These days it’s almost the norm to be or want to be an ‘entrepreneur’. You might want to read an earlier blog on the difference between entrepreneurs and business owners.
Almost everyone you meet has some kind of an idea about a business that they’re thinking about starting – you’ve probably had one or more ideas too. And that’s the first step in building a business – recognising that an entrepreneurial opportunity exists in the first place.
Whilst they appear to be everywhere (especially if you train your brain to look for them), unfortunately, as every venture capitalist, banker (and probably most accountants) will tell you, an idea (or opportunity) without execution is usually worth close to nothing. So how do you get the idea out of your head and into reality – so that it can make you those bazillions of dollars you’ve heard about?
Well, before you quit your day job and invest your life savings (or even just this month’s mortgage payment), you might want to take a step back and consider these six things.
Six questions to consider before pursuing that entrepreneurial opportunity
- What makes your idea unique, special, different to what’s already available?
It might be style, colour, distribution, location, service, flavour, price, more environmentally friendly, newer technology, etc. Not every idea needs to be completely unique or totally new. Lots of people have created solid businesses tweaking someone else’s original idea – just look at Pepsi (vs Coke), Virgin (vs British Airways), Porsche (vs Ford).
But whilst the product or service might not have been an original idea, these brands certainly put their own unique spin on them and made the product/service/customer experience different enough that those customers that weren’t well served by the original, found someone who/something that suited their needs better.
- Who’s your customer?
And just so you know, the correct answer to this question isn’t everyone or anyone with money. If you try to appeal to everyone, chances are you’ll appeal to no-one.
The more you can drill down into who this person is, the better placed you’ll be to get on with developing your product/service. Ask yourself questions like;
- where they live
- how old they are
- where are they in their lifecycle, are they married, single, have kids or not
- how educated they are
- what they do for a living
- what’s important to them
- what they drive
- how they feel about this sort of product/service
- how much time they have to buy it
- what they buy currently
- what do they think needs improving in the category
Knowing this will help you with creating your product/service offer, your marketing materials, any advertising you might be considering, where you’ll set up, etc.
If you’re looking for ideas, there are some great group descriptors available for you to consider here.
- Is there a demand for your product/service?
Once you’ve figured out who your perfect customer is, see if you know any. Run your ideas by them and see what they think. Just make sure that you’re open to their feedback. In addition, you might want to do some online surveys, or a focus group or two. Once you’ve done that, you might consider putting up a basic website or running a quick Google Adwords/Facebook/LinkedIn campaign to see if you get any traction. Keep tweaking until you start getting some bites.
So, okay, you might have heard that when Steve Jobs market tested the iPod it failed miserably – yet it all but rebuilt Apple’s success. It was an idea ahead of its time, that people just didn’t understand- when it went through research. Jobs apparently ‘knew’ in his gut (which was really seasoned by several decades at the helm of Apple by then) the gizmo would work. BUT they had to do quite a lot of market education before it became the accessory almost everyone now owns.
If yours is an idea like that, best be aware that you’re going to have to do a LOT of market education. And that takes considerable time, effort, energy and money before any rewards come back your way. Which leads us to the next question.
How much money is it likely to cost to get to market?
Getting your product or service to market is likely to take considerably longer and cost a bit more than you anticipate.
Sure, you can bootstrap your business, but you’ll still need some business basics – business cards (yes, we believe they still have a place – at least in most service businesses), a website, some professional marketing materials. If yours is a product based business, you’ll need some stock, somewhere to store stock, some samples, money for shipping (in and out), potentially a storefront rental, in addition to the other business basics.
If you have to manufacture your product – that’s a whole bigger kettle of fish.
No matter what your model, you’re best to start by thinking through a start-up budget and an revenue forecast.
Where will that money come from?
As we’ve mentioned in past blogs, cash flow is king! Lack of working capital, is the number one reason why businesses fail – despite having healthy profits or lots of work in progress/orders in the system.
Once you’ve done your budget and forecasts – you’ll have a better idea of what level of funding you’ll need. You might get that from your own funds, borrow it from friends or family (often the place baby businesses start), take out a loan – usually against existing assets, or if you’ve got all your ducks in a row, you might approach angel investors or venture capitalists (you can read more on what they require here)
How long can you survive without a regular income?
If you’ve been able to answer the previous questions really well but your answer to this question is less than 3-6 months – best start your business on the side. Plenty of businesses have been started with their owners working on them at night, in lunch hours, on weekends or holiday breaks. Doing it this way, you can pay your set up costs, get things up and running, work out the niggles and save extra dollars to fund your requirements before leaving the comfort of receiving that regular salary.
If you have a business idea that you’re itching to see become a reality and you’d like some help working through budgets, setting up your books, or ensuring that your cashflow will see you through until you achieve regular income, we’d be delighted to help. You can call Kerry on 6023 1700, drop us a note or connect with Kerry via LinkedIn.