Discovery Driven Planning makes the intuitions of entrepreneurs explicit
Browsing through this month’s edition of Inc. magazine, I came across a column by Norm Brodsky on the advice he gave to a young entrepreneur. The guy’s business concept was interesting. He imports dirt from the Holy Land in the hopes of selling it in the US. Apparently it is traditional at funerals to sprinkle dirt on the grave, and he thought families might go for something special from Israel.
Brodsky, in assessing the young man’s business, used classic DDP thinking to work through the numbers. Here’s what he said:
“You targeted almost all of your sales efforts at a very limited market,” I said. “Let’s say there are four million Jews in the United States, and 40,000 die a year. Of that, say, 20,000 have religious burials. Of the 20,000 burials, let’s say 10 percent are done by people who think Holy Land Earth is a good idea—which is optimistic. In that case, your total market would be 2,000 people a year, and you never get 100 percent of your market. You’re doing great if you get 20 percent of it. That’s 400 sales per year at $39.95 a bag. Even if you had the highest possible gross margins and doubled your price, you couldn’t survive on that.” Steven listened and kept nodding. “And that’s not repetitive business, either. It’s a different group of potential customers every year.”
“So maybe I should try something else,” he said. “I get ideas every day.”
“Well, that’s for you to decide,” I said, “but why would you go on to the next thing before you know whether this one can be successful?” I pointed out that he could expand his marketing efforts to Christian Evangelicals, for example. He could also come up with uses that would be repetitive—like planting a tree or a flower in Holy Land Earth once a year to commemorate a loved one’s death or to celebrate a birthday. And maybe he could find related products to sell, such as Holy Land seeds. “You’ve already spent a fair amount of money and, more important, time,” I said. “The expertise you’ve acquired is worth even more than your financial investment. You’ve figured out a lot of things that stopped other people from doing it. And you still have all this imported dirt. Don’t you want to see it through?”
It’s a common situation. I’ve seen a lot of people who get an idea they think is hot, but when they try it, suddenly it’s not as hot anymore. So they shove it aside and start on the next one. You need patience, persistence, and focus to succeed. First efforts often meet with failure. When I started my record-storage business, I thought it would be easy to get sales. I would just offer great service at a good price. I set up a booth at a trade show—and came away without a single sale. I could have said, “OK, if people come to me with boxes, I’ll store them, but I’m going to move on to the next thing.” I won’t repeat the story here; I’ve already told it elsewhere. (See “What Business Are You Really In?” December 2000.) Suffice it to say that I wouldn’t have 3.5 million boxes in my warehouses today if I hadn’t kept asking questions.
To read the whole article, click here.