It’s often said that imitation is the sincerest form of flattery. As you build your business and create ideas, you’ll find yourself looking to others for inspiration. Experts say that copying the ideas of known winners isn’t necessarily a bad thing. On today’s The Small Business Show, we’re diving further into this idea with George Deeb, the Managing Partner at Red Rocket Ventures.
According to Deeb, “When developing a startup, the hardest thing entrepreneurs have to prove is that there is a demand for their product in the market.” To illustrate, If someone has already proven there is a market for what you’re trying to launch, it becomes less risky to follow the lead of someone who has already done it. This situation, Deeb says, “Is the only instance where it is okay to copy the idea or model of others.” He continues, “In my mind, it’s a perfect strategy to get to be a smart investor and follow the lead of others.”
Say you have a successful restaurant in Chicago. There is no reason for the format to work in New York. “The same thing applies at the domestic U.S. level versus the international level, says Deeb. For this example, you may see something in the U.S. as a European, and then you might want to launch something similar. These examples, according to Deeb, “Are the reason franchising is a good example of industries copying a clear and successful model format.” Or in other words, if people have a winning franchise, you know their model works.
However, the issue with copying franchises is that the parent company cuts 10% of revenue off the topline. If you came up with your own idea, you wouldn’t have to share the fee with the franchising company. For example, in Germany, a company- Rocket Internet- is professional at following successful business models in the U.S. and launching a copycat version in Europe before the success stories have had a chance to reach Europe. To illustrate, Europe launched “Wimdu,” a complete copy of our Airbnb.
Ultimately, Deeb asserts, “If you’re following the copycat trend, it’s a great opportunity to stream quick revenue.” However, copying models is not sustainable in the long run. By following the trend of copying products you know has trafficked and generated big sales, utilize the model you know works, but switch the product or idea you’re selling.