Episode 37 – Only Create Proven Products or Services
You’re listening to the Apollo Podcast Network. So in this episode, I’m going to talk to you about the second biggest mistake that entrepreneurs make and it’s one that causes so many entrepreneurs sparks inside of people to die without becoming a reality, and it breaks my heart to see it. So listen to this episode, so you’ll never make this mistake. And let that entrepreneurial spirit inside of you soar and create businesses that no one could have ever expected.
This is Titanium Life Radio with your host, peak performance speaker and business coach, Arman Sadeghi.
Hey everyone, this is Arman, and I’m here with the second biggest mistake that entrepreneurs make. And this episode is the second one in series of seven. And I’m going to talk to you about some of these mistakes and make sure that you do not make these big mistakes in your business. So let’s get started and talk about the second biggest mistake, which is creating products or services that are not yet proven to sell. This is a critical one because so many businesses die in the early days because they run out of money. And part of the reason they run out of money is because they spend so much time, effort and money trying to create a product or service thinking that if they have this fantastic idea, they have to bring this idea to fruition before they could go out there and sell it. And here’s what happens, the number one thing that happens is that they never actually end up getting their product or service, so their idea dies because it never actually becomes a reality.
They run out of money, they run out of time, run out of effort whatever it is, and they give up. The second thing that happens often is that they actually create the product or service. You see people who spend the money that they’ve saved for a lifetime and they create this business; they make some great service or a great product, an invention, a website, whatever it is. They bring their idea to life only to find out that no one wants to buy their idea. But here’s the thing, they sit there, and they say, you know that when I was thinking about this and everyone told me it was a great idea. I just felt like it was going to be a great idea, why doesn’t it work. See, that’s the thing. As a business coach, one of the things I’ve learned to do is to tell people what to do with their incredible idea. There are multiple examples of this; I remember, for example, I had a young man in his early 20’s who came to me a few years ago and tell me this fantastic idea he had.
The idea sounded good, and the reason he was coming to me was because he wanted to see if I’m willing to invest in this company that he’s trying to create. And I get a lot of people coming to me for that. I said, okay, ‘what’s your idea?’ He said something along the lines of, “Look, I’ve got this idea of taking sports drinks and making little-frozen things out of them like little-frozen popsicles that are sports drinks. And so when people are going to the gym, they’re kind of like an otter pop, if you know what that is. “. And he said, you know, I want to create these frozen sports drinks, I think they’re a great idea.
Then his buddy was there, who’s a friend of mine as well and the guy was like, “yeah, this is a great idea. Man! And I would love that blah blah blah..” And he was asking me if I wanted to invest a couple of hundred thousand dollars in it. And if I were like anybody else, I’d say, “Let’s see if it’s a great idea or not and If I’m sold on it being a great idea, then OK, I’d say let’s do it.” But see, understanding how business works, I wasn’t about to do that.
I wasn’t about to say “Okay, let me invest a couple of hundred thousand dollars.” In fact, I wanted to see how serious this guy is about the business and I also wanted to see if his idea is one that would work. I was like, “Okay, so let me ask you a question. How long would it take for you to make this?” And he’s like “I’ve been working on it for six months. So I found a company that’s going to produce it for me, and they’re going to make all the juices and stuff like that. And then I found a company that’s going to take it, and they’re going to package it. It’s going to be frozen, and it’s going to be transported in these kind of trucks in this and that. And this going to be taken to this, and some of the gyms are going to have to put it in the freezer.” He told me this massive thing that was going to cost half a million dollars to put together, and I was supposed to say pitch in a couple of a hundred thousand dollars or the whole thing if I wanted to. And I was listening to this, I was like, Okay let’s do this. The second biggest mistake that entrepreneurs make is that they create products that are not yet proven to sell. So, here’s what we need to do. Let’s see if this thing is actually going to work before you do all this stuff and you know what, you don’t need my two hundred thousand dollars, in fact, you can do all of this for less than a hundred dollars. And he said, what do you mean? We’ll let’s see, so one of the things that you said is that it’s going to cost you God only knows how much, was to create the actual mixture that you’re going to have frozen. And he said yeah, and I was like, who’s the competitor of yours? And he said, kind of like Gatorade of course but they don’t make frozen Gatorade.
