Issue #51 – Tuesday,
April 9, 2019
Posted by Denny Hatch
Denny Hatch’s 41-Point
Checklist for Starting a Business
Over the 55+ years of my checkered career I have run into—and read
about—men and women who have spent fortunes on acquiring an MBA degree. Yet
they had no idea what they planned to do with it (beyond proudly displaying it
on the wall in the big corner office).
When asked about the future,
they have said, “Gee, I’m not sure. I think maybe I’d like to start a business of some kind.”
From a guy who started two businesses and saved two others, here's a drill:
Your
Passion
1. Are you passionate about
this undertaking? Is this a product or service you honestly believe matters and
can make a real difference (and therefore a real profit)?
___Yes
___No
The
Industry and the Players
2. Are you
intimately familiar with the inner workings of the business, the companies and
the industry you are getting into—or do you have a partner, advisor or
financial backer who is?
___Yes
___No
A
Quick Course: Trademark,
Patent or Copyright?
(Courtesy of U.S.
Government)
A trademark is a
word, phrase, symbol, and/or design that identifies and distinguishes the
source of the goods of one party from those of others. A service mark is
a word, phrase, symbol, and/or design that identifies and distinguishes the
source of a service rather than goods. The term "trademark" is often
used to refer to both trademarks and service marks.
Must all marks be
registered? No, but federal registration has several advantages, including a
notice to the public of the registrant's claim of ownership of the mark, a
legal presumption of ownership nationwide, and the exclusive right to use the
mark on or in connection with the goods or services set forth in the
registration.
A patent is a
limited duration property right relating to an invention, granted by the United
States Patent and Trademark Office in exchange for public disclosure of the
invention.
A copyright protects
works of authorship, such as writings, music, and works of art that have been
tangibly expressed.
The Trademark Operation of
the United States Patent and Trademark Office (USPTO) handles trademarks only.
For information on patents,
please visit Patents
or contact 800-786-9199.
For information on
copyrights, please contact the U.S. Copyright
Office (a division of the Library of Congress). 202-707-3000.
Beware of Copyright Theft and
Patent Trolls
Theft
Alert:
• Erich
Spangenberg, 53, makes millions as a “patent troll”—amassing patents and
filing lawsuits.
•Jay Walker—ousted founder of Priceline—is also a leading patent troll.
• My father’s copyright biography of Franklin Roosevelt was illegally
reprinted by Kessinger Publishing, printed and sold all over the Internet without
ever contacting the family about a royalty arrangements. I blew the whistle.
• If your new product or service gets into the hands of
Chinese counterfeiters, your copyright, trademark or patent ain’t worth squat.
3. Have you consulted an
attorney who specializes in intellectual property to protect your new business
from theft and piracy?
___Yes
___No
4. Have you consulted with
an attorney for ironclad contractual arrangements with your partners and/or
financial backers?
___Yes
___No
Your exit strategy must be worked out with partners and investors at the
outset. You don't want a big internal squabble at the point where you have an
opportunity to cash out.
5. Do you have an exit
strategy?
___Yes
___No
Your Product or Service
6. Do you know
your start-up costs and cash flow projections for the next three years?
___Yes
___No
7. Have you
firmed up suppliers, manufacturers, consultants and agencies to execute your
product or service?
___Yes
___No
Theft Alert: I urge you to avoid China. Chinese suppliers or partners will steal you blind. You risk losing everything. You are invited to read:
8. Are you
planning to get into bed with Chinese?
___Yes
___No
9. Have you made
arrangements for warehousing, fulfillment and dealing with returns and unhappy
customers.
___Yes
___No
Competition
10. Will you have
competition?
___Yes
___No
11. If so, are you
intimately familiar with your competitors?
___Yes
___No
12. Have you bought your
competitors' product(s) or service(s) and used them?
___Yes
___No
13. Have you been a secret
shopper to experience first hand how your competitors treat their prospects and
customers throughout the various offers, sales, returns and re-order cycles?
___Yes
___No
14. Have you prowled your
competitors’ websites, studied their offers, guarantees, pricing and sales
messages?
