What service should you do? How do you come up with an idea?
So we know you don’t need a new idea. We’re not going to try to reinvent the wheel with the next tech startup and chase venture capital.
This is my analytical approach to finding space to start a business.
I would advise you to start by making a list of 10 services that you think you could provide.
What framework should you use while developing this list?
Make sure all the services on this list are becoming more popular. More and more customers are coming on the market every month. Luckily this is the case for most home services. People are outsourcing more and more stuff and doing less and less themselves. Ideally you want to find a service that you could build your business around only new customers. You don’t need to take a single customer away from your competitors to find your way and build your company.
Remember how we talked about 20 years ago only 5% of people paid to get their lawn mowed and today more than 40% do. That number is growing every day. You wouldnt need to steal a single customer to make your way in this space. Lawn care is one example. A restaurant would fail this test because the number of people eating at restaurants isn’t going to drastically increase over the next few years.
We got really lucky here with our storage business. Our business thrives at colleges with a lot of international students because they are more likely to utilize our pickup and delivery storage services than an in-state student. When we launched in 2011 it coincided with a huge shift in american universities bringing in more international students. A lot more. The US dollar was weak against the chinese yaun and other foreign currencies so a US education was cheaper for foreigners. For example in 2005 to buy one US dollar it took 8.27 Yuan. By 2013 in our second year of business that dropped to 6 Yuan. Effectively making a US education 25% cheaper for a foreign student. At the same time American universities were realing from the financial crises where their endowments took huge hits so they began accepting more and more international students who would be paying full tuition.
This was the perfect storm for our potential customers. The 2018 incoming class at cornell had nearly 2,000 more international students than the class of 2009. Thats 2000 more customers on the market than there was 10 years ago. We built a successful company without even taking away from the customer base of our largest competitor at Cornell. It was a Win Win for everyone. It wasn’t a race to the bottom. We weren’t fighting for the same customers. The same trend happened at most of the other schools we operated at.
On the other side of the coin lets look at brick and mortar retail. Lets say you are interested in setting up a store and selling something. The trends are the opposite. Every year people buy 5-10% more online and 5-10% less in stores. Its a dog fight to keep customers and businesses are fighting each other for the same customers. Not a good market to be in.
As you develop your list of businesses Look at the statistics. Get the data you need to analyze the total spending in your area as well as the population growth expected to come on the market. You can dive deeper and analyze industry data for your specific type of service. Are people spending more and more each year? Are there enough companies to service the existing population? Are you going to be fighting for customers in your niche or is it underserved? We’ll talk about how to dive in and figure this out.
The next question to consider while you are making this list think about what is unique about your town. If its a collegetown there are often services you can design towards the students that are underserved. You can then use other collegetowns as a mold and find what services thrive in some other towns but aren’t offered in yours. Maybe you live in Daytona Beach FL or any other vacation town and all the traditional vacation rental companies are getting disrupted by AirBNB and its now easier to manage them and create investment properties. Maybe you live in washington DC so you have a lot of traveling politicians who would be interested in renting their homes part time to other visitors while they are away. Maybe your town is NYC and space is very tight and everyone is living in close quarters so installing Murphy beds for people could be worth pursuing. Maybe you live in a small town of 3,000 people like Watkins Glen NY that gets disrupted by a nascar race or a music concert a few times a year and 100,000 people descend on the city. Maybe you live in Atlanta where there is no public transit so everyone drives to work. Mobile car detailing or mobile oil changes might be opportunities worth exploring. Find a way to offer those people something they need.
The next question to consider is how will future change affect the economy in your city? Change is good. Change means new customers. Change means new opportunity. Change means new services become feasible and old services and companies die. Do you live in a city where the cost of living has skyrocketed over the past 10 years? Think about how this will affect the economy. Labor costs will skyrocket. Low wage employees will be harder to find and retain. Service business owners without bombproof systems will fall behind and struggle. More income and wealthy people will need more services. This is an opportunity for you to enter the space and do things right, charge a higher price and build a great business. I’ll do an entire episode later on why I think expensive cities are ripe for service based entrepreneurs right now.
You also need to think about what is unique about your skill set. If you are a techy with experience in digital marketing that transfers well to almost any service business. What do you have experience with or interest in? Build your list with these things in mind but don’t let this limit you. If you don’t have any experience or particular interest in any of the services thats fine and honestly an advantage because you have no limitations.
Think about how much capital you have, where and how you could acquire the equipment needed in a low risk way, and creative ways you could get ahold of the equipment temporarily while testing the waters. How long can you live on your savings? What is your current debt? How long can you survive before profitability? The longer you can push off profits and the longer you can operate around break even building up customers the better off you will be. At my company we did this for years while we grew our brand and increased volume and it was one of our main competitive advantages.
Working a current job to cover expenses is a great way to start something on the side in a low risk way and then make the leap when it is ready to support you. I get this question a lot so we’ll do an entire episode on this as well.
Quick review of the questions to ask:
Is this industry or service growing in popularity?
What is unique about my city or town?
How will future change affect my city or town?
What is unique about my skill set?
How long can I survive before profitability?
Now what you are going to do is make a list of industries that you could possibly enter. We are going to make a list of 10 specific services. The first 5 on the list should be very common services where there is a huge customer pool and relatively low barriers to entry as far as skills and money goes. Next 3 should be specialty niche services that only a few companies do but the customer pool is relatively small. The last 2 should be high skilled services that are in high demand and undersupplied. The barriers to enter are higher, it takes time to get certified, and you most likely need equipment and working capital.
Lets start with the 5 common low skilled services. For example:
Lawn Care / Landscaping
Off Premise Bartending
Mobile Car Detailing
Mobile Oil Change
Mobile beauty services - Haircuts makeup massage or pedicure
People sometimes get turned off on these spaces because they can be commoditized. They say customers only care about price. They say anybody or their brother could advertise on craigslist and get into the business. They say its a race to the bottom.