Hot potatoes and great blogging - Part 1

I used to give regular talks on the secrets of starting up a profitable business. Some of the lessons I sought to convey back then can be applied equally fruitfully to blogging. Over the next few posts I'll have a look at some of the things you might want to consider before you launch a successful blog.

When I gave my talk I always entered the auditorium carrying a three pound bag of potatoes out in front of me. This novel sight immediately captured everybody's attention. Tittering invariably broke out.

"Hi, folks. You want to be rich and I'm here to show you how. It's easy. So easy in fact that everything you need to know about launching your successful business is contained within this bag of potatoes." My anouncement was usually greeted with looks of amusement, tinged with scepticism.

The first lesson, I informed the audience, is that before you launch a new business you need to learn to think like an entrepreneur. Take the potatoes. Suppose your business is going to be potato-oriented. The first question you need to ask is: where should I position myself on the economic food chain that surrounds this versatile tuber.

Ask yourself: Do I want to be the farmer who ties up vast amounts of capital, and is subject to the vagaries of weather and disease while operating in a commodity market over which I have no control whatsoever? Right at the very bottom of the food chain, in fact. The answer, in case you're wondering, is absolutely not.

Maybe you want to retail potatoes. A corner shop with low overheads and minimal marketing budgets? Not worth the hassle. Open a supermarket? You don't have the capital nor the buying power nor the marketing muscle.

Maybe you could sell your potatoes online. That's a possibility but then you're faced with the question: why would anyone buy from you rather than the supermarket? How are you going to compete? When this question is posed to a group of would-be entrepreneurs you can bet that nine times out of ten the answer is: we'll compete on price. Wrong. Small companies can't compete on price. To compete on price you need volume and that is expensive and difficult to achieve. Small companies that compete on price usually go bust.

If you're going to make money out of potatoes you need to find a way to add value to the basic commodity. How are you going to do that?

Invariably the answers to this conundrum follow a shallow curve up the value-added equation. Washing the potatoes is often the first proferred solution. Okay. But it doesn't really add much value and it costs quite a lot to do. You need to think bigger. Pained silence. How about you cook the potatoes, someone at the back usually pipes up eventually. Good. That's a start. Not a very profitable one but a start nonetheless. What would you do with the cooked potatoes? French Fries? Yeah, good. I know people who make money running a fish and chip shop. It's a cash business which is always good. But it's too limited. I want to make real money. Big bucks. Turn them into Shepherd's Pies, someone else shouts, to much hilarity. Good, better in fact, I enthuse, that would add more value and we could freeze the pies and sell them nationally but we're still not adding enough value. I want to turn these troublesome tubers into gold. Worth more than their weight in gold in fact. Think harder!

"How about potato sculptures?" someone shouts, a little guy with big glasses. I mark him down. That's one guy I won't be investing in.

In the end the group usually iterates its way painfully to the process that will best add enormous value to our humble potato. I'm sure you've worked it out already. Turn them into crisps, of course. Compare the price of a potato to the price of crisps, pound for pound. That's called adding value. Big time.

Except of course it's already been done. Pepsi Cola have cornered the market with lots of variants on the processed potato. There are some specialist producers (Kettle crisps in the UK for example) who hand produce into a niche market and so on. But already we're too late to enter even that market segment.

So, you need to have another look at your potatoes. Maybe you could grow - or better still buy in - rare varieties and sell them online. The kind you can't buy in supermarkets. That sounds like a possibility. More research needed. How about an online Potato Futures Market? A virtual potato exchange? Possible, possible. Do the research. Maybe someone's launched the idea already. And if they haven't there may be a good reason why not.

Maybe potatoes just aren't a good market to be in full stop. Yeah, maybe all our new-found enthusiasm for potatoes is misplaced. Okay. How about carrots instead? Or onions or....Stop! That's enough vegetables for one day.

The key point is, though, that if you're starting a business - or a blog for that matter - you should pause at the very beginning before you make your first big mistake. Take a look at the supply chain you're about to enter and make sure you select the easiest point of entry, the soft underbelly, that unique place where what you do or what you sell can really add value. Added value means big profits. And if you're not profitable you won't survive.

More about potatoes tomorrow.