to Get Your First Great Idea
Five rules to follow that will help you recognize
valuable business ideas. Includes case studies of
entrepreneurs who quickly transformed ideas into
By Samuel Fromartz - April 1, 1998
best business ideas aren't hard to find. They're
just hard to see
Silber's nearly $9-million entertainment business
sprang from one simple observation: all these people
must need something to do.
in 1991, Silber was working as an agent for New
York Life Insurance Co., located in that tourist
mecca otherwise known as the Empire State Building.
Watching the crush of visitors who piled into the
elevator every day, Silber reasoned that there were
profits to be made in offering an indoor experience
for the out-of-towners, especially for those who
found their view clouded by uncooperative weather.
something with a modern, high-tech appeal, he came
up with the notion of a simulated helicopter tour
of the Big Apple. So appealing was his concept--or
at least his pitch for it - that he managed to raise
$6.2 million in a February 1994 stock offering,
which took place before the ride was even built.
Plowing that money into the venture, he opened New
York SkyRide before the following Christmas. In
1996 the ride would draw about 19% of the 3.4 million
tourists who made their pilgrimage to the skyscraper
that year. Aside from charging $11.50 per admission,
he also has been selling customers hot dogs on the
way out of the SkyRide. "The lesson in this
story is, Capitalize on and benefit from existing
infrastructure," Silber, now 30, says. "Take
advantage of other people's toil. That's really
what everything is about."
it turns out, that's true of most great ideas: they
aren't so much hard to find as they are hard to
see. Retrace the steps of entrepreneurs who've brought
great ideas to life, and they'll all lead back to
a familiar spot: the markets where the founders
operated, the companies where they worked, a customer's
remark, an employee's insight, an intractable problem--even
the weather. Opportunity, it seems, is in the eye
of the beholder. Innovators are able to "make
associations and see things differently," says
Thomas Kuczmarski, a Chicago-based consultant who
specializes in innovation. "If they look at
research, new technology, or trends, they can piece
those together and draw a mosaic and end up with
something completely different."
in fact, a perfectly valid concept can be camouflaged
by its very ordinary roots. But the remarkable fact
that no one else is doing it--or even thinks it's
a good idea--can be enough to inspire visionaries
to get serious. The fact that his big-company employer
shot down his idea wasn't enough to discourage software
entrepreneur Mike Klein. The months he'd spent studying
the market and writing a business plan made him
only more enamored of his idea's potential. "It
became so crystal clear in my mind what we had to
do to win this game that it really came down to
a decision: Do I stay with my job and wonder what
if, or do I quit my job and just take the risk?"
he says. "And that's what we did."
probably do the same, you're thinking, if only you
had that powerful an idea. Or maybe you do, but
you just don't realize it. How do you find that
great idea that's almost certainly in your midst?
Here, some guidance from those who've done it.
1 -Keep the small picture firmly in mind
Citipost, in New York City ?
Time from idea to start-up: Three weeks ?
Initial investment: $19,500
Trayford was only looking to kill three months before
his new job in music promotion began. So in late
1989 he did what he'd often done to bankroll his
fledgling music career: he got a gig at a Manhattan
was there, after a couple of weeks on the job, that
Trayford decided that the company was "missing
its own concept," as he puts it. To entice
customers to choose its services, Manhattan Borough
Couriers offered overnight delivery for just a dollar
anywhere in New York City. What the company viewed
as nothing more than a promotion--a teaser for its
same-day delivery service--Trayford saw as the basis
for a business. Three weeks later he borrowed $19,500
to launch Citipost, pitching the service to companies
in publishing, media, and financial services.
first sales call was to Random House, a publisher
that delivered hundreds of books every day to reviewers,
agents, and others in Manhattan. "We had a
lot of concerns at first, but the cost savings outweighed
the risks," says Kevin Farrell, who listened
to Trayford's pitch at Random House and is now vice-president
of real estate management at Bankers Trust. "A
lot of this publicity material was going out by
UPS and FedEx, so the savings were tremendous, at
least 50%." Within four months Citipost was
handling all Random House promotional materials.
Using the same principle of focusing on intracity
delivery and on high-volume industries, Citipost
has expanded around the country and overseas. Last
year its revenues reached about $20 million.
2 -Take every complaint you hear seriously
Misty Mate Inc., in Tempe, Ariz. ?
Time from idea to start-up: Two years ?
Initial investment: $80,000
Steve Utter was hearing from employees couldn't
have surprised him: it gets hot in Arizona in the
summertime. Nonetheless, he was unhappy that the
oppressive 110-degree midday heat was melting away
productivity at his Phoenix-based construction company.
"We'd start before the sun even came up,"
recalls Utter, "and we'd be lucky if we made
it to noon."
logical response might have been for Utter to switch
over to interior remodeling. But all he could think
about was that if he could boost productivity, he
could add as much as $100,000 to his bottom line.
Just as he was sweating out a solution in 1987,
he came across a fog nozzle used with garden sprayers
to spread insecticide in a fine mist. If he could
somehow connect the nozzle to a tube and a portable
water supply, Utter figured, he might be able to
create a personal misting device to cool his workers.
He also realized that the product would have broad
appeal. "I had million-dollar signs in my eyes,"
a two-year period, Utter's employees served as guinea
pigs, testing out the device as he toyed with it.
Once they were satisfied, he applied for a patent.
The original Misty Mate cost $175 and consisted
of a backpack water supply with a flexible tube
and a nozzle. "We started showing it to other
construction companies, and they said, 'We want
to buy these,' and we ended up getting a lot of
media coverage because the original ones were a
large size and very conspicuous."
Mate now costs $25 and consists of a fanny pack
that straps to the waist and a stiff but flexible
tube that clips to the shirt collar. Sales of the
device have doubled every year, reaching around
$7 million in 1997.
