I had just sold the business I started in college. It was the only place I’d worked in my adult life. As if that was emotional enough, my wife gave birth to our son just three days later. And then, a few whirlwind weeks later, it hit me: I didn’t know what I wanted to do next.
Today, I’m about a year and a half into building Powderhook, the business that has become my second entrepreneurial leap and my great passion. It’s the perfect combination of what I love to do and the talents I’ve been given. We’re solving a meaningful and hard problem in a space I really care about. But how did I get here? Why should I get to build something I love every day? Today I was speaking to a class of graduate students when these questions came up. So, I thought I’d look back at the filter I created before Powderhook started and share it, just in case you’re thinking about starting something of your own. And, for what it’s worth, I believe the same filter could apply if you’re looking to make a career change.
This is my filter. You might use this one or make your own. Each part of the filter benefits from the lessons I learned building and selling my previous company, and is informed by the dozens of smart folks I met with before starting Powderhook. Here goes:
1. Your customer will pay you for your solution.
Altruism abounds when you’re asking your friends about your ideas. They like you, so they’ll probably like your idea. But, does the problem you’re solving have a monetary value for a person or business? Do you know for sure they’ll pay you to solve it? Can you get them to pay you before you solve it, or at least contingent on delivery of your solution? If not, skip the rest of the article and come back with your next idea.
2. Costs you sleep.
Would you want to wake up earlier and get to work? Will it be hard to shut down the laptop at night? Are you pissed when you see someone getting close to your idea? Do new thoughts about your idea wake you up at night? Can you see yourself being genuinely interested in the solutions to the problems you would adopt?
3. Service aids sales, it’s not what is sold.
My first company was a service business – one filled with smart and talented people. But, most service businesses don’t grow in enterprise value like some other business models. If you’re building a business because you want to own it forever, this is probably okay. But, if you want to solve a problem at scale, my experience taught me to build something around a product or repeatable process. If you’re in a career search, ask yourself, “Do I want my time and talent to be what is sold, or do I want to use my time and talent to build the thing that’s sold?”
4. Understand the growth constraints.
Can your idea become a business? A big business? Do you want it to? Does it scale itself right into something someone else is doing really well? Is it a broad consumer-level idea or a niche? Or, a niche within a niche? Knowing the market potential of what you’re getting into, before you get into it, makes a lot of sense. If you’re looking at a new job, estimating your earning potential before you start, based on what you could sell or what your team could generate should be a key factor in your decision.
5. Operates or can operate from Lincoln.
I’m not from Nebraska, but Lincoln is now home. It’s where I want to raise my family and it also happens to be a good place to start an internet company. Where do you really want to live? Make getting there an integral piece of deciding what you’re going to do next.
6. Enough funding to start and a plan for outside capital.
I believe if you have an idea for a business and it makes its way through your personal filter, you should start it immediately. Like right when you’re done reading this article. But, in order to preserve value for yourself, it may be important for you to find a way to self-finance for a period of time. A friend of mine recently sold his company to Zillow. He started it on his credit card – while he had young kids at home. It can be done and you can do it. So, start now, but have a timeline and plan for how much you’re going to need in terms of financial help from the outside.
7. Leverages current relationships or vertical expertise.
Starting a business can be really hard. Make it easier by capitalizing on what or who you know. The same can be said for finding a career. If you walk in to your new job and in the first few days can really start contributing, your employer will notice.
8. Understand how the business will be valued.
Start with the end in mind. Building your company with an exit in mind does several things for you. It helps you focus your value proposition around the most disruptive, competitive or innovative piece of your business. And, even if you never want to sell it, knowing how businesses are valued in your space will help you understand the drivers important to growing your company.
9. Can run without me.
In my opinion, the culture, processes and product define a business. The work ethic and talent of your collective team inside that construct is the “X-Factor,” but no individual at any level should be irreplaceable.
10. Own a controlling interest and run the company.
Once I owned and ran a business I knew it would be hard for me to do anything else. It’s not for everyone, but it’s the only way for me. Maybe a swap for someone looking to change careers would be “clearly defined career path.”
If you’ve made it this far into the filter and your idea still works, then start. Now is most likely the best time.
About the author:
Eric Dinger is the co-founder and CEO of Powderhook.com, a website built to help people find access to hunting and fishing spots, trips, groups and events. He can be reached at firstname.lastname@example.org.