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Old 26th August 2014, 11:05 AM   #1
JKirby
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Exclamation AVOID FAILURE: Before You Start Your Business

Foreward: I had some free time today and I wanted to share with you what I use to evaluate business ideas and create better visions for my clients. Feel free to ask any questions!



The N.E.C.S.T. Formula

The N.E.C.S.T. formula is a system of evaluating a business idea to instantly see if it is worth pursuing or not. I encourage you to use this formula to evaluate your idea to see if it is valid in the marketplace and worth pursuing. The N.E.C.S.T. formula is not based on theory or opinion. It is the same formula that is used by every successful company in the world. If you follow this formula and only venture into businesses that meet all the criteria, your chances of success are as close to guaranteed as they can be. The N.E.C.S.T. (pronounced NEXT) formula stands for Need, Entry, Control, Scale, and finally Time. I will now go through each section one by one and talk about how it can apply to your new venture.



Need
In order for your idea to be valid, there must be a need in the marketplace that supports such an idea.

If there is not a need for your product/service/idea in the marketplace then one of three things will happen:

Your business will become commoditized
What I mean here is that if there are 25 other carpet cleaning companies within a 50 mile radius of your location and your plan is to become number 26, you will be in a price war with the other 25 your entire career.
Your product or service is not needed or wanted
This is our friendly way of saying that nobody cares. I’ve sat down with hundreds of entrepreneurs who thought they had a great idea but upon further research found out that they were the only ones who thought it was great! Sadly, most of these people end up spending a lot of time, effort and money on something that will at most be a hobby.
You’ll go broke
If there is no need for what you are offering and you are emotionally attached to the idea, you will continue to dump money into it until you are dead broke. I’ve seen it many times and always ugly.
Remember This…
  • Your passion means nothing if the market doesn’t want it
  • You do not come up with ideas. The market presents ideas and certain people jump on them.
  • Instead of “following your passion” or doing what you are good at, focus on filling a need, burning desire, or some hole in the marketplace.


Entry
There’s a very good reason why almost every person who enters into a network marketing company (Amway, Herbalife) ends up spending much more than they make.

The reason is because the barrier to entry is LOW. I’m pretty sure that anyone, if they really wanted to, could scrape together $100 and attend an Amway meeting. Once they do, BOOM, they’re in business! When the barrier to entry is low and anyone can get involved, it’s time to scratch the idea off your list immediately.

Your idea should drive you crazy. It should keep you up for days on end. It should take you 10 or 15 tries to “figure it out”. And you should hit hundreds, if not thousands, of stumbling blocks along the way. Easy doesn’t make millionaires or billionaires. Easy is for people who people who watch 6 hours of American Idol a night then spend another 6 on the phone voting after it’s over.

Hard is for the determined. The ones who don’t care about “getting by”. The ones who have a burning desire to not only become disgustingly rich but also enjoy crushing those in their path. Hard is for the WARRIOR. And true entrepreneurs are the best warriors on the planet!

Remember This…
  • You want the barrier to entry to be HIGH.
  • If you are not running into roadblocks your idea is too easy and it’s likely that others will be jumping on your bandwagon and competing against you pretty soon (if they aren’t already).


Control
You must be in complete control of everything inside of your business for at least 5 years. This does not mean that you cannot hire people, outsource, or use contractors. What it means is that you want to do everything you can to get through 5 years with no outside investment or partnerships. Once you start to relinquish control of your business you slowly start down the path of buying yourself a job.

If you want a job then go get one. Vacations, sick time, 401K, Rolex from the streets of NYC after 30 years – it’s a dream come true. On the other hand, if you feel that spending 5 days in a place you hate with people you hate just so that you can get 2 days of free time is a little out of whack, keep 100% control.

Remember This…
  • You must maintain 100% control for at least 5 years
  • The more control you lose the closer you get to buying yourself a job.


Scale
Scale means reach or as I like to call it, Touch. You can scale your business in two ways: Width or Height.

Scaling by width simply means that you have a very large target audience that is easily accessible. Everyone on earth who is wealthy either scales by width or is connected to someone who scales by width.

Scaling by height simply means that you sell a high ticket item and can become wealthy by only selling a few each year. Remember, it is impossible to become wealthy by scaling by height unless you are connected to (selling to, servicing) clientele who are scaling by width.

Here’s an example of Width
A man name Bob lives in a small town in rural Virginia. One morning he wakes up with the brilliant idea of starting a painting company. There are only 500 homes within a 50 mile radius of his home. It would be impossible for Bob to survive (create wealth) in this situation because he cannot scale wide and has no connection to a width scale in his business.

