.