Want to start a company? Answer this question first!

Are you thinking about how awesome it would be to start a company, a project, something new?  If so, that means you want to be an entrepreneur!  And that means you better be willing to stare failure in the face.

At its core, entrepreneurship means trying to build something that hasn’t been built, that solves a problem, that people will pay for, where they will pay more than it costs you to build.  And that is very very hard.

The most important part in this process is the connection between the problem and what a person is willing to pay to solve that problem.

The question that you have to answer is – “Are there customers willing to pay me for my [product, service, technology, etc]?”

Here is an example. I want my lawn to look nice. I cut the grass sometimes and I pay someone to cut the grass sometimes. I have flower beds, and the beds have mulch.  After a year, the mulch doesn’t look all that nice and so I want to replace it.  There is a problem.

To have someone else come in and take out the old mulch and replace it with new mulch is not cheap.  To have a landscaping service do it, the cost is about $1000.  They have to pay for the equipment, people, mulch etc and then have a little left over for profit.

For me, that is too much. For others, maybe it is not too much.  The question for a landscaper is, ‘are there enough people willing to pay that amount to have their mulch replaced?’

For the landscaper, this question is the first one to answer. She needs to do this before she hires people, buys equipment, buys mulch etc.  She needs customers first. She needs customers that agree that the problem (replacing the mulch) is worth paying her $1000 to do.  In this case the $1000 might change from home to home, but the point is she needs to test the market and find out if there is a critical mass of customers willing to part with their cash to have the specific problem solved.

You can apply this logic, of testing the market, to every situation, product, and service.  If you want to start a business, this is the first step.