startup-costs, intellectual-property, growthI work at a hospital, and a group of us (3 regular guys) thought of a good idea that will benefit most hospitals in our state. So we approached our boss and he said that we could test our idea with the patients of the 2nd floor. This means develop software, buy special laptops, and test. So everything’s good since we can cover the costs for this 2nd-floor trial.
The 2nd-floor setup costs us $30,000. Best-case scenario, 2nd floor trial is a success and now they want us to install it in the 3rd floor. We somehow manage to install our software/laptops at the 3rd floor, but it’s getting hard. Then another hospital calls us to install it in a whole wing. We don’t have the budget for that. And here’s the issue.
The concern of one group member is that, given our limited budget, we won’t be able to expand as we would like to. At the same time, GE Healthcare hears about the software and decides to develop something similar. They have the resources to deploy in the whole state. Once they do, we will be irrelevant.
What do you guys suggest? If it were up to me, I’d say we go for it. But he has a valid point.
He also mentioned going directly to the large company (ie. GE) and explain to them the idea, since they have all the infrastructure. I told him that was a bad idea.
Any suggestions are really appreciated. Please do not suggest anything that involves a 3rd-party entity (ie. venture capitalists, investors, kickstarter, etc). We either do it with the money we’ve saved or we do nothing at all.
Great ideas don’t mean you are a great executor of the idea. If you can, go pick up autobiography titled “Straight from the Gut: The GE Story” by Jack Welch. As much as you curse GE, the book tells you how he found a number of strengths in the company, from different levels of management.
I’m not trying to ruffle feathers - only that you need identify your strengths and your weaknesses, and lean heavily on your strengths, and the competitions weakness.
A story I recall hearing as a kid might serve as an example (and I’m no bible basher)… but… When David was fighting Goliath, he had his sling shot in hand. Supposedly the Israeli’s said he would never kill Goliath with that - yet David supposedly said in response that Goliath was so big, he could not miss.
You three have lower costs. You are already in house. You are familiar with inhouse processes. Your learning curve and relationships within the business are an edge. Your lack of size, reach, budget and experience hang around your neck. Pick of some of these strengths that get one up over the competition and you got momentum.
Start small - if need be, put your big idea on hold, or take the smallest sliver of it that can show cost advantages, price it as accurate as you can. Add 30% to cover for mistakes, delays, overruns. If you want to be taken seriously, you need present yourself seriously. Present your idea to the business with the cost. You don’t need to break the costs down for the client in too great detail or they’ll start pulling it (and your profit margins) apart. But you need to show the profits (either something is faster, or less expensive but of equal or greater quality). Flexibility is key, think: when buying a car you can decide on the stereo, colour or even the aircon but you cannot decide to buy the car without the wheels because you can get the cheaper elsewhere.
If the client has questions which you cannot answer, the response is you need consider it and that you will get back to them. Look into it, charge accordingly. You don’t ever ever ever say no. You just get more expensive (let the customer say no).
If the business likes your small sliver of an idea, you should be able to get a purchase order from them. Bring that to a few banks.
Banks are in an ugly spot at the moment. I know, its hard to feel sorry for banks, but they can only make profits with interest on loans. Be honest with your experience, be open to advice, and be prepared to accept that you don’t have all the skills and be prepared to work with others who have the skills. It is not that you are stupid, but the best doctor probably can’t cook to save his life, nor will the best footballer have an idea how to play a great game of tennis. We all have our skills, some are in greater demand than others. When you accept your strengths as quickly as you accept your weakness you’ll learn to use both to your advantage.
(One of my strengths is also one of my weaknesses: I talk to much. It opens many doors for me, and occasionally, I judge things wrong and it will close the occasional door - hence my advice of knowing how to use your strengths and weakness sensibly).
So… if you don’t know how to present your plan to the bank, reach out to an accountant - get a kid in college (meaning late teens, early 20s, not a 15year old since our education systems are different I want to be clear). A college kid doing accountancy will be able to put together a decent set of numbers for you, and help present them well.
Know your plan. And be calm about it. Those who work in banks ate corn flakes for breakfast no more or less than you. They are human despite what the press might say.
You need sell shares in your company to friends and family. Be honest, tell them they might not get their money back, but you hope they will - respect their time, their money, and your own money. I don’t care if you put together $1000 or $10,000. When you have some skin in the game, it helps with the bank. And when you have others that have contributed, it also shows creativity.
You got nothing to lose.
Nothing.
Yes its time consuming - but if business was so easy, more would try and everyone would be richer.
You fail when you don’t even try. After that, you achieve different levels of success. You might be like my brother, in business for 28 years then go bust - do you describe that as a success, or a failure? I see him as successful and I have learned lots from him (he does not believe me, but its true and I in business since 1994).
Even if this venture fails to fly high, the knowledge gained from the process will carry you on another path. A question I previously answered for one of your fellow countrymen might help… https://startups.stackexchange.com/questions/8576/how-to-build-a-startup-freelance-software-qa-in-the-us/8585#8585 and read points 1,2,3,6 and consider 7. Relationships that you make now will help you later - there are different levels of success… never forget that! And… you need consider an SLA (Service Level Agreement) https://startups.stackexchange.com/questions/8613/process-for-implementing-support-contracts/8615#8615
Best of luck!
I would start with an IP lawyer and nail down your specific patents, trademarks and copyrights as they relate to your project. From this point you should be safe. GE or any other competitor at this point would have to “rethink the wheel” so to speak in order to accomplish the same task that you’ve already solved. Now this won’t necessarily prevent the competition from trying to capture your newly created market, but should give you an initial leg up.
Funding at this point will be vital. If you’re able to do it on your own great. Remember that family loans or even small business loans are also options. Venture capital or an angel investment would also work though it sounds like this is not ideal for you. You should know that you’ll operate in the red initially. You’re also going to incur some debt through your startup costs. That’s a given.
Pricing at this point becomes vital. Understanding your market audience is key. Are you targeting a niche market with your product that only a small subset of hospitals will need or is this product useful to the broader and more general market of any hospital? Understanding this will allow you to understand and semi-accurately predict your demand curve. Controlling the supply based on this demand allows you to price your product accordingly. Soon enough that debt will turn into profit.
At this stage your growth strategy will still be in its infancy. You’ll need finesse to determine the appropriate balance of marketing to sales to product development as you reinvest your profits to grow your business. The ability to manage this strategy according will ultimately drive the success or failure of your business.
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