I said Great! How much does it cost to buy a bottle of Gatorade?
Great! We’ll buy a bottle of Gatorade. And then I said, how much are you spending on this company, that’s going to package this and that?
Another fifty, hundred thousand dollars.
And I was like, great! If you go to Target, they actually have this thing that makes this little plastic Ziploc bags. And the way it works is that it seals the bag. And I know because in my house we use one of those. And I said you need to go buy one of those or if you want just borrow money. And I said, what you’re going to do is you’re going to take these little bags, and you’re going to take Gatorade and pour it in these bags and seal it. And while it won’t be perfect and pretty and beautiful, and have labels and stuff on it like you’re the product is supposed to going to have. You can actually buy one of those machines for like $50 or borrow mine, and then you buy some bags which costs you a couple of more dollars, buy a couple of bottles of Gatorade which will cost you a couple of dollars. And then you can spend about an hour; I bet you, you could create probably thirty of these things. Stick them in the freezer, and a few hours later you will actually have a few sample products. Not for two hundred thousand dollars. You’ll have your sample products for a hundred dollars and maybe a couple of hours of your time.
And then I said, here’s what I want you to do. Then I want you to go to your friends and family and people like that, and say “Hey!” Don’t tell them you started this new business because if you tell them that, they’re going to give you positive feedback. You don’t want that. Go to your friends who don’t know you have this business and say, “hey, have you guys heard about this new frozen workout drink or whatever that they have..” And they’ll be like, what do you mean? Yeah, you’d be like, I’ve been getting this. Want some? And ask, how much is it going to cost? And then you’re going to sell them for say, 2 dollars each.
And I said great! And tell your friends you just bought a pack of them and they’re about two dollars each and bought like a ten pack. And if they’re interested, you’ll sell a couple of them and they try it out. See what they’ll say, see how many of the people you actually know are willing to pay two dollars to buy one of those. And then if that works, now you go to Phase 2. I said, make 50 more of them and then go to a 24-hour fitness or gym down the street, maybe a small gym that’s more willing to work with you. And then take a little fridge, you can buy a used small portable freezer on Craiglist for maybe, 30 dollars. Get one of those things that kids have in their dorm rooms and take it down to this gym and offer them.
Say, hey look, I’ll give you all the proceeds to go to you. So you sell this thing for two bucks, and any money you make is for you. I’ll cover all the costs. And the total for that, for the fridge, for all the bags, all the Gatorade you’re going to buy, maybe, less than a hundred dollars again. So now, for less than a hundred dollars, you’re going to actually prove if all this works. And if it all works and if it all works, and these go flying off the shelf, and the fifty sell and you can prove that this stuff works, now come back to me, and not only am I happy to give you two hundred thousand dollars but I’ll tell you what, if today I were going to invest two hundred thousand dollars in your company, you’d have to give me like 70 percent of your company. However, if you prove to me that this work, not only that I give you two hundred thousand dollars, but at that point, you might be able to convince me that I’ll only get 10 percent of your company for two hundred thousand dollars because your idea is not as risky.