Rule 3 -Wait for your boss to say no--then go
Steeplechase Software, in Ann Arbor, Mich. ?
Time from idea to start-up: Six months ?
Initial investment: $30,000
Klein's story sounds like something right out of
the panels of Dilbert: an eager employee spots a
great new innovation, takes the concept to the management,
and is told his project would be perfect--as a candidate
for a slow corporate death. "They said, 'You
could do it,' but they would treat it as an R&D
project and probably kill it," Klein recalls.
though, had done enough work on his concept as part
of a night class in entrepreneurship that he thought
he might know better. So he raised $30,000 and went
idea for Steeplechase came from observations he'd
made working at Allen-Bradley, the Rockwell International
Corp. unit that makes industrial controls. Klein
heard customers complain that Allen-Bradley's mainframe
systems, which run factory lines, were complicated.
He wondered if those costly systems could be replaced
with lower-cost PCs.
was around that time--late 1992--that Klein approached
his managers at Allen-Bradley and asked them how
the company would receive his idea. Their clear
message: don't pursue it. Later he heard a senior
official say that it would be at least a decade
before PCs were running the factory floor. "To
my mind that translated into at least a five-year
window of opportunity," he says. On New Year's
Day 1993, Klein launched the company, which has
grown by 400% a year.
Ryan, who knew Klein at Allen-Bradley and is now
president of Rockwell Software Inc., says he isn't
at all surprised to hear that Klein was actively
discouraged. "It wasn't something that the
big company understood back then," he says.
"You needed to have the entrepreneurial outlook
to see beyond the current revenue stream to what
was going to happen in the future."
4 -Assume everyone has the same problem you do
HealthCare Financial Partners Inc., in Chevy Chase,
Time from idea to start-up: One year ?
Initial investment: $500,000
inspiration for healthcare financial Partners began
with a headache. John Delaney and Ethan Leder had
bought a home-health-care company in 1989, quickly
positioned it in the profitable niche of delivering
drugs to patients at home, and then ran into a problem--a
cash-flow crunch. To expand, they had to add nurses,
so expenses rose. But revenues didn't keep pace,
because it often took government and private medical
insurers 90 to 120 days to pay for services.
sources of financing were reluctant to lend Delaney
and Leder money because of the difficulty in valuing
medical accounts receivable. Each insurer had its
own policy on repayment, making it tough to figure
out the value of the receivables. Finally, the partners
found a factoring company in Texas that was willing
to extend them credit.
the money "was a key to our success,"
Delaney says. And what he and Leder had to go through
to get it sparked an idea. Factoring, in which a
company borrows against its receivables, was especially
valuable to small but fast-growing medical businesses
that didn't have access to credit, they realized.
"We were all collectively intrigued with that
business," Delaney says. With their legal counsel,
who became a partner in the new business, they began
brainstorming ideas for setting up a finance company.
Delaney and Leder sold part of the home-care infusion
business. Soon after, they started HealthCare Financial
Partners, having realized several advantages they
had: no factor of any size was focused on the small-
and midsize-company segment of the medical-finance
business, and there was a barrier to entry--specialized
knowledge of receivables. Since Healthcare Financial
Partners leaped into that void, the company has
grown to 70 employees; its financed receivables
increased from $6.2 million in 1994 to $219 million
in the first nine months of 1997. "We want
to be the GE Capital of health care," Delaney,
the company's CEO, says. "That sounds ridiculous,
but we don't think it is."
5 -Ask the right questions
Compression Inc., in Louisville. ?
Time from idea to start-up: Six months ?
Initial investment: "Insignificant"
Verity and Bob Leasure knew the kind of company
they wanted to start. They just didn't know what
business it should be in.
1992 the two men, a former investment banker and
a former chief financial officer, owned an injection-molding
company, which--much to their chagrin--had become
a commodity business. What they were looking for
was an opportunity that would have just the opposite
attributes: something unique enough to command a
profit; situated in a growing market, so they wouldn't
have to steal market share; and capable of diversification,
so they could sell more and more to the same customer
those criteria in mind, they systematically began
asking engineers and customers about what business
they should go into. The answers bubbled up slowly.
"It really comes down to listening to customers
and the people who work for you," says Verity.
Over time an idea began to take shape. "We
found that almost every company we talked to had
this urgent need to develop better products faster,"
Verity says, adding that a six-month delay "would
be the difference between dominating a market and
missing it completely." The bottlenecks were
not in production but in design, engineering, and
six months he and Leasure had hired two specialists
in product development, design, and prototyping,
and opened up Compression Inc. Besides wanting to
produce products more speedily, companies were also
looking to outsource product development. Since
1993, Compression's sales have risen from $700,000
to $30 million. "We tapped into a much larger
need than we initially anticipated," says Verity.
that growth has required some fancy financing; so
far the two have raised a total of $30 million in
several phases to systematically grow the company.
A business idea, after all, is only as great as
an entrepreneur's ability to execute it. Just ask
Zalman Silber. Though his simulated helicopter ride
seems like a natural winner--so much so that he's
opened a virtual-reality arcade in Times Square--his
losses totaled nearly $3.5 million last year. Plans
for a $10-million private placement collapsed last
summer, and he's now involved in a legal battle
with the owners of the Empire State Building. Not
that any of that has tempered his enthusiasm. This
year he's hoping to open another location, in Sydney,
Australia. All he needs is the money. Ideas, after
all, are the easy part.
Inc. Magazine – “How to Get Your First
Great Idea: Five rules to follow that will help
you recognize valuable business ideas. Includes
case studies of entrepreneurs who quickly transformed
ideas into start-up companies,”