There is more to being an entrepreneur than having an idea for a product or service? Entrepreneurs launch businesses. An idea, a product and/or a service is not a business. As a women's business coach, I am asked by clients, "what do I do first?" It is the chicken or the egg dilemma, but unlike that philosophical question has a very simple answer.
The definition of a business is "the practice of making one's living by engaging in commerce."
In order to engage in commerce the entrepreneur must have something to sell - a product or a service. The product or service must have a price and that price must be greater than the costs of everything that is involved in getting that product or service to the customer.
Now, before you think I have completely lost my mind by being so simple with this definition I'll tell you a couple of stories that will provide some context for this blog.
Recently, I had a call from a woman identifying herself as a woman in business. I asked her about her business and she asked me if I knew anything about fashion. I asked her if she was in the retail business and explained I had several clients in retail. She again wanted to know what I knew about fashion. Realizing that we weren't making any progress, I asked her to tell me why she thought she needed a business coach. She explained that she had a design for a shoe and was looking to partner with someone. I delved deeper with more questions trying to understand if in fact she even had a business.
Caller: I found the right partner who could connect me with the manufacturer I want in China, but he wants 49% of the business. Should I give it to him?
Me: Will you be selling your product wholesale or retail?
Caller: I don't know yet. Since I don't want to give him 49% of my business I reached out to a woman who has a fashion business who also wants to partner with me. How much % of my business she I offer her?
Me: What exactly do you think your business is and why are you giving any % away?
I share this conversation with you (and maybe some of you reading this blog will relate with it) in order for you to clearly see a product is NOT a business. And, of course, if she had an idea for a service and was progressing in the same way it is also clear that a service is NOT a business.
It doesn't matter if you believe the chicken or the egg came first. When you want to start a business the PLAN comes first. Yes, it is officially called the BUSINESS PLAN. A great place to start is with the Guide to Small Business Ownership at FinancesOnline.org.
Getting back to the definition for a business - the practice of making one's living by engaging in commerce - the entrepreneur must have a product or service in mind before creating the business plan. But, that product or service may change as the plan is being developed. For example, I have worked with entrepreneurs who begin their businesses with a plan to work from home only to realize that a better plan is to lease space. The added expense for the space must be incorporated into the plan so that the expenses don't outweigh the revenues thereby lowering profits. A retail space may also require more product for display purposes or in the case of a service business more space for other employee service providers.
If you are a new entrepreneur, please read the above paragraph again so that you will clearly understand the importance of the business plan in your early business development. Every entrepreneur must make a lot of assumptions upfront. How much money will be allocated for product, space, marketing, employees, etc.? These questions are part of every business startup.
Make special note that the Guide to Small Business Ownership doesn't ask the entrepreneur what her idea or product or service is for the business. (or whether it knows anything about fashion). Why?
Repeat after me - because an idea, product or service is NOT a business!
