Three Things You Must Do Before You Start That Business
A young man walks into our office. He pitches a business idea based on an app. He wonders if we believe his idea would be a good one to pursue. The business/app might definitely stack up among the better ideas that if implemented well would probably result in a solid business, both scalable and profitable. However, as interesting as the concept sounded, from the word go you could see certain flaws in his approach to developing his business model.
How often do you get asked by others whether a concept is a good business idea? Do you wonder if that idea you have would translate into a business worth pursuing?
As entrepreneurs, we spend quite a bit of time dreaming of ‘world-changing’ business ideas that would propel us into the 1% club. The reality of the matter is only 10% of these ideas see fruition. And from those that see fruition, an even lower percentage are actually worth pursuing. This is due to a myriad of crucial considerations entrepreneurs overlook while starting their businesses.
So what are the factors that you should consider before you go from idea to business?Here are the 3 crucial steps you should take before taking the plunge.
1.Conduct some market research
In market research and analysis, it is critical to discern the characteristics of the market. Identify which customer you are targeting, what their needs are and if ultimately they can be able to pay for the product. Remember, demand entails both the willingness and ability of customers to purchase your product. Your product or service must meet the needs of your target market and they should be able to afford it. Market research should not scare entrepreneurs. You don’t have to hire a specialized company and spend millions on it. Such simple things as observing clients at the competitors or launching a straightforward survey will go a long way in delivering the information needed. Just don’t mistake yourself for the market and extrapolate your feelings about the product to the potential customers.
2. Develop a prototype
If possible develop a prototype of your business idea. Instead of spending a lot of time, money and effort developing the final product, launching it, then testing it, first create a minimum functioning unit and test its viability in the identified niche. This will not only prevent you from accumulating significant losses if the product is not accepted by the market, but it will also give you an insight into improvements, necessary to bring it up to optimum capacity.
When we say prototype, we do not only mean production. It can be the first application version or starting with the minimum order even without a profit margin if launching a new retail product.
3. Ask: Does it make financial sense?
Your product in the long-run should be able to generate income; with your minimum expectations being that (a) it pays your time and (b) earns some minimum return on the capital you invested. For you to clearly comprehend this, you need financial projections based on your market research and the prototype testing. Whereas there always remains an element of uncertainty, projections will enable you to foresee better if the expected returns have a chance to match the risk you are ready to take to venture into this world of unknowns.
The beauty of entrepreneurship is you never stop learning. At ISBI we teach, train, coach and mentor you on how to brave the harsh sails that rock an entrepreneur’s boat.
Subscribe to our newsletter to receive similar articles, tips, and advice in your inbox.
