Ha! So you think you have an idea that you can parlay into a good business, whether it’s a cutting edge technology or a tried and true formula, like a car wash.
Regardless of the industry that you’d like to enter, there is a more or less standard checklist of factors you should consider before investing your money, time and hopes. Before fantasies of entrepreneurship carry you away, do yourself a favor and answer these questions first. You’ll know how to proceed from here, whether it means that you meet with the Branch Manager at your bank to learn about business financing options, or you take a trip back to the drawing board.
1. Who are the target customers and what is the size of the market?
Define your market demographic. Who will pay to buy what you plan to sell? Is this a product or service that is growing in popularity, or maintaining its broad appeal, or is there a shift in customer preference on the horizon as those who would be your customers learn about a new choice that may persuade them to switch to The Next Big Thing?
In addition to demand for your intended product or service, are there enough customers in your location to support the business? By the way, how are your competitors doing? Do they appear to be thriving?
2. What is the problem that target customers want to solve or avoid when they do business with companies like your proposed venture?
Understand the back story of why customers would buy the solutions that you plan to sell. What is it that they’d like to achieve or avoid? One calls a window washer when the windows are dirty because clean windows demonstrate the owner’s desire to protect and enhance the value of his/her home.
3. How are target customers meeting their need today?
What businesses would be your primary three or four competitors? What factors persuade their customers to do business with them—a convenient location, exceptional product variety, discount pricing, the right relationships?
What advantage can you offer that customers might be drawn to—more convenient hours of operation, for example? Can you provide a product or service that meets a need that is valued but not currently addressed?
4. What is your solution (product or service)?
Describe your proposed product or service. You should be able to easily and clearly describe (and sell) your product. Develop an off-the-cuff sales pitch, record your delivery of it, then listen and evaluate. Would you buy this product or service?
5. How will you reach your customers?
If your business is B2C and requires a physical location, can you afford to set up shop in an area that potential customers will visit? If your business idea is B2B, do you have a plan to access customers and referrals? If your plan is for e-commerce, how will potential customers learn about your website?
6. Do you have the credibility and credentials to do business in this industry?
Especially if you plan to enter the B2B sector, be certain that your education and experience will command respect and trust. If obtaining certain licensing, certifications, or an educational degree is vital (even if not required), investigate the process, plus the time and money involved.
7. Do you have the funding to launch the business?
Research the expected business start-up costs and think objectively about how long it might take you to start making sales you can live on.
Pay your bills and get your credit score. Build up your savings. Whether you expect to self-finance, ask to borrow from friends, family, or your retirement account or apply for outside funding, you will need a lump sum of cash on hand when you launch a business.
Thanks for reading,
Photograph: Financial District, Boston, MA. Kim Clark, September 23, 2018