The Principle of One Step Removed
Archives: Entrepreneurship
Your chances of success in starting a new business decrease with each step you take away from the business you already know.
Let’s say you have a successful neighborhood restaurant called The Steak House. Your basic business is selling a certain kind of eating experience to a local community.
Over a few drinks with friends, you come up with two new business ideas:
1. The first is to open a local restaurant called The Fish House.
2. The second is to go into the wholesale steak-selling business.
Both of these businesses have elements that relate to what you are already doing.
The Fish House is almost identical except for one difference – you will be selling fish, not steak. Everything else – how you attract new customers, how you create a profit margin, and how you control your costs to deliver a bottom line – remains the same.
Starting a wholesale steak-selling business is about selling steaks – and that’s what you already do. But in this case, there are many differences. For one thing, the market is different. You are not selling to local diners but to regional businesses. This means the selling strategy is different… which means the profit margin is different. And so on.
Opening The Fish House is an example of starting a new business that is only one step removed from what you know. Opening a wholesale steak business is three or four steps removed.
The first new business idea has a good chance of succeeding. The only unknown: Will there be a big enough local market for fish? The second business idea has a poor chance of succeeding. There are simply too many things you don’t know about it.
It is possible to succeed by taking two or three steps away from your core experience. As a rule, though, you want to take one step at a time.
[Ed. Note: Get even more of Michael's surefire strategies for getting ahead in business in True Path to Profits: A Master Entrepreneur's Guide to Business Success. Find out more - including how you can get a bonus subscription to Michael's VIP newsletter, Ready Fire Aim - right here.]
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