___Yes
___No
Naming
the Business
"If it didn't
happen on network television, then it didn't happen."
—Ron Nessen, White House Press Secretary, Nixon Administration
Fast-forward 45 years. If your business is not on the Internet, then
your business does not exist. What’s more, you sure as hell don’t want to
register a business only to learn someone else owns that web domain.
15. Does your business/product/service have a
name that is also your web domain?
___Yes
___No
Note: If answer to #15 above
is “Yes,” Go directly to “Your Universe”
Below.
Settling
on a Web Domain that
Matches You Business Name
A couple of years ago I had the wacky idea for new business with the
domain name: “PantsOnFire.com.” The search engine of NetworkSolutions.com came
up with the following:
Oops. Domain trolls got there first.
Within 10 minutes I was the
owner of YourPantsAreOnFire.com
Okay, not ideal, but close
enough.
My cost: $35.
A year late I abandoned the
idea and canceled the domain name.
pantsonfire.com is still available for
$24,500.00
yourpantsareonfire.com is
available for $35.
Your
Universe
16. Do you know the size of
your potential universe of customers?
___Yes
___No
Many marketers make extra revenue renting their customer lists to
other marketers. (It’s basically free money.) In order to do that, they print
data cards that reveal a great inside information about their business.
• Number of current buyers.
• Number of multi-buyers.
• Lapsed and/or inactive buyers.
• Average dollar amount per sale.
17. Do you know the size
of your competitors’ customer bases?
___Yes
___No
18. Do you know what
percentage of the total potential market your competitors serve?
___Yes
___No
Three
Reasons Why People Buy
People buy for one (or more) of these reasons:
• Price: “Buy 1, Get 1
Free” always captures attention. I know a guy who collects antique wristwatches
and loves showing them off. Gives him stature. Cheapness or expensiveness give
a sense of value and self worth smarts. Attractive pricing generates sales.
• Exclusivity: You offer
precisely what the prospect wants. Your items are unique and available
elsewhere only with great difficulty.
• Service: Instant
gratification. Easy to order. Easy to return. Great guarantee. A favorite sales
person knows what you want and takes wonderful care of you.
The ultimate practitioner
of great service was founder of the L.L. Bean outdoors catalog. What’s not to
love and trust about him?
(Alas modern catalog banditry forced L.L. Bean’s
bean counters to discontinue this magical promise after a century. Today, Bean
merchandise is guaranteed for one year.)
19. Can you compete on the
basis of Price and/or Service and/or Exclusivity?
___Yes ___No
Your USP
(Unique Selling Proposition)
The Unique
Selling Proposition is one of the toughest challenges the fledgling
entrepreneur can come up with. It is one or more key elements that enable a
product or service to stand out from the crowd and makes it immediately
recognizable to prospects and customers. Examples:
“Bags Fly Free.” —Southwest Airlines (GSD&M, 2010)
“99 and 44/100% pure.” —Ivory soap (Procter & Gamble, 1892)
“Tastes great, less filling.” —Miller Lite Beer (McCann-Erickson, 1974)
“Does she…or doesn’t she?” —Clairol (Foote, Cone & Belding, 1957)
“When it rains it pours.” —Morton salt (N.W. Ayer & Son, 1912)
“We’ll leave the light on for you.” —Motel 6 (Richards Group, 1988)
“The skin you love to touch.” —Woodbury soap, (J. Walter Thompson Co.
1911)
“Breakfast of Champions.” —Wheaties, Blackett-Sample-Hummert, 1930s)
Here are some
ideas on how
to come up with a USP.
Note: Do NOT allow this USP business to bog
down your work in creating the business plan. Just keep it in mind as you get
closer to the launch, and eventually one or more USPs will surface.
20.
Do you have a USP (Unique Selling Proposition)?
___Yes
___No
21. Do you give a damn about
having a USP?
___Yes
___No
“Imitation is the sincerest form of collective
stupidity.” *
—Bill Munro, Sr. VP of Marketing, PepsiCo
*Exception: the Chinese who imitate anything, duplicate it and sell it
all over the world, no matter whether it’s copyright, trademarked or patented.
