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Fad businesses: Catchy but risky

By Rafael Santos |
<>KEEP YOUR EARS TO THE GROUND

To spot trends or fads, entrepreneurs must always be on the lookout, according to Yason.

[related|post]“Read newspapers and magazines, and read blogs. Watch TV and try to see what the variety shows are doing. Basically, do anything you can to stay on top of what’s hot and what’s not so that you can be sufficiently ready when you see a trend coming up,” he said. However, Yason advises entrepreneurs to focus not just on industries they are in or want to be part of, and counsels a more holistic approach.

“The key is that you can’t only pay attention to industries that interest you because everything is connected. Remember, opportunity misses those who view the world through the eyes of their profession,” he said.

TRENDS VS. FAD

Deciding between a trend and a fad business largely depends on the kind of business you’re in. Most importantly, don’t assume a fad is business-worthy just because you have a good feeling about it.

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“Gut feeling is important, but that’s not the only thing you should look at,” Yason said.

Tamayo acknowledges that people have made fortunes out of fads. Not a few entrepreneurs have used a fad business as a testing ground when they first let the entrepreneurial bug bite them. As a first business, it will teach you a lot of things about being an entrepreneur, but keep in mind that you don’t have to be discouraged if it fizzles out, since that is its nature. Ideally, by that time, you’d have learned enough about handling a business, and you’re ready to get into your second, more stable one.

But to be successful in a fad business you should do a cost-benefit analysis first. Entrepreneurs must take into account sales and profit projections, how you can prolong the fad, and your exit strategy.

“The exit strategy is the most important aspect of betting on a fad. True, you can stoke the flames by waving a blanket at it, but soon you’ll tire of it. The mentality of people who cash in on fads should be get in, and get out ASAP,” he said.

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Yason echoes this sentiment and adds: “If you think you’ve spotted a worthy fad, you have to be prepared to act quickly and move on when the fad has run its course. To be successful in a fad business, it’s all about timing,” he said.


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