Good idea? Trying to start a business on a shoestring budget.

[Meldread]

I'm in a bit of a situation and in need of advice.

I am contemplating on starting my own business, but the funds to start the business are not enough to cover operational costs. That isn't really the problem I am having, though.

The business would be based around an invention idea that I have that merges two existing technologies. I do not have a prototype (and couldn't afford to build one yet) but because it is based off of two existing concepts (completely unrelated to one another) I am 98% certain it will work. The problem I am having is as follows...

First, I have never started my own business. I've made various attempts at internet businesses but after looking at potential gains for time spent and the competitiveness in the market I didn't deem it a worthy venture. My time was simply more wisely spent elsewhere. The downside to this is the fact that I lack any real experience in developing a real business plan. This will be required to get a loan or any sort of funding.

Second, I am not an expert in the field of the product I designed. It came to me as a burst of inspiration (one of those infamous "duh" moments). It is elegantly simple, but even so, lacking real fundamental knowledge of the field involved I REQUIRE someone with the capabilities of sketching out a more detailed plan. I require someone with at least a rudimentary knowledge of physics. Once the plan is adequately detailed I can submit it for a patent.

Once the idea is patented I can then use it to seek funding. Sadly, patents are expensive, and on top of that starting up a business comes with its own expenses. I am confident that the idea is good enough to warrant government funding, and if nothing else I am VERY confident I could get a private loan that is backed by the SBA.

Now, here is where the "good idea" question comes into play. I need two people, one to help develop a detailed business plan, and another to help flesh out the details of the invention. I have done the rudimentary work for both ends. However, I require individuals with more knowledge than I currently possess.

Because I lack funds the idea would be to seek out interns to assist in the first phase of the process. It will require all three of us to develop a cohesive and accurate business plan that will help us outline how to proceed. From there I can obtain a patent and will at least be able to secure the funds to build a prototype. Once the concept is proven it should not be overly difficult to secure further funding for the business.

So here are the steps I am contemplating taking.

Step 1: Filing as a sole proprietorship. This is very inexpensive and is all that is required for the beginning.

Step 2: Seek out an intern with a passing knowledge of physics to help flesh out the invention idea.

Step 3: Once the idea is proven theoretically possible I can then file for a patent.

Step 4: Seek out an intern that will be able to help create a business plan for the business.

Step 5: Once we have a strong business plan that we can then present to others, and I have the patent firmly in my hands I can then reincorporate the business as an LLC for further protections under the law.

Step 6: Seek out funding for a prototype.

Step 7: Build a prototype to prove the concept.

Step 8: Once the concept is proven I will need to secure further funding to begin production.


So back to my original question. Is the above a good idea?

[Brutha]

How much funding do you think you will need?
How much cost/unit to you expect?
Are you sure that you search someone with physics knowledge instead of someone with engineering?
What skills can you bring to the table yourself?

[Dwane J.]

What you are looking to do is bootstrap your startup. This is a good read;

ChangeThis :: The Bootstrapper's Bible

I think you are off to a good start but one thing worries me, who is going to buy what you are making/selling? In your post you didn't mention who you customers are.

I recommend visiting your local Small Business Development Center (SBDC). It is part of the SBA and have seasoned business professionals available at no cost to help you out. The SBA and SBDC can point you where you need to go to acquire the business skills you need.

[ethereal]

I highly suggest you ask around and get advice from people who understand your concept and technology, and proposed business model. Don't be afraid that they will steal your idea; frankly, great ideas are a dime a dozen but people who can implement them are rare. Perhaps during this search you might find someone who is so enthused that he'll help you with your business, and if not, at least you'll get some potential advisors you can either ask for help or serve on your advisory board.

The key is to make sure that you are addressing a real customer pain (and I mean, serious cash-draining, time-wasting, arm-twisting PAIN) with your solution, not just another cool gadget that will "change the world." As my entrepreneurship professor said, "Don't be a solution in search of a problem." Everything always sounds great and plausible in theory, until we get the real facts from potential customers.

I'm kind of iffy on securing a patent so early, it's quite expensive I thought? $10k or something? Less for a provisional patent, but still... Unless you're 100% (I guess 98% is good enough ) sure that people really want this new technology...

And how do we really know whether they do or not? By asking them and finding out for ourselves I think you're going to have a lot of field work to do Perhaps these potential customers will be so excited that they'll be the first beta testers and provide you the money to build the prototype for them -- that would be ideal, wouldn't it? So go get around to talking to them

It's better to fail often and early in the process, than to put in lots of effort and money only to find out that it wasn't what we imagined it to be. I know it sucks to be this cautious, but I think it's the smart and practical thing to do

[Meldread]

Thanks for all the responses.

I also have to give a special thanks to you Dwane for linking me up to The Bootstrapper's Bible. I just read the entire thing and I highly recommend it to EVERYONE who is even THINKING about starting a business. Although most of the things it talks about should seem obvious it consistently points out mistakes that in retrospect lots of people make again and again. It's also written well - it isn't boring and it's easy to understand.

