I was watching an episode of Dragons’ Den on CBC the other day when one of the venture capitalists brought up a seemingly obvious point that is oftentimes overlooked by entrepreneurs.
For those of you who are not as familiar with the show, Dragons’ Den allows entrepreneurs and small business owners to pitch their ideas to a number of investors. The hope is that the venture capitalists will be willing to invest in their companies for a percentage share of the company’s ownership. We see everything from iPod sleeves to barbecue sauces on this show.
In the episode that I saw, one of the entrepreneurs presented her idea for a dog fancier’s trade show and carnival. She said that she had already successfully hosted a number of these shows and that she was ready to take it to the next level. As it stood, the show had free admission, was small scale, and under-charged the advertising vendors like Purina and Iams.
The budding entrepreneur said that the next step would include larger indoor venues, charged admission rates, and an expansion of the concept with merchandise sales, among other ideas. The venture capitalists questioned the profitability of such a show, saying that while it may be popular with free admission, it is unproven as a money-making business.
It’s easy for entrepreneurs to lose sight of the end goal. They can get caught up in the enthusiasm of the idea without paying enough attention to whether or not the business can make money. Nowhere is this more prevalent than with web-based businesses. Twitter and Facebook are hugely popular, for example, but they’re far from being immensely profitable.
For your business to succeed, it needs more than just popularity; it needs to be economically sound and it needs to financially viable.
About the author: http://michaelkwan.com" target="_blank">Michael Kwan is a professional freelance writer based out of Vancouver, Canada. He can be found blogging at http://btr.michaelkwan.com" target="_blank">Beyond the Rhetoric.