Making sure your idea is viable

Few things are as exciting as coming up with a new business idea. You lie awake all night thinking about the opportunities as results that the new idea will bring into your life. The mind is an interesting thing and one idea leads to the next and soon you are running your own business empire. But of course you have to start with the basics, and the basics for almost every entrepreneur I know is establishing a need for the business or concept after which you can start thinking of the business plan. You can of course come up with an entirely new product idea for which there may not even be a need as of yet, in which case you will need to invest heavily in marketing to educate your potential clients on why they should be buying your product. If yours is not the next iPad though, chances are that you need to start with finding out if clients will be interested in buying your product and the actual terms related tot heir interest.

So how do you go about testing your own business ideas?

Well there’s several approaches, ranging from asking friends, family and anyone down the pub for their opinions (not recommended) to actually going out there and doing it – if it succeeds it’s a good idea, if it doesn’t it’s not (again not recommended as it’s a very expensive way to test a business idea). Instead I favor testing any ideas for your own business in several ways. Firstly desk research and when it comes to that in a recent post ‘The 2-Minute Opportunity Checklist for Entrepreneurs’ on the Harvard Business Blog, Prof. Daniel Isenberg (of the The Isenberg Entrepreneur Test) described a pretty good test:

   1. Does your business idea soothe someone’s pain, discomfort, frustration, or dissatisfaction?
   2. Are there lots of those people out there?
   3. Do these people (or companies, or governments) have money to pay for it?
   4. Will they be able to decide quickly to buy your product or service?
   5. Does your idea exploit something about you that is outstanding or unique?
   6. Are there important assets you have that no one else has? (money, access to customers, technology, leadership skills, execution, location, salesmanship, etc.)
   7. Can you think of at least two people who might join you?
   8. Do their skills complement yours?
   9. Do they have the same values as you do?
  10. Do the majority of people whose opinion you highly respect think your idea is a good one?
  11. Does at least one person (and not more than three people), whose opinion you highly respect, think your idea is a bad one?
  12. Is there something about the idea or its implementation, that compels you to really devote yourself to it?
  13. Can you sneak by the big competitors without them noticing you for awhile?
  14. Can you find a potential customer who will take your calls, give you feedback, try a pilot out?
  15. Can you start up without huge gobs of money?
  16. Can you keep your fixed costs low during launch?
  17. Does your idea lend itself to small incremental steps that can inexpensively generate valuable information as well as at least a little cash?

He suggests that if when you evaluate business idea against this criteria it scores 16 or more ‘yes’ answers then you should get on and start a business around your idea. He expands on a few points noting that great ideas are those that attract detractors, explaining:

    …unless you have at least one major detractor, then you are probably not on to something big. In fact, if everyone thinks it is a wonderful thing to do, then probably a legion of competitors is on the launch pad.

Then provides a great description of a good business opportunity:

    Opportunities consist of:

       1. the alignment of a market need,
       2. a personal competence,
       3. values or motivation.

If your business idea passes that desk research stage, then it’s time to start failing fast, failing cheap! By which I mean find cheap ways to develop prototypes and test your ideas. Where cheap doesn’t necessarily mean low cost, but rather that they use a relatively low proportion of your start-up capital. The point being that you will make mistakes and get things wrong in the early days of any business and if the first mistakes uses all your capital it’s game over, in contrast if the first mistake costs you just 10% then you have nine more chances to get the idea right and start a successful business.

Once this is done you can start to put your business plan together and ensure that your knowledge of the product and market is expressed in such a way that you can attract business finance, should that be needed. In every step of the way the excitement will of course be growing and the better you know that the demand is really there for your forthcoming business the more confidence and excitement you will take in to the next stage.

Find a business opportunity

Selecting the right business opportunity in which to invest your time and energy may be one of the more important decisions you will make. Not only of course do you want to ensure that you safeguard your business investment and that you will have a good return on the business plan that you invest in but it is also important that the idea excites you and that you are not going to be miserable every day while working on it. Create a business plan template or a mind map outlining what you are interested in, what your values and passions are and perhaps use this as a starting point.

Here are a few further tips on how to get started.

Step 1
 Are you ready to tackle new small business opportunities?  While working from home and being your own boss sounds great, not everyone has the entrepreneurial spirit, drive, and business knowledge to make it work.

Step 2
Decide if your new business opportunity is product or service oriented.  If you are a professional, such as a dentist or lawyer, this is an easy choice.  If you choose to enter the product market, decide whether you will sell directly to customers (retail) or to other businesses (wholesale).

Step 3
Choose online or local business.  Will you sell your product or service locally, or on the internet?  The overhead and start-up costs are often lower for e-commerce companies; however, you also need to think of your own knowledge of internet business and marketing, the location and accessibility of your target market, and more.

Step 4
For local business opportunities: Word-of-mouth is often the best way to find a business opportunity in your area.  Perhaps an established small business owner is considering retirement, or wants to move out of the area.  Also, check newspaper listings and visit your local small business center for business for sale listings.

For online business opportunities:  When searching for small business opportunities online, it is important to recognize small business scams.  Use reputable business listing services such as Entrepreneur.com's Opportunity Finder to review available franchise, online, and home-based business opportunities.

Step 5
Match small business opportunities to your start-up budget.  Compare the cost of each new small business idea to your available capital and any funds you can raise or borrow.  Franchises and turnkey businesses may provide an estimated return on your investment, while new business ideas require financial forecasting.  Compare the cost of starting each new business with the anticipated return to see if the idea is feasible.

Prepare a formal business plan before moving forward with any new small business idea.  Even if you choose a different opportunity, the business planning stage gives a realistic overview of the business idea and whether or not it will work for you.

Once you select an idea, consult a business lawyer, accountant, and small business resource center to ensure all licensing, tax planning, and other considerations are covered.  Do not forget to include the cost of these professional services in your start-up budget.