If You’re an Entrepreneur, Unsexy is Smoking Hot
October 4, 2011
One of the greatest aspects of my ever-excellent job is that I have my world rocked at least once a month. And I actually mean my world gets rocked. My heart beats faster, my eyes open wide, and my mind wanders – races even – through the myriad implications of what I have just learned. What have I learned?
There are so many different ways to make money and lots of those ways are sitting right in front of you in some fairly obvious places.
A good place to start your thought process is with market size. If the market is large enough, there is a higher degree of probability that you will be able to build a successful commercial enterprise. It may not be a Fortune 500 company, but if done correctly it could still provide quite nicely for you and your family.
That’s the beauty of starting software company with a SaaS revenue model – 80% gross margins and 20-50% EBITDA margins! A $10 million dollar a year top-line business could produce $2 to $5 million in pure profits. There are THOUSANDS of great software, technology, and services businesses that need to be started to satisfy actual needs in large and unsexy markets.
This might sound obvious, but I’m constantly astounded by entrepreneurs that have created profitable businesses in enormous markets that might bore you to tears. Have an interest in human resources payroll software? Probably not, but that’s going to be a $4 billion dollar market by 2016 (so says Accounting Today). Does the Tuxedo rental business interest you? It doesn’t really interest me either but Men’s Wearhouse did over $350 million in tuxedo rental revenue last year with over 80% gross margins — and according to the Wall Street Journal, the tuxedo rental market is a $1.2 billion dollar a year industry.
Should you go into the tuxedo rental business? Probably not. But should you spend an hour of your life figuring out if there is a way the business could be made more efficient with a piece of enterprise software? Perhaps. The bottom line is that if you’re committed to starting your own business (and building one that is commercially viable and profitable), start with evaluating market sizes in old industries that may be looked over by other investors, hackers, or entrepreneurs such as yourself.