Tip #4:
The Letterhead Test – The best way to test your idea is to ask someone to buy it.
At the birth of the software industry, the idea of “packaged software” was a new concept – would this idea work? The idea had to be tested. I created an inexpensive but very effective market research effort to determine the answer.
Specifically, I made appointments with potential buyers I knew well at major corporations. I explained the concept of packaged software and asked them, “Would you buy software products and related services if they were available?” As friends, they were naturally positive in their comments. However, to really qualify them, I asked them to issue me a nonbinding letter of intent, written on their corporate stationery, stating that they would be interested in buying software products from my company if, and when, they became available.
Getting corporate executives to issue a letter of intent on their corporate stationery was the test. Most executives, regardless of how friendly, were nervous about using their corporate name and position in such a way. It forced them to think about the idea and whether they would really consider buying software products. To me, this was testing the marketplace in the most effective way available to me – and at no cost, one that I have used many times, since.
These letters were included as part of my financial proposal, and they were most influential in convincing the investment banking firm to help underwrite the Company. If you can’t get an obvious prospect to do at least this much, then maybe it isn’t such a good idea. Maybe it’s time to go back and find another idea. Incidentally, ideas are easy to come by. Bringing them to life is incredibly difficult.
John Cullinane’s Entrepreneur Survival Tips of the Day Come from his book, The Entrepreneur’s Survival Guide: 101 Tips for Managing in Good Times & Bad.
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Cullinane Corporation was to become the first successful software products company in the world at a time when computer industry gurus said it couldn't be done, that others had tried, and failed, and so would he. As such, it was the first software products company to have an IPO, the first to be listed on the NY Stock Exchange, and the first to reach a billion dollars in valuation. However, there were scary times. For example, the company's capital got as low as $500 with a payroll of $8,500 due that day when a check of, literally, $8,500 came in the mail that morning. For fifteen years the company had growth in sales and profits of 50% and then it ran into problems because it had stopped doing some of the very things that had made it successful in the first place. That's what these tips are all about. How an entrepreneur can do something that others say can't be done, and how to continue to be successful.
John Cullinane was named three times as the Wall Street Transcript's CEO of the year in the computer software products industry. He was also Founding Chairman of the Massachusetts Technology Leadership Council, Founding President of the Boston Public Library Association, first President of the John F. Kennedy Library Foundation, and a graduate of, and a recipient, of an honorary degree from Northeastern University.
A walk down Wall Street from the perspective of a high tech entrepreneur...
Download John Cullinane's Report, "Widows and Orphans" (pdf, 168Kb)
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