Many of us have fantasized at one point or another about starting our own business. Whether it's a a bakery, a law firm, or a tech giant, the American dream has always been to create and pilot your own business to prosperity. It's no surprise then that there are over 400,000 new businesses created each year, according to the U.S. Small Business Administration.
However, building a new business (or launching a new product) takes a leap of faith that's not for the faint of heart, even if you are an experienced entrepreneur. The steps leading from idea to reality are treacherous, time-consuming, and can be extremely costly. As a result, many budding entrepreneurs and businesses are smart to consider: Is my idea worth pursuing?
Quelling the Questions
The answer to this question will have ramifications on our finances, our families, and our future careers. There are no guarantees in the startup world — something everyone learns quickly — so there are important steps to take before quitting your job and committing everything to a new idea. Let's examine some of the very first questions that we can ask in order to validate our ideas and launch our businesses on the proper trajectory.
1. Do Your Research
Due diligence may feel tedious and time consuming, but it’s absolutely necessary. Before even considering dedicating a dime to an idea, we must understand the market we are entering and the competition that we will face. While tons of information exists on the Internet about market trends and competition — the US Small Business Administration is a perfect place to start — we can’t rely entirely on others to do our work for us. Put your boots on and hit the ground running!
One place to start is by finding prospective customers on social media and gauging their interest in your venture. Search out communities, groups, and businesses in and related to your potential field to find out what customers are saying. What problems do they have with their existing service? What are their complaints? How significant are they?
Confirming both the validity of your service and the severity of the problem is a vital first step when considering launching a business. Rich Mintzer, journalist and author, explains in an article in Entrepreneur,
“Just because you build it or sell it doesn't necessarily mean anyone will buy it… Too many entrepreneurs have found out the hard way that there was not enough market share for them to capture.”
2. Confirm Your Customers
In your idea’s earliest stages, you’ll hear tons of “I’d love one of those” or “I’d definitely buy something like that.” My advice: take these comments with a big grain of salt. Liking the idea and actually purchasing the product are two distinct actions. So, how do we know our idea will sell?
Even if a gap or inefficiency exists in the market, we can’t assume our product will automatically fill it. If it is wildly over-priced or too varied from their normal routine, chances are customers won’t buy it. Our products need to be different enough in function but still recognizable enough to sell. Debra Kaye, brand strategist at Lucule, asks the question in an article for Entrepreneur,
“How much effort is required for customers to make the transition from a current product to yours? If the cost is more than its relative advantage, most people won't try the new product.”
We need to ensure our innovations are geared for customer convenience, otherwise they will likely refuse to adjust. And research doesn’t end at identifying customers. We need to make sure our product or service has a proper distribution channel, suitable manufacturer, and any other vital factors in place as well.
3. Compare with the Competition
What makes us different and more advantageous than our competitors? If this answer isn’t clear to us, it most definitely won’t be to our customers. For that reason, we need to validate and clarify our competitive advantage at the earliest stage possible
In the crowded marketplaces of today’s world, even the simplest difference can make you millions. Uber entered the ride-sharing service with a revolutionary app, and Netflix brought rentals to customers' doorstep. Small changes to the existing offerings in the market can be the difference between success and failure. We just have to find these areas for improvements and apply them to our service. Most often, advantages arise from user experience, increased product effectiveness, and better value. The more evident these advantages are to customers, the easier the sell will be when the product or service actually hits the market.
4. Ask the Experts
This might be the most obvious approach, but it's still the most often overlooked. Before launching a new business venture, seek out the experts in the field and sit down with them. Talk to some executives about your proposed business or service. Focus on the potential for growth, current market inefficiencies, and the competitive advantages. They’re likely to provide you with honest, unbiased feedback that will help guide your decision. Finding a good mentor that can give you adequate guidance through the process of launching a new business or startup is crucial in building a successful company.
Well On Your Way
Ideas are powerful, but they aren't all worth a million dollars. Even established, successful companies have had failed product launches simply due to faulty research or poor product timing. Before investing our time and capital into a new business or product, it's always smart to take time to confirm our assumptions. These aren't the only steps to take when building out a new product or business, but if you have completed these four, you've taken the best first steps possible. The next steps you should be looking to make are to build your team and construct a minimum viable product. Look out for future posts covering these topics!
What steps and strategies do you believe are necessary before launching a new business venture? Join the conversation by tweeting @EidsonPartners!