It opened my eyes to a few major hurtles that I am facing that I simply won't be able to overcome and could doom me to failure before I even begin. So I'm going to either have to rethink my plan or try something else that will allow me the funds to self-fund the idea. Since I am definitely a bootstrapper, I don't think I should pursue the idea yet. Sigh. Once I have more capital to invest and more experience then it is definitely a road I intend to travel down.

On the brightside it gives me time to learn more about the industry and for technology to mature enough where it can receive maximum benefit. That was one of its major flaws - it could not work at maximum capacity yet because technology simply hasn't caught up. There also seems to be a few things in development that should make it even more effective. So if nothing else it will definitely benefit from sitting on the shelf until I am certain that once I am ready - I can come out fighting.

[Blueskied]

A great idea is only 1% of a project.
So you basically are looking for people who do the remaining 99% (implementation, selling).
Afraid this won't work. You'll have to get your ass up yourself.

[maken]

i think you should focus on 'step2' once the idea is proven and protected, you'd only need to prove its commercial value (potential) then it becomes easier to get a loan or even an investor.. once you've secured the funding, its easy to hire someone to develope a business plan, you might even get a business metor!

[Jason S]

None of your proposed action steps includes the two most important things you need to do: one, make sure there is a viable market for your idea. (Who will buy it, how much will they pay, and how often will they buy again?) And two, make sure that YOU are the person who can make it happen.

You don't need a patent yet. You don't have the financial ability to enforce it! You also don't need to incorporate because you're not doing anything that requires you to have the kinds of protections that incorporating offers.

I'd spend my time at this stage testing how real the opportunity is, both for the idea and for yourself... if you're going to spend any money, spend it on phone calls to and breakfasts with people who will know what to do with your concept.

[Lauxa]

Disclaimer: I am not a lawyer.

But I did consider going into patent law and even studied some materials for the patent bar. My understanding is that you cannot get a patent without a working prototype. Also, a clock starts ticking either when you file for a patent or get the patent. If you do not introduce your product to market before the time runs out, you could lose your patent. I also had a friend who was very creative and was working with a patent lawyer on an invention, and his advice was to be very careful about who you tell your idea to or it may not be patentable. Finally, I have heard that there are large companies who hire people to search for new patents in their markets, and then they will steal the ideas. If you do not have the funding to defend your patent you are SOL.

[Ponce]

Originally Posted by Lauxa

Disclaimer: I am not a lawyer.

But I did consider going into patent law and even studied some materials for the patent bar. My understanding is that you cannot get a patent without a working prototype. Also, a clock starts ticking either when you file for a patent or get the patent. If you do not introduce your product to market before the time runs out, you could lose your patent. I also had a friend who was very creative and was working with a patent lawyer on an invention, and his advice was to be very careful about who you tell your idea to or it may not be patentable. Finally, I have heard that there are large companies who hire people to search for new patents in their markets, and then they will steal the ideas. If you do not have the funding to defend your patent you are SOL.

Lauxa? he can do his own patent research and save a LOT of money, also you DO NOT need a working model....... that was way back in the 1800.s

Also ANYONE can make copys of his product and pay him nothing and they can do this till such a time that he gets the actual patent, remember that a Chinese company can steal and put out a product in three months..... and even if the patent is for the US they can still sell it world wide.

I started selling my product at the swap meets in CA in 1992 which I started with $58.00 and retired six years later with a few mills.

[ticktockclok]

Its really hard to bootstrap a great, new idea, especially if its the kind of thing you find in a retail store. Find some existing way of making money, and bootstrap that.

[Ponce]

Tick? making money is easy but keeping it is the trick......

What you can do.......books... at thrift stores, swap meets, garage sales and so on you can find books that you can buy for a dime and then sell it for $100.00, I saw my X do it......all that you need is an inventory of 2.000 books on line and they will sell themselves.

At the same time and at the same places you can buy old cameras, lamps, rugs, posters and so on that you can sell on E bay for a lot of money... a couiple a weeks ago at a garare sale I found five mechanical metal toys for which I paid ten dollars and one of them alone goes for $250.00.

A couple of years ago I went to another garage sale (early in the morning) and I saw a box with around 250 one oz silver rounds, I asked the old lady how much she wanted for them and she told me that she didn't know because it used to belong to her long gone husband..... I gave her $100.00 and she was very, very, very happy........I then sold them at the coin shop for a very nice price and then went back to the old lady and gave her half of the profit, it really made her day.

I have another invention (really an idea) that one out of five person would buy.....ok , ok, at least one out of twenty five...... would cost 0.17 cents to make and another 0.25 cents for the display, could wholesale for .075 and retail for $1.50 but because I am retired (that's why I made my money) I really don't want anymore adventures and dealings with the government.

By the way friends, as you may have noticed I talk a lot about myself and that's because I feel that you can learn more from my own personal experiences rather than about what someone else did.