PROVEN STRATEGIC NAVIGATION

“Just ‘cause it’s on the net, don’t make it tech”

Increasingly we see businesses trying to describe themselves as “tech companies” and their founders as “tech entrepreneurs” because they have a website.

If you are selling clothes, glasses, watches, cosmetics or books over the internet you are not a technology business. You are a product business that sells over the internet. You are an ecommerce business.

Tech companies apply scientific knowledge to solve problems. When a customer is willing to pay for that solution, there is a tech business rather than an R&D project.

Why does it matter?

In believing that their business is tech, these “tech entrepreneurs” think their businesses must be worth more and be worthy of investment.

They don’t understand that when they don’t get investment it may be an issue of the product.  The product they are selling on the net maybe a niche or the cost of scaling too large. Building scale on an ecommerce business isn’t cheap. If your tech business is really an ecommerce site, selling a niche product, then you really need to understand how Amazon isn’t going to “eat your lunch” (or other such “techpreneur” idioms) because your business health is based on your product.

“But it will scale faster on the net!”

Once your business has traction (ie. customers), you need to understand the acquisition costs of new customers. It’s easy to get excited by reading “How Dropbox Scaled from 2,000 to 200 Million Users” and pointing to that kind of growth in five-years. Dropbox is a tech company and, most importantly, they have raised $257 million.

Scaling does not come cheaply, even on the net.  Too often businesses think that their costs will remain fixed whilst their customer numbers go flying up.

Product businesses do not need to own their channels to market. The more channels the better.

Do ecommerce businesses get investment?

The way to avoid the Amazon behemoth is to create a unique product line.  If the product is good then everyone will want to sell it for you. This means you have to design and produce your own product, market it and then deliver at the right price. That’s all very non-trivial stuff, but if you can build that business, you’re investable.

What should my business plan cover?

All businesses need to answer the same questions in describing themselves:

-        What is the problem you are solving?

-        What is your product/solution?

-        Who are your customers?

-        What is your USP?

-        How does it scale?

-        How much money do you need and what do you need it for?

It’s the first three that determine whether you have a business and the last three that are relevant in determining the value of the business.

If you answer those questions, simply and clearly, you have the best chance of starting the conversation that is the investment process.

If your business is good, you can find investment whatever you call yourself.