22. Do you believe your
product or service has exciting new features that will generate sales to your
competitors’ customers as well as bring in new buyers?
___Yes
___No
Creating
Dependency
Back in the 1980s I had lunch with Chuck Tannen, Editor and
Publisher of FOLIO: The Magazine of
Magazine Management.
I remember Chuck
as a lovely, low-key guy with a mop of curly hair who was happiest high in the
sky in the cockpit of his private plane. It was Chuck who wrote the 1979 cover
story on Hugh Hefner and Playboy.
I asked Chuck, “Is
FOLIO profitable?”
He raised his
right hand over his martini and waggled it to signify: “Profitable? Comme ci, comme ca. So-so.”
I waited for him
to elaborate.
• “FOLIO
is the flagship. From FOLIO, all else
springs.
• “It has paid
subscribers who benefit from our information.
• “FOLIO readers buy publishing services, so we
get advertising.
• “We put on
seminars.
• “We publish
special reports and sell them.
• “If someone
wants to reach magazine people, we have lists to rent.
• “Writers of FOLIO magazine articles write books that
we publish.
• “We do
consulting.
• “We have card
deck programs.
• “And, of course,
we have the yearly FOLIO SHOW—which
is huge and very, very profitable.
• “In short, it is
our intention to surround the industry.
If people want information about any facet of magazine publishing, they turn to
us. We make them dependent on FOLIO.”
23. Have you
thought about “line extensions”—creating related products and/or services to
generate additional sales and service to your customer base?
___Yes
___No
24. Can you
create dependency?
___Yes
___No
Marketing
Your Product or Service
25. Do you know precisely
who your prospective customers will be—income, demographics, behavior,
interests?
___Yes
___No
26. Can you or your
copywriter talk their lingo?
___Yes
___No
27. Do you have personal,
corporate or brand recognition with your prospective customer base?
___Yes
___No
How Will
You Market to Your Prospects and Customers?
28. Are you expert in
marketing—finding prospects, converting them into buyers and repeat buyers—or
are you working with a professional marketer known for these skills?
___Yes
___No
Do you plan on:
29. Direct (mail, space advertising,
telemarketing, Internet, Front Door Hangers)?
___Yes
___No
30. Wholesalers?
___Yes
___No
31. Sales reps calling on
prospects?
___Yes
___No
32. Retail?
___Yes ___No
33. Social Media?
___Yes
___No
34. Other?
___Yes
___No
35. Are you a world-class
copywriter or are you working with one?
___Yes
___No
36. Are you working with a
world-class designer?
___Yes
___No
Two
Start-ups
Here’s how two entrepreneurs—Lillian
Vernon and John Peterman—each launched a single product using magazine ads.
They went on to create major catalog businesses from their simple beginnings.
Others who have used this same model—a single ad that brought in enough
money to expand and launch catalogs: Mel
and Patricia Zeigler (Banana Republic) and Richard Thalheimer (Sharper
Image).
Theft Alert: If you use print or
digital advertisements to test a product or service, competitors with deep
pockets may see your ad. They can copy what you are doing and put you out of
business before you start. If you use the Internet to test, your “baby” could
be all over the world in 90 seconds and your idea deader than Kelsey’s nuts.
Check out:
How to Steal an Idea and Destroy a Fledgling Business.
Repeat Business
As direct marketers we're not here primarily to make
a sale; we're here to get a customer. Sales are important, of course. (Where
would marketers be without them?) But the name of this game is repeat sales
rather than one-shots. And to have that, you need a customer.
—Joan Throckmorton
37.
Selling a Single Product vs. Starting a Business
When I was editor of editor/publisher of Target
Marketing I would routinely get one or more phone calls a week from
strangers who would say: “I have an idea for a product to sell by direct mail.
Where do I start?”
My reply: “What else do you have?”
“Huh? What do you mean? I’ve got this idea for a product…”
“Direct mail is a hugely expensive medium—costing 60¢ on up to
dollar-a-pop for each mailing. You cannot make money selling a single product
by direct mail (unless it’s a condo in Florida or Las Vegas). If you have a
single product, sell it on Amazon or eBay for starters. Or in retail stores or
catalogs.
