Anyone needing a crash course in copywriting - focusing, in particular, on the power of words - need only spend a little time with young children. When it comes to ’selling’ them on dinner… or chores… or various other activities… using the right words can make all the difference.

I was reminded of this today when it came to preparing dinner for my kids. Not wanting to debate the merits of crumbed chicken breast with a 6 year old and a 4 year old, I decided to pitch the meal in such a way as to yield the most positive response (i.e. them eating the meal without argument).

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Jason Calacanis thinks we’re in startup depression. He’s probably one of the more qualified to comment, having built several tech companies in the last decade (Silicon Alley Reporter, Weblogs, Inc, Mahalo) including one which rather famously died in 2002 (Silicon Alley Reporter).

Now, I don’t think most of us running self-funded Internet businesses need to be worried about a depression. Sure, we may see fewer customers or sales over the next year or so, but we don’t need to worry about venture capital drying up. (Basically, because we’re not seeking or relying on it.)

But for those of us relying on venture funding to get our products and business off the ground… be worried, very worried. That is, if you take Jason Calacanis’s article ‘(The) Startup Depression’ to heart.

According to Jason, ‘the economic downturn will be much worse than it is today… 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.’ He believes that 8 out of 10 of all the ‘Web 2.0′ startups to raise an A or B round of venture capital will go under.

I guess Jason Calacanis can relate. His first business, Silicon Alley Reporter, went from 70 employees to 12, and with the bank account running out of funds, he struggled to meet payroll. And that was BEFORE the stock market crashed in 2000.

But, according to Jason, that was the ‘darkest hour before the dawn’ and it was just a year after the company went under, that he started Weblogs, Inc. Just 18 months later, Jason sold Weblogs, Inc. to AOL for $25 million.

Which is why Jason Calacanis’s seemingly negative article is really a message of hope. This quote from Jason’s article applies not only to tech startups in the grip of the economic depression, but also to ANY entrepreneur struggling to get a business up and running or through any kind of difficulty:

‘If you’re failing right now, and if you’re suffering, you need to take Kurnit’s test. You need to access where you’re at and you need to fight on. You can give up, sure, but the truth is that when you give up, you have to live with that fact for the rest of your life. For me, living with having given up in tough times is a much worse fate than certain failure.’

(According to Scott Kurnit there are three (3) reasons why a business will fail: bad idea, bad execution or outside factors.)

If you want some timely inspiration – and a quick education in what makes for a successful growing business - I definitely suggest you read Jason’s article, if only for a full explanation of his 10 tips for getting through tough times:

1. Execute better.
2. Grow the talent you have.
3. Fire the ‘average’ people on your team.
4. Cut spending every where you can.
5. Find a revenue stream and ride it.
6. Focus on your profitable clients.
7. Make your top 10 performance areas 10% better.
8. Hold an optional off-site breakfast meeting on a Sunday and see who shows up. Whoever doesn’t show up is unlikely to step up during the tough times: fire them.
9. Build market share.
10. Raise money.

(Those tips about firing people may sound harsh… but may just be the right advice.)

Source: Jason Calacanis, “(The) Startup Depression”, September 29, 2008, Calacanis.com

Yesterday I revealed the 8 most dangerous words in Internet marketing: ‘I have a great idea for a product.’

Why so dangerous? Because they can so very easily lead you to create a product that no-one wants… that no-one buys… and that causes your business to fail… and your heart to break.

That doesn’t mean that I don’t believe that it’s impossible to create or stumble upon a product that no-one knows they want until you release it, and that turns out to be an enormous success. We probably all know of businesses that have succeeded that way.

But when you don’t know what the odds of your success are… it’s a gamble. And unless you are willing to gamble your money, time, resources, and so on, you’re much better off taking an entirely different - and much less risky - approach to starting a business.

What is this much less risky approach to starting a business?

It’s to identify a market, find out what they want, and come up with a product or service that satisfies that want better than anything else available.

Note that I said ‘want’, not ‘need’. Forget what people ‘need’ – most people buy what they want, or what they want and need. Rarely do they buy – and it’s much harder to sell – based only on needs.

Sometimes finding out what the market wants requires a little research. For example, if you want to sell on the Internet, a great way to identify market niches is to perform ‘keyword’ research. Tools like Wordtracker (http://www.wordtracker.com) and Keyword Discovery (http://www.keyworddiscovery.com) can help you uncover topics that large numbers of people are searching on. One or more of these topics may signify a want (or wants) shared by many people.

In other cases, you don’t really need to do a lot of ‘market want’ research. You can simply observe how many other businesses already sell a particular product or service. There wouldn’t be so many if there wasn’t sufficient demand for that product or service, right?

You might object that that if there are so many competitors then the market is saturated. I used to think that way too (I’m also recovering from the ‘I have a great idea for a product’ syndrome). But experience and common sense tells me that even in saturated markets there are often plenty of opportunities to do things better – provide a better product or service, do better marketing, deliver better customer service, and so on.

What concerns me more than a saturated market with lots of competitors is a market that has only one, two or three huge competitors. Wanna go up against Adobe? Having said that, it’s not impossible… but that’s a whole other story…
So, if you don’t have money to burn, don’t let the words ‘I have a great idea for a product’ ever pass your lips, or the lips of anyone among your staff.

Instead, train everyone to say, ‘I have a great idea for a market’ – meaning that you (or one of your team) has done some market research and come up with an idea for a product or service that gives the market what they want.