#51 Denny Hatch's 41-Point Checklist for Starting a Business

Issue #51 – Tuesday, April 9, 2019

http://dennyhatch.blogspot.com/2019/04/51-denny-hatchs-41-point-checklist-for.html

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:

How the Chinese Stole Yekutiel Sherman's

Invention Before It Was Even Funded

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:

Bob Hacker’s Revolutionary New Testing Technique

     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 

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.

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