May the External Forces Be With You

Seth Godin makes a great point about starting new businesses in his blog:

No project, no brand, no company exists in a vacuum. You make bets about external forces when you build something.

If you want to cross the Atlantic by boat, you can build a sailboat. Your bet is that the wind will be right when it's time to sail. Or you can build a motorboat and deal with the noise and expense, but insulate yourself from the wind.

If you launch a $100 million magazine, you're making a bet that the advertising environment will support you a few years down the road. If you spend four years getting an advanced degree in computer engineering, you're making a bet that there will be plenty of high-paying jobs still waiting for you when you graduate.

If I had a hundred million dollars to invest in a business magazine, there's no way I'd invest a hundred million dollars in a business magazine. Why put all your chips on one medium, one source of revenue, one model?

The external factor is not disconnected from your bet. It is your bet, your decision. Damning the gods of fate because you made the wrong bet makes no sense. I rarely see business plans that have a section entitled, "External forces we're depending on." Acknowledging that things out of your control will change is the first step in hedging your bets in advance, just in case.

What are those external forces? First, you are betting on an industry. This means that the technology or business model of your industry will not be obsolete or superceded. It also means that there will be funding sources around who are interested in funding your industry.

You're also betting on your customer. This means that you are betting on demographics -- is the population getting older? Getting younger? Which nationalities or ethnicities will be great customers for your product? Are those nationalities or ethnicities becoming a bigger share of the world market? How much disposable cash is your customer likely to have one year from now? Two years from now?

You're even betting on employees. Are there enough people trained in your industry to support your product? Can you hire talented people at reasonable wages? How is the labor market going to change in the next five years?

Maybe most difficult of all, you are betting on a few fickle trends. Someone like Martha Stewart's brand wouldn't have worked in the 1960s and 1970s, but with the return to traditional values in the 1980s, she had an opening. J. Crew works when people are into the preppy look. If grunge returns, J. Crew is going to have a brand problem.

I'd imagine that most startup founders think these issues through, but they can be some of the more complex issues and headwinds facing a company. A lot of time one factor seems positive and another seems negative. It's probably one of the toughest things for a company's founder: predicting the future is both impossible and essential.