If you have an idea for a business - congratulations, you are about to embark on the journey of a lifetime if you decide to go ahead with it. Becoming an entrepreneur is an exciting path to take. It’s also a path filled with pitfalls - most businesses don’t make it past their fifth anniversary. In fact, most businesses never come about at all as people who have ideas for businesses rarely go about turning them into reality and those who do often fail in the first five years of operation. If you have a business idea the statistics are definitively against you. That’s not to say you can’t beat the statistics though. If you are a true entrepreneur at heart beating statistics is probably something you will get a kick from. Entrepreneurs tend to enjoy a great challenge.
If you do decide to battle the statistics (and win) here are some tips to follow when converting your idea from a mere dream into reality.
The Reason Business Ideas Fail
There are, in essence, two reasons why a business would fail to launch, or fail after launching. The first one is that the idea itself is not solid enough - the product or service is not good enough, or there is no market for it. The second reason why a business would fail is execution - either the person behind the business doesn’t get if off the ground, or when he or she does, the way the business is run is not up to standards.
Knowing the reason why a business would fail is the first step in ensuring you succeed, as you can have a look at what to avoid and by finding out what to avoid, also finding out what to do instead.
Establish If Your Idea Is Worth Investing In
The truth is most of us have some business idea or other during our lifetime. We take a shower and whilst singing and shampooing our hair have an epiphany about some service or product we think the world would truly need. Unless it’s a cure for a disease, or an invention like Aladdin’s lamp that guarantees your every wish, chances are you won’t know if there is a real demand for your product/service. You think so, but what do others think? It’s others that are going to buy it.
So how do you establish if your idea is worth investing time and money into? You do market research and trial tests for the product.
First you have to check if there is a similar product or service out there and if so if yours can compete with it. Also, check how saturated the market is - if there are a hundred fast food restaurants in your town, do they need one more? Are there clients enough to support it? Or is it a strong enough concept to lure clients from other restaurants?
The first and most obvious way to check if there is desire for your product/service is to check with friends and family if they think it’s a great idea, but this is also the most unreliable way. Some will probably tell you they believe in your product just so as to support you, whilst others might be negative as that’s their nature when it comes to anything new. Most importantly: are your friends and family your target market? Are they the kind of people who would buy your product if it was released on the market? Sufficient to say most people might think an eco-friendly and beautifully designed car, like the Tesla, is a great idea, but most wouldn’t be able to afford it. So if your friends can’t afford your product, then they definitively aren’t your target market. They aren’t the ones who need to be willing to take out their wallets and pay. Likewise, asking your friends who live in apartments if they think your newly invented garden hose is a great product makes little sense, because they won’t buy it.
One of the best ways of finding out if there is a market is using a service, like uSamp, UserTesting.com, UsabilityHub.com, CrazyEgg.com, GutCheckit.com, and Ask Your Target Market to check if other people think it’s a great idea. Do they vote for you taking it further? Crowdsourcing today is a powerful medium.
Another thing you can do is asking people in the industry you are intending to enter what they think. They are probably more likely to see the opportunities and disadvantages. Ensure they are people you can trust and have them sign a non-disclosure agreement before doing so.
Last, but not least, you could ask a product development company to evaluate your idea for you.
Testing Your Product
Finding out people’s opinion is all very well, but by the end of the day you have to check if they are willing to part with their money for it. We all come across products that sound cool, but that we, in actual fact, would never buy when it comes down to it.
Can you develop a prototype for one of your products? Or do the branding and show what your products/services will be like? If so you can test the waters. Doing this, ensure that the product development phase is well thought through, because the quality of the products/services as well as the branding and design can make or break your product.
You can test your product by using a service like Kickstarter or Indiegogo to find out if people would be willing to buy your product up front and by doing so fund the first phase of your business venture. Having sales up-front is a great way to start. Not least as it will convince investors you have a great concept, should you need more money.
An alternative way to test a product is to attend a trade show in your niche and get direct client feedback. If you can sell your product at a trade show, whether B2B or B2C, chances are you can sell it in the real world. However, bear in mind that sales strategies at a trade show are very direct - in a shop you won’t be there to pitch the products yourself.
Another way to check if your product has a market willing to pay is to put up a website with a shop. You then market the site as you would when the business is launched. The only difference is that when people want to pay (and this is where they fill out their credit card details, not where they put things in the basket) you put up a notice saying that the product is out of stock and give an estimated time for when you will have it in stock. Ensure to take down their email so you can contact them when the products are ready. Tim Ferriss talks about this approach in The Four Hour Work Week.
The Business Model
You can have the best product or service targeted at a market willing to buy it, but if you try to sell it for the wrong price, or aim to sell it in the wrong quantities, producing a lot more products than you need, the business will fail. Your business model is crucial to the success of the business and for investors to wish to invest.
The best of businesses can fail if you have the wrong team around you, don’t market it properly, or let your strategies and procedures fall by the wayside. Make sure to write a great business plan as well as an operational plan and consult various people for feedback. Constantly revise your plan, as well as measure how you are doing in comparison to your plan.
Commercialising a business idea is not easy, but it can be worth it. Make sure you do your research, work with people who can help you evaluate your ideas along the way and most importantly: find out if there is a market and if they are willing to pay, then create an execution plan that is well thought through.