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GO IT ALONE!

The best business ideas typically leave you a lot of room to make mistakes. And remember, what you end up making money from may not be what you set out to make money from, so leave lots of room for experimentation. This test is probably most valuable when conducted before you put time and energy into test-driving your business. Once you’ve already perfected your business model—while keeping your day job—you may not have to adopt such drastic assumptions, because you’ll have the advantage of real experience to tell you what works.



THE “DEPENDENCY” TEST

A central source of risk in any business can be too great a dependency on one supplier or customer. The rule of thumb is that no single customer should account for more than 35% of a firm’s sales. Go-it-alone businesses, which often fit into a chain of activities, are particularly susceptible to a dependency on one company in the chain, so, the questions to ask are these:

  • If I look to my left, to my right, above me and below me, is there any firm on whom my business is likely to be particularly dependent?

  • If the answer is yes, is there anything I can do to reduce this dependence or to mitigate potential of damage?

One area in which many businesses today are highly dependent is marketing. A few firms—eBay, Google, Microsoft (via MSN), and Yahoo!—control the way hundreds of thousands of people make their living: Search engines and eBay are the primary source of potential customers for many highly targeted businesses. If you are considering a business that is dependent on search engines or eBay, then the relevant question concerns your confidence level that that you will have the skill to reinvent your business if one of these entities dramatically changes its practices, in a way that hurts your business.

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GO IT ALONE! Copyright 2004 by Bruce Judson. Reprinted by permission of HarperCollins Publishers. All rights reserved.