Once a show stopper... now an opportunity

Both my business buddy & I had some bad news on our costs today, and for me this is a moment when I realise that even bad news can have a positive effect.


I had made some assumptions about my cost structure based on Internet searches, so when I finally got round to talking to one of the main suppliers in the UK today he said I couldn't reach that level of pricing. I could of course source supply from outside of the UK, but he pointed out that this would not stand up to the quality that I require for my idea. So it looks like my cost structure is now THREE times higher than I expected.


Now, this is the bit where I recognise I have changed through this whole process...

If I had heard that news 18 months ago when I was first researching this idea, I think I would have shut up shop and forgot about this idea. But now, I think to myself how can I overcome this obstacle; how can this make my idea better; etc...

And the funny thing is, I think it has made it better. I've now had the jolt for me to revisit the actual size & packaging of my idea. I'm coming round to the idea to re-package my idea into a "bundles" set up, where you can buy smaller denominations of my product depending upon your need rather than the one size fits all package I had previously tried to create. This means I can keep the per unit price at a great headline price, and flex the appeal of my idea to a wider number of users, rather than just the average.

And its the same for my buddy... he doesn't see his increased costs as a big issue - its just means he needs to be a bit more creative in his pricing, and possibly means he needs to position his product in a more premium sector with more premium appeal.

Monte Carlo or bust

Being the geek that I am, I've now developed my own Monte Carlo Simulation after reading about it in "Fooled By Randomness" by the same author as "The Black Swan", Nassim Nicholas Taleb. Its not a very sophisticated Monte Carlo Simulation, but it does do the job I set out to use it for - interrogating my business model.


This isn't the first time I've come across a Monte Carlo Simulation, as a Finance geek I used to work with (we used to call him the Temple of Doom!) used it to stress the probabilities of success for hitting our finance targets - he persuaded the company to buy a very sophisticated software package that I seem to recall was several hundred if not a thousand pounds, but anyway it looked amazing and told us all what we already knew - that we were not going to hit our targets!

Anyhow, my Sim has been used to "test the robustness" of my business model.

So I've taken my top down model (Total number of current users x Awareness x Trial x Distribution x Gross profit per unit) and run that 15,000 times with random numbers every time in each element of the model, e.g. Awareness.


Now at this stage its just a stack of numbers, so then comes the "fun" bit... the analysis. And this is the bit where I have to confess to not knowing exactly what I'm doing... (I should have kept awake during that one term of Stats I did at Uni!). But what I think I am doing is building a histogram using a function in Excel called Frequency which tells me the number of instances that the random numbers in my model have generated an answer within a set band level, i.e. bins. All very interesting I hear you cry...


Well I won't bore you with the detail on the guts of the model, but basically my Sim shows a range of possibilities for my business model, from £0 to £30m. The mean seems to be in the £8m ish range (give or take several hundred thousand pounds!) while the mode is in the £4m ish range. The standard deviation is £10m ish, and the Standard Error is under £100k. So what???


Now whilst it is possible that my business idea (if successful!) could hit £30m plus it is more probable than not to be significantly less than that, which has dented a bit of my enthusiasm. But still £2m is better than a kick in the teeth!


I've found building my Sim very stimulating and I already feel that it has been worthwhile for me as it has started me thinking about moving away from the big scale launch and more towards a slow burn launch. I think I will now use my little Sim a little more often now to see the effects of randomness on a whole range of things...


The image above is from Rolf Hicker

Uping the ante

I wrote my last entry while sitting in my local tea shop enjoying a cup of tea and a couple of croissants, and as you could probably tell, feeling sorry for myself and trying to work out my next move.


And then the phone rang... my god! I had given up hope that my advertisement would deliver anything. So I'm trying to sound vaguely professional on the phone to a customer in the middle of a bustling tea shop at lunch time on a Wednesday, with clattering cups all around me. For some reason the customer didn't seem that distracted and was willing to see me the next day.

Suddenly I had to get my skates on... no more dilly dallying... I need to finish the proposition, print off some point of sale examples, and prepare for the meeting. Oh and I had to work out the customers location... Bollox! He's in deepest darkest bumpkinville! Why can't he be in glamorous west London???!

After bouncing the proposition off my business buddy, I went to bed trembling with a mixture of excitement of fear & hope. Hope that this would work. That this would be the breakthrough moment I had hoped for. That this would prove one way or another that my idea was good. But what happened if the customer didn't like it? Arghhh... My dreams were riding on the next 16 hours. Perhaps my whole life was being decided by the next few hours.