After looking at the numbers Bob changes his mind. He knows painting houses is relatively easy with a little training and Bob can do it well. Instead of starting the painting company Bob puts together a 5 part video series on how to paint your entire house like a pro and launches it on the internet. He now has an audience of billions of people.
Here’s an example of Height
Sidney Crosby is the greatest hockey player in the world. He gets paid 8.7 Million Dollars per year to play the game he loves more than anything. It’s a pretty sweet gig. But his contract also made his agent a millionaire as well.

If Sidney Crosby was his agents’ only client, the agent would still be rich! The reason is because the agent uses a scaling model of Height. He gets a percentage of his clients’ contracts and therefor makes a great living.

It’s important to understand that the agents’ income is directly related to the players’ income. The players’ income is high because the player entertains tens of millions of people per year.

The agent scales by height but it only works because the player scales by width. Without that connection the agent is broke.
Remember This…
  • Your income is directly related to the number of people you “touch” every year.
  • It is impossible to scale by height unless you are directly connected to someone (or a group) who scales by width.



Time
So you’ve evaluated your idea and found that it meets the criteria for Need, Entry, Control, and Scale. Based on this research alone you decide to start the venture and move forward. The incubation period is perfect, new customers are coming on board, and your revenue is at 5 Million Dollars after 3 years of operation.

Everything is going smoothly but you are still working 20 hour days just to keep up. Unfortunately, even though you are making a great living, you forgot about the real reason entrepreneurs do what they do – FREEDOM!
In order for an idea to be valid there must be a way to separate your TIME from the business.

There are a number of ways to do this but what we usually like to look for is a liquidation event – selling the company for a factor of 5 or more.

This is the big payday that we focus on when we are starting a new venture. We actually try to pinpoint our target buyer before we even get into the incubation phase. With our exit strategy in place we can effectively plan out 5 years and accurately target what our big payday will look like.

Remember This…
  • If you do not have a plan to separate your TIME from your BUSINESS you will never achieve every entrepreneur’s true goal – FREEDOM.
  • The separation of Time is usually a liquidation event that provide a high 7 or low 8 figure payday.



Last edited by JKirby; 26th August 2014 at 12:06 PM. Reason: Formatting
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Old 26th August 2014, 09:40 PM   #2
pm_softhub
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Thanks Jkirby for this inspiring insights. I completely agree that for a business idea to succeed, there ought to be a need for the product or service you have in mind. Wayback in my college days, my marketing professor used to say it, whenever a need or demand is non existent, the job of marketers is to be able to create a need/ demand for that product or service. Is this really possible?

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Old 27th August 2014, 10:24 AM   #3
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Quote:
Originally Posted by pm_softhub View Post
Wayback in my college days, my marketing professor used to say it, whenever a need or demand is non existent, the job of marketers is to be able to create a need/ demand for that product or service. Is this really possible?
Now this is something that will be hard to give an answer for. Mainly because it comes down to fundamentals and your own belief system. On one hand, people can believe that it's the marketer's job to create the need/demand. Same thing goes when training sales people. Some people believe that it's the 'job' of the salesmen to create the need/demand for the product or service. I find that utterly ridiculous.

Essentially, when people say that marketers and salesmen' jobs are to create the need or demand for the product, they are causing more issues and creating a harsher work environment for their staff. Take the first generation of portable phones. I'm talking about car phones here. It took years and years for these portable phones to be accepted and available for the public. Even still, the car phone never really took off at all. Tens of thousands of dollars were essentially wasted on development and manufacturing while they were desperately creating a need for their product.

Why any new business owner would want to go that route and create something that didn't fill in a need immediately is beyond me. Sure, treading water that no one has goes before has high risk high reward involved... just not a sure-fire way to generate or create a business model. Instead of me trying to explain in principles, let's take my actual business model for example.

I am an Offline Marketing Consultant that provides the typical website redesign and 'SEO' services. The typical website design company goes around and basically tells their prospects that their websites suck or it isn't mobile friendly and they need a new website from them. The typical SEO company tells their prospects that they aren't on the first page and you need to get to the first page to see more business finally come in.

What I tell my prospects is that every business in the world is in business to make money. Starting from today, I can set up a strategy that will allow them to increase their bottom line. And my guarantee is, give me two months and if you aren't making more than what we charge, please fire us on the spot.

The difference is, that I know 100% of my prospects always need more revenue. They always want to grow their business. They want more money. That's why they are in business. Even multi-billion dollar industries need more revenue. Walmart has shareholders that they must make happy. They have revenue and sales goals and quarterly quotas that must be met. I don't have to create a need for my services. They already need them. My job as a sales trainer and a business owner, is to present my services to be the best option for my clients to get what they want. If they won't buy from me, they won't buy from anyone else offering similar services. The goal is not to create a need or tell business owners what they need to be successful.

When you're a business owner, your goal is to become the best solution that fills a real need for your audience. When you make that transition, you'll see that change in your business. Sure, you can create a completely different need for your audience, but there's plenty of problems that need solutions without you having to create another yourself!

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