Your entrepreneurial DNA has kicked into overdrive – you’re motivated, optimistic and ready for independence – and in the back of your mind you’re making plans to launch a venture. In between your innovative thought and a successful business launch, a few steps must be taken to ensure your idea is viable.
The first (and most important) step in evaluating your idea is conducting market research.
It’s understandable that aspiring entrepreneurs get excited about their ideas; after all, that’s what entrepreneurs do best. They experience an epiphany that serves as the foundation of an idea, envision all of the problems in the world this idea has the potential to solve, and begin to mentally calculate how their idea will impact a potential multi-billion dollar market.
Unfortunately, in the midst of this burst of enthusiasm, many potential business owners consider market research to be of secondary importance. That’s troubling for those who make that mistake, but fear not: you’re not going to make that mistake.
The thought of spending hours sifting through reams of data is not very appealing to most people, but this holds especially true for “creative types” who tend to focus on the big picture as viewed from the top of Mount Success. As a result, it is assigned secondary importance or overlooked altogether.
That makes as much sense as buying a vehicle sight unseen and writing the check without knowing if there’s an engine under the hood.
As you conduct your initial research, keep in the back of your mind that fact that an idea that doesn’t stand up to research also doesn’t immediately make is a “loser.” Ideas are everywhere and can be mixed, blended and adjusted to fit the market conditions you discover. Your initial concept may be great with a little “tweaking” here and there.
1. Is it unique? A concept can be unique by being so innovative that no one else is doing it at all, or because you have little or no competition in your particular area. If you think your concept is unique but a Google search reveals there are 700 companies in your local area already engaging in your concept, you need to rethink your idea.
2. Is it viable? When entrepreneurs tell me they have the next best idea for XYZ product or service, and all they need to make it happen is hundreds of hours of university-level research and $30 million dollars for development – neither of which they have the budget to fund – chances are the idea isn’t viable. If you have the perfect retail storefront location, but the rent is so high your business will never be profitable, the idea isn’t viable.
3. Is there a need? In a free-market economy driven by the laws of supply and demand, potential demand will dictate if your