I met up with the customer (after a long & eventful trip!) and delivered my proposition. I could tell there was mild curiosity but was not getting a strong buying signals from him about if he really wanted this product. Looking back on it now, I think I had over sold it to him. I had made it too specific to his profession when in actual fact it was much simpler & wider than he was thinking. We chatted a bit more, and then I realised he didn't know I was offering him a no lose situation - basically I was going to guarantee his level of sales by a couple of hundred pounds AND he didn't have to buy anything off me. Suddenly his demeanour changed. He started to ask questions about how to make it work as opposed to the preceeding questions about its purpose and what was wrong with it. He had seen the opportunity - this was my chance.


He now unbelievably offered me more - his brother also ran the same sort of business and offered me an introduction to him, and he worked just up the road. Would I be interested in seeing him. I took the opportunity and this time made the sell far more simple. It was for everybody, not just a specifif type of person. I tapped into a general need rather than a specific condition! His brother really bought into it and started asking me lots of questions about how it worked, giving me loads of buying signals. In actual fact he made some additional suggestions about the product which I was like "why didn't I think of that?" and "He really wants that - that's loads of value to him, but little cost to me" (the Oxo cube / Treasure Chest scenario).


So I left there in a bit of haze. Both guys were up for the test. Both wanted additional things. Both had called my bluff. Now I had to deliver. Where would I get the Point of Sale? Where would I get a secure website? ARGGGGHHHH!!! Why do I always fly by the seat of my pants!!!!


Afterwards I spoke to my business buddy and he was over the moon. Our theory of making the first £100 was vindicated. I knew I couldn´t have done it without him, as every time he progressed I felt I had to push on, which in turn made me progress and in turn made him push on.


As if to confirm the feeling of constantly upping the ante, he emailed me the following day "I can't tell you how great it was to hear that your meeting went well. That is a truely momentous step!... it's my turn next to step up to the plate."


This is now a game of poker where both players could & should actually win the pot!

Frustrating Times

Its getting tougher and I'm getting more & more frustrated.


I have now started cold calling outlets to help me trial my new product, even though I've tried that before, and funnily enough I'm still hitting closed doors.


On top of that very real frustration at getting knocked back is the frustration that a great deal depends on this trial, that this trial would give me a breakthrough on my journey.


And this is the point where I really need breakthrough, even though I not sure it really ever happens like that. This trial will unlock a whole number of doors that have remained resolutely closed till now, and, I hope, present more doors to open once they themselves have been opened.


I know what the test will give me in the sense of objectives, but most importantly it will give me a sense of progression which in turn will build my confidence about my idea and about myself.


I am feeling massively frustrated. I just can't find an angle into these retailers, and it gets even more frustrating as I know just how much is riding on this.


And what is riding on this is my idea that I have nurtured for 18 months. Its my reputation as I have told people I am starting my own business. Its my self belief and confidence as I have told myself I can do this. Its my dreams of the life I want. So not much then...



And the trial gives me a chance to see if all of those things are possible, and so far I'm struggling even to ask the questions to the customers...

Going Schizo!!!

I once pondered that I thought there were only two types of people in this world: lazy & thick.

And for the last week, I have been both of these types of people.

I've had a week off my day job so I can focus on starting up the test and see how it goes. I have relied on one route rather than chasing it down, and I'm beginning to face the consequences of that decision. I had really thought this through and thought it would be easier than it actually has been in the last 7 days (despite me spending hard cash to chase the game!). So I've been a bit of a thicko on that one...

But never mind just being thick - with my week off I thought I would be chasing leads down, making things happen, but in reality what I've been down is chasing my own tail. I've had long lies and pottered about the flat, and then disaster yesterday when I succumbed & bought a PlayStation 3! Now all my good intentions have been destroyed.

So all day today I have been cursing myself for being truly lazy and a bit thick, but I have resolved that I will shake my commitment up tomorrow... in time to go on a stag weekend in Ireland.

P.S. I am prone to making sweeping generalisations, and I know that people don't fall into JUST two main groups... there's at least 7!

Monday Blues...

My euphoria of getting stuck in to the game with me spending some cash is wearing thin, as its been a little slower than I expected in taking off.

The first step of my test isn't even finished yet and I'm already feeling a bit glum. I was kind of hoping to be inaundated with questions at least. But all I've had thus far is 5 visits to my website and 1 call.

Now that call was interesting... it was from a guy that sounded promising until I asked if he had taken part in tests before, to which he said "Yes" as he had a sister company that he had tested things on their part before. Curious, I took a look at his site. Now it wasn't even close to being a competitor but I think its just too close to actually test with him, so I think I'll leave it for now...

So may be this is just another "darkest hour before the dawn" moments... we shall see!