So see, if you listen to this podcast, I want you to understand so many entrepreneurs make the mistake of producing products and services that are not proven to sell. And sometimes, you’re going to say, well Arman; it’s not as easy as a little-frozen drink. First of all, let me tell you, I’ve worked with thousands of entrepreneurs and hundreds that I’ve coached, almost every single case there is a very, very simple way of doing it. You don’t need to go out there and build this massive thing. In fact, sometimes what you can do is pretend like you have the thing you have, and then try to sell it. And see if anyone’s willing to buy it. So if you’ve come up with some brilliant idea, let’s say you have come up with an idea or something that’s going to revolutionize the industry. Great! Pretend as you have, get on the phone, open up the yellow pages or wherever you get your lead. Start calling up potential buyers and pretend like you already have this thing. And sell it to them and see if they’re willing to buy it for the mount that you say. And if you get some people who are interested, you’re going to have to tell them that unfortunately, you’re currently out of it. And then go create it. Sometimes it could be even a service; it doesn’t have to be a product. So for like, my marketing company, often we have ideas for these new services we want to offer, but instead of going out building it and creating and creating all the systems, we just tell some of our current clients that, ”Hey, we have this thing.” And see if they’re interested. And if they say, yeah, we’d be interested in paying $2000 a month for that. Okay, we’ll we can’t do it for you for another two months, and they give us another 60 days to go and create this service. So what you want to make sure is that you are not creating products or services that are not yet proven to sell. Don’t go out there and spend massive money and time trying to create this massive thing. I see this with websites, for example, people have this idea for websites like it’s a new dating site. It’s going to do this, it’s going to do that, and it’s going to be just like Tinder, that instead of swiping left and right, you’re going to swipe up and down. And that is going to revolutionize the industry. Why? I don’t know, but that’s their idea.
What I’ll tell them is. I’ll say look, pretend like you already have it. Tell people that you already have this dating site and don’t tell them it’s yours and say that you just found it. And see what kind of interest you get. Don’t go out there and invest days, weeks, months, years of your life and your hard-earned money trying to build this stuff only to find out it doesn’t work. By the way, the other thing that happens is this; people use this as an excuse. Many people who will use the excuse of trying to build this product or service early on in the business as for why they didn’t go out there and sell because most entrepreneurs are scared of the selling part of the business, right? So what they do is they focus on the artistic side of it. The side of creating a product, creating a service. And all their friends are family are impressed by what they’re doing, but they haven’t proven that this thing can sell first. So what you’ve got to do is start with selling. And that means people sometimes say Arman, “are you telling me that when I start a business, the first thing I should do is sell? Even before I have a product or business to sell?”
The answer is an overwhelming, yes! You going out there creating and spending all this money and you don’t even know if it’s going to sell. For example, the person who got me to do this podcast, he owns a podcast company right? Apollo, you’ve all heard of him. When he came to me first, and he said, “Hey, do you want to start a podcast?” Let’s say I was working with him; he was going to offer me some new service. If he starts what he would do is he would offer me the service before he’s actually going to go out there and spend the time, money and the effort creating it. Because you’ll never know, is this something that could even work, are people going to be interested in this service. The way that Sherman Gunavi is doing podcast is revolutionary. Different than what anyone else is doing. You can hear, if you listen to this podcast than any other podcast, the quality of the sound, the quality of the various things that go along with this thing are unlike what anyone else is doing. A hundred other things about it that are totally revolutionary. He had no idea if someone is willing to pay for this or not. Because most podcasts are recorded on a phone or on a computer, and not professionally like the way, this podcast is done unless it’s a super, super high ranking podcast that has been around for years and is top rank. The thing is he was smart enough to see it if there was any interest in it first before he went out and created the system. That’s what you got to understand.
Another friend of mine the other day, he has a business, and he came to me and just gone out, and he’d made and $11,000 investment into an inventory. And the inventory is for a specific product; I haven’t gotten his permission to mention it so I won’t say specifically what it is. But it’s a product that he can buy for about a dollar that’s selling on Amazon for about $20. And he said, well I’ve invested $11,000, and this is a coaching client of mine. And he’s coming to me after having spent $11000 which already pisses me off ‘cause if you’re my coaching client, you’d better run this stuff by me first. SO he comes to me, and he says he made this $11000 thing, and he got these things, and they’re a dollar each, and they’re selling on Amazon for $20 each. And I was like, ‘How do you know they sell? Well, other people are selling it.
“How do you know how much of them you’re going to sell?”
Well, I don’t know. I just know. I just have a good feeling about this.
And I’m like, why didn’t you a test run on this? He’s like, well if I’m going to get this price I have to buy 10000 of these things.
And I’m like, why did you go buy 10000 of them? Why don’t you go to a place where you could go buy 10 of them?
Well, I would have to pay $20 each. I said, who cares even if you have to pay $25, it may be better to buy 10 of $25 each that will cost you a total of $250. Put them on Amazon and see if they sell.
