The Patel family came to the United States from India in the 1940s. In their home country they were all professionals – doctor’s and laywers, but their professions couldn’t help them in their new world. They came to America with nothing but their ambition, hope and their family looking to start a new life. When they got here they thought, “What are we good at that we can do to earn a living?” to which the answer was, “Hospitality.”
This revelation led them to think that it might be a good idea to open up a motel. Not only were they good at making people feel comfortable, but they realized that by having the family run the motels, they could run them much cheaper than anyone else could. And if they couldn’t for some reason pay back the bank for their loans, the bank would have no choice but to renegotiate because they would never find anyone else who can run a motel as well as their. The Patel’s now own about 40% of all the Motels in the United States….including most of the ones located in Santa Cruz.
This story was recanted by Loren Kinczel of Sharf Investments. Him and Michael Allard came into speak last Friday for our 7th speaker of the quarter. Following up with the story, he gave our students five steps to making their business (or any endeavor) be as riskless as the Patel’s motel conquest.
1. First step: Discovery
Make sure that your idea is solving a problem. Study the market, its needs and wants. Then fine tune your idea so that it creates value for your potential customer.
2. Second step: Test the viability of your idea
Loren commented that this step is often over looked. Sure you may think you have a good idea, but it is important to test it. Go out and test the viability of your idea. Talk to potential customers, partners and even competitors. In this process you want to find qualitative and quantitative information that will help you determine if your idea truly creates value for your market.
3. Third step: Planning
Next you want to plan your startup. Use all the information that you have gathered to plan how to execute your business plan. You may want to look at which location to start in or which suppliers you want to contact. Be careful to make it through steps one and two before you start on the planning stage or you may be wasting your efforts
4. Step four: Startup
This step is pretty straight forward. Startup your business, secure funding and get the wheels moving. But one piece of advice is to presell. To minimize your risk, sell your product before you have even started. That way you know when you start your business, you will have some customers from the get go.
5. Step five: Development/ launch
Loren emphasized the importance of a good team. Once you have gone through all the steps from discovery to startup you must make sure that you have the right people on your team. They must be dedicated and have experience running a business.
In the end our students got a good idea how to start a business without taking excessive risks. Loren left us with one final idea. He told us the story of how the market sometimes gets too excited and wants to buy a dollar for $1.20. Sometimes the market wants to only pay 60 cents for that dollar. “In your life, you should try to pay 60 cents when the market is over reacting,” Loren advised the students, “you don’t always have to risk a lot to gain a lot.”