Advices to new company
Yesterday, a group of students came to see me. They said: “We are graduating this year but we want to start our own company instead of working for somebody. We have good ideas of what to do. We already started design our product. Our parents have agreed to support us to start a company. However, we want to ask your advices.”
I told them: “Many young people want to start their own company. They all have good ideas and technical skills but a business is more than just ideas and skills. To build a successful company, you need to know what products your customers are willing to buy so it is important to review your ideas in a business context. The reason many technology companies failed because there are not enough customers to buy their products. Develop software product is one thing but building a good business that generate revenue and profits is more difficult. Many students are often optimistic about the market but when it comes to create your own company, you need to be realistic.”
A student explained: “But we believe that we have a good idea that could turn into a great product.”
I cautioned them: “You think that you have a good product, so does other company. There is always competition in the business. What you need is to have a business strategy that promotes your product. In order to do that, you need to understand the competition, the market, the customers, and the advantages of your product. You need to know how to reach your customers? How do customers find you? You must create your company websites, send e-mails to friends and customers, using Facebook or twitter to market your product and print advertising brochures too.”
Another student answered: “We already have a website but your suggestion on emails, Facebook and Twitter is good. We will do that. Is there anything else?”
I told him: “Of course, there are more. The next thing that your team need is to determine how much you will sell your product. This is important because you need to do market analysis to come up with the right price. As a company, you must figure out how to make money. You need to know how much customers is willing to pay for your product and how many of them will buy your product. You need to estimate your total costs of develop your product, including your salaries. For your company to survive, your revenue must be greater than the overall cost. Getting customers to buy a product is the most important skills of an entrepreneur. You must understand what it takes to do that and put into a business plan. You may sell your product on the internet but you also need sale persons to sell it to retail stores. In that case, you need to have it placed in package for distribution. You need to keep detail information of all sales, revenues, costs, expenses and everything else.”
A student explained: “We have thought about that. My uncle is in retail business and he promises to help us distribute our product to other stores. If our company does well, we may hire graduates in business schools to help us too.”
I told them: “Selling is not enough. You need to provide customer support too. Besides helping them to use your product, you need to deal with defects and answer any questions that your customer has. It is important to listen to what customers say and incorporate their suggestions into the next release. You may consider providing consulting services to help customers integrate and implement your products in their companies. If your product is becoming a major component of a business, you need to have good support. Many companies only concern with making and selling product but the ultimate success of a business depends on how much it helps customers achieve their objectives. Satisfied customers are your best “sales people” because they will buy more and recommend other to buy too. On the contrary, unhappy customers will become your biggest issue as they can influence others too. I have seen many companies failed because they did not pay attention to customers. Today most companies are in a hurry to make quick money and do not pay attention to customers. That is a big mistake. It is better to learn from their failures to avoid making the same mistake. Be prepared to improve your product and make it better as you gain more experience and as the market changes. Remember that it will probably take several months to get your business to do what you wish. Be patient you will get better with practice.”
The team agreed: “We appreciate your advices. Is there anything that you want to tell us?”
I concluded: “Yes, there is something. As your professor, I am very glad that your team has come up with an innovation and turns it into a product. You are young and have excellent future ahead but you must exercise caution in your business, for the business world is full of dishonesties and trickery. Keep your integrity because it is things that will protect you in this fast changing world. Keep good spirit among team members and preserve the team harmony. Never forget that you are sons and daughters of your parents so you must do something that they will be proud of you. Be fair and honest to everybody. Money can come and goes but integrity and honor are things that stay with you forever. You are also members of society so you must do whatever you can to be good citizens. Continue to learn as much as you can because things will change. I am sure you all will do well.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