So how are you going to sell it? And I’d say, well, I’d price them at $15, and I will beat the competition. And I’d say, great! Buy them for $25, put them on Amazon for $15 each. And if the ten would fly off the shelf today, then you know you might have a product that you could sell.
Let’s do the numbers and see how fast you could actually make it worthwhile. Let’s look at this. If you can sell ten a day, let’s see how long it takes to sell 10,000 of these. It would take two years and nine months. That’s a ten a day, seven days a week. It would take you two years and nine months. So almost three years is what it would take. Would it be worth to put a $250 investment to find out if that’s true? Here’s the thing, is that even a reasonable investment? Should you buy a product that’s going to take three years to sell? In my world, I would say, ‘No way! I’ll never make an investment.’ However, if you’re buying them for a dollar and selling them for $15, now he could technically get his money back soon. Now let’s see, how many would he have to sell in that certain period of time in order to make sure that he at least get his investment back. So his initial investment is $11000, so if he takes his initial investment of $11000 and divide that by $15 each, it means he’s going to have to sell 733 of these in order to at least get his investment back.
Now If he can sell 10 a day, which by the way, I don’t know if this product can possibly sell 10 a day or close to it. I’m just randomly pointing out that number here. If he sold 10 a day, he’d be in really good shape. But if he sold 10 a day, that means he’s going to get his money back in 73 days. Now he also has to put in the order, which takes a month and a half, so you’re talking about four or five months before he can have his initial investment back. The question is, is that a worthwhile investment? Now in this case, if he proves that he can sell 10 a day, I’d say yes, that is a good investment. And as a coach, I’d say go out there and do it. Even though it’s going to take them three years to get all his money back, that’s okay because, within the first four months, he’ll get his initial investment back. And from then on, there isn’t anything else. Now I’m leaving out all the stuff like the cost of shipping, cost of handling and all that, so let’s ignore all that. Now what you’ll get is another factor, what if he can’t sell 10, what if he can only sell five? If he can only sell five a day. Now what you’re doing is that you’re pushing this thing out, so that he can’t get his money back for about six months, eight months, nine months. What if he can only sell two a day? And now we’re in trouble. He’s never even going to be able to get his money back, and he’ll go through 10000 of these things, that’s going to take him over 10 years.
Reality is, in any business before you create a product or service, you must first prove that it works. If you’re listening to this out there, and you have a business, and you’ve got some new ideas for your business, awesome! Run it by your current client or Do some cold calling and try to sell this thing even though you don’t have it yet, it doesn’t matter. If people are dying to buy this thing from you, you better get out there as quickly as possible. Create it and make it available to them. You’re going to see that most of the ideas that people have, unfortunately, just don’t work. If you find out they don’t work before you put money and time into it and especially if you’re an entrepreneur who’s trying to start a business, this is critical. Because if you’re working for someone else and doing it on the side, I don’t want you to waste the next two years of your life trying to bring an idea to fruition that literally is never going to work. And you waste your time, and you waste your effort and here’s what will happen, that spark, that entrepreneurial spark inside of you is going to die. I don’t want that to happen for you.
So what I’m telling you to do today, is make sure that as of today, any business idea you have, anything that you want to do. Prove that it works first before you go out there and do it. This comes from over two decades of business experience. Trust me; I’ve had plenty of times where I used to create products or services only to find out that no one was interested enough. Well no longer my friends, I only do products and services that are proven to sell. And that’s the only way that I’m willing to do those. So get out there, take good care of your business, make sure if you’re an entrepreneur you get out there. And you’re constantly looking for products and services that are proven to sell. And you can prove that you are able to sell that product or service, then get out there and make the best product or service you can and revolutionize your industry. Make sure you pick up a copy of my book, The Business Bible if you haven’t already done so. It’s a great book. However, it does not give you the seven biggest mistakes that entrepreneurs make. So make sure you listen to the rest of these podcasts. This is the second one; we’ve got five more of these coming. This will revolutionize the things that you’re doing, I guarantee you. Now get out there and every single day in your business, in your personal life, in whatever else you do, always please lead with your heart.