Every month my bookkeeper hands me an invoice from one of those “U-Store-It” type places. You know these places, they rent you a corrugated tin lean-to and you pay it off for them in about six months.

The rest is pure profit.

I say this because I have the amount of their bill etched into my brain - $230.42.

That’s about what I paid for my first car. Instead, I get about 200 square feet and a padlock.

I once calculated that the cost of paying to store my “stuff” surpassed the retail value of that same “stuff” by about the 17th month. (In case you’re wondering, I’ve been paying this bill for more than six years now.)

But I just can’t get rid of my stuff! (My wife can --- when it comes to “terminating with extreme prejudice”, my wife is absolutely devoid of emotions.) But I just can’t throw my stuff away. Too many memories, too much stuff.

So, and as I stroke the $230.42 check each month, I think to myself, “What a business this is; no employees, no R&D, no distribution network … plus depreciation!” And all this in an era when people are hoarding their “stuff” like crazy.

Think about it. People acquire stuff, hoard stuff, and trade stuff. Whole industries exist because of “stuff.” (Do you actually think that e-Bay would be around if we weren’t addicted to both acquiring and trading our stuff?)

I do two weekend shows – Saturday and Sunday mornings – and as I drive past “Trader Jack’s” each of those mornings, I find myself thinking, “Now there is an even better business … instead of just storing stuff and charging for the privilege, old Trader Jack merely puts out a bunch of folding tables and charges people to come and peruse other people’s stuff.”

(I think Trader Jack’s also has some sort of transaction fee --- I’m about to find this out because I’ve got a bunch of “stuff” in my own garage that I intend to take down there one of these Saturdays.)

Once again, just a handful of employees, absolutely zero R&D, no distribution network, and no marketing (unless you consider the giant sign that says, “Trader Jack’s”).

Beautiful.

People call my radio show all the time, looking for help with their nascent start-up. Not always, but more often than you would guess, they lay before me some of the most complicated business models ever imagined. These models will consume great amounts of product development, market research, employees, and sales/marketing.

Moreover, they are “me-too” businesses. They are hardly differentiated from their competition.

Ladies and gentlemen, it doesn’t have to be this hard. So, let me now give you some ideas that will not only improve your chances of success, but also greatly abet your start-up’s bottom line.

• First and foremost, you need a niche. Those of you that regularly read my columns probably get very tired of hearing this.

  But I say it so frequently because it is without question the most important thing that you can do to ensure your success.

  Niches are critical. If you can find one where there is no competition, you’ll have a pretty good chance of succeeding. But you’ve got to find a business idea where competition is non-existent.

  Which means that you have to have the only product or service of that type.

  Think of the drug addict. (This example may make you squeamish, but I’ve never found a better way to illustrate the concept of an inelastic price curve than by talking about junkies.)

  The addict knows that he or she can only get their “fix” by buying that next addictive substance. But because that substance is illegal, very few people will get involved. So, the “distributor” takes great risk.

  Because of this high risk curve, the margin (the difference between the cost of goods sold and the ultimate “street” price of the drug) is very high. (I guess you could also say that about the user as well.)

  But it is both this unique differentiation and fear of being arrested that eliminates virtually all competition. Because of this, the “addicted” user will pay almost any price.

  Think National Football League. Think iPod. No real competitors always equals high margins.

  And margins mean both profits and the ability to overcome bad decisions.

  So, find a (legal!) business that is one-of-a-kind and you will find yourself in a business where you can make an awful lot of mistakes and still win.

  (After all, the real benefit of “margin” is that it will provide “cover” --- basically, enough money to survive --- as you make mistake after mistake in your start-up. And believe me --- you will make mistakes in your start-up.)

The rest of my tips pale in comparison to having a uniquely differentiated product or service, but they are all goals you should strive for if you are looking for success. Here are some more.

• Keep it simple! This is so important if you are bootstrapping your start-up (and face it, most of us are --- very few of us will ever raise significant amounts of angel or venture money). Try to avoid as many moving pieces as you can.

  Think of the above examples; our storage friends truly have perhaps a bookkeeper (somebody has to send me those bills every month) and one or two people to man the facilities. (Somebody has to sell those new accounts as they wander in.)

  Our storage friends have absolutely no research and development costs either. When I ran software companies, we would routinely pour anywhere from 5% to as much as 25% of our revenues back into R&D. I soon learned that the term “R&D” is akin to saying, “Come work for Ron --- he will pay you $75,000.00 a year to put your feet up and stare at a computer screen. Your biggest challenge is in trying to convince Ron that you are about to invent his next great software product.”

  And of course, our friends at the storage business spend almost zero dollars on distribution and marketing.




• Think Strategic Partner - As most of you know, we have a radio show called The American Entrepreneur. This show is on air seven days a week, a total of 21.5 hours of airtime.

  But what we do not have is a radio station. To acquire a radio station would have cost millions of dollars up-front, and Lord knows how much more per year just in maintenance and electricity.

  I prefer instead to partner with already-existing radio station owners. Thus, we can choose to either pay them for air time or partner with them, so that they participate in our successes.

  The key rule to remember is this: When forming a strategic partnership, always make sure that you’re the little guy. Little guys almost always win when it comes to strategic partnerships.




• Look at Trends - This is probably one of the more important things I can tell you. Right now, our society is trending in clearly discernible directions. People are afraid, people are backing away from risk, and people are hoarding their cash. These are but three mega-trends; there are many, many sub-trends to these.

  I have a great friend. He’s a guy I grew up with. We played high school football together.

  Upon graduation, he went to Vietnam and then became a police officer. Once he had enough years in, he retired with a full pension. In his early 50’s, he opened up his own security company.

  Today, he can’t find enough good people to staff all of the projects and contracts he is getting. This is primarily due to the fact that he provides a high-quality service but also in part due to the fact that people feel insecure and are therefore willing to pay for security. It’s one hell of a trend.

  Other trends that I see and that I know of individuals clearly profiting from include: energy conservation, DIY (Do It Yourself), and the general move from owning homes to renting residences. Ten years ago, none of these would have qualified as active trends.




• Lastly, Avoid Fads – Less than nine months ago, I took my daughter to the Consol Energy Center to hear a young 13 year-old phenom by the name of Justin Bieber. Career-wise, J.B. was hotter than a comet’s tail that December evening. But when I asked my daughter just recently, “Where’s your Justin Bieber poster?” (she just re-painted her room and Justin apparently didn’t make the cut), her response was, “Oh, dad, he’s so yesterday.”

  I’m not saying that you can’t make a buck in the very short-term by playing the fad game. But if so, you had better be ready to manage chaos and so you must build an organization that can react and capitalize before the competition shows up.

  In other words, this is not a game for old guys. (Nor are you building a business that has any long-term equity value.)

I hope this helps. Remember, even if you do everything here absolutely right, your odds of success are still about one in two. Hard work will help an awful lot, but you’re still going to have to have some element of luck.

Speaking of which, “Bon Chance!”