“With direct mail, think magazines (with yearly renewals). Think
insurance (with monthly or semi-yearly premiums). Gillette built a huge
business getting inexpensive razors into the hands of consumers and then making
a killing on the back end selling blades for years to come.”
38.
Do you want to sell a single product or start a business?
___Single Product ___Business
Testing
The principle of testing is real simple. Make and offer to the marketplace and it will tell you whether you have a winner or loser. This is the ultimate market research!
“There are two rules and two rules only in marketing. Rule #1: Test
everything. Rule #2: See Rule #1.” —Malcolm Decker, Freelancer
“Don’t test whispers.” *
—Edward Mayer, Marketer & Teacher
* E.g., Don’t test $89.95 vs. $99.95. Look for breakthroughs.
“Success in direct
marketing is 40% lists, 40% offer and 20% everything else.” —Ed Mayer
What to test? Pricing. Lists and media. Distribution methods. Offers.
39. Have you designed test
matrices and done the arithmetic?
___Yes ___No
40. Do you have marketing
plans for Publicity and PR?
___Yes
___No
Direct Mail as a Test Medium
My suggestion: If you
want to test a product, go the dry
test route—mail an offer for a product or service that doesn’t exist to
30,000 likely prospects on several different mailing lists. Expensive? Yes. But
sending out 30,000 direct mail pieces is a lot cheaper than manufacturing
actual products, warehousing them and then trying to sell them when you have no
idea if anybody will buy them. If your idea is going to bomb, you want to know
that as down-‘n’-dirty quick and cheap as possible.
If you want to do big-league, high-tech testing, check out
DOWN-‘N’-DIRTY,
QUICK-‘N’-CHEAP:
Theft Alert: In addition, Direct Mail
is secret—the safest way to test and not have your product stolen while its
still in your nest. With a dry test mailing of 30,000 pieces and chances are
slim to none a competitor will see it. Send out a confirming mailing of 200,000
pieces and if the results hold up, you can roll out, cream the market and leave
your competitors eating your dust.
The
Three Ways to Grow a Business
A. Increase your share of market.
Acquire more and more paying customers.
B. Increase your share of
wallet.
Persuade your existing customers to spend more money with you.
C. Acquire a profitable business and see A and B above.
41. Are A, B and C above
part of your business plan?
___Yes
___No
Asking your
help. I want to get this Checklist right.
This is the digital world. I can make changes, additions, and
deletions in two minutes.
What have I missed?
What have I got wrong?
What do you disagree with?
What is your experience in
starting a business?
Your ideas and/or criticism
are welcome—either in the Comment Section below or direct to me: dennyhatch@yahoo.com.
When I have your input and
changes, deletions and additions are incorporated, I will alert you when the
final version is ready.
Thank you.
###
Word count: 2719
CONTACT
At age 15, Denny Hatch—as a lowly
apprentice—wrote his first news release for a Connecticut summer theater. To
his astonishment it ran verbatim in The Middletown Press. He was
instantly hooked on writing. After a two-year stint in the U.S. Army (1958-60),
Denny had nine jobs in his first 12 years in business. He was fired from five
of them and went on to save two businesses and start three others. One of his
businesses—WHO’S MAILING WHAT! newsletter and archive service
founded in 1984—revolutionized the science of how to measure the success of
competitors’ direct mail. In the past 55 years he has been a book club
director, magazine publisher, advertising copywriter/designer, editor,
journalist and marketing consultant. He is the author of four published novels
and seven books on business and marketing.
CONTACT
dennyhatch@yahoo.com
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keep in touch. Thank
you and do keep in touch. dennyhatch@yahoo.com
Invitation to Marketers and Direct Marketers:
Guest Blog Posts Are Welcome.
If you have a marketing story to tell, case
history, concept to propose or a memoir, give a shout. I’ll get right back to
you. I am: dennyhatch@yahoo.comYou Are Invited to Join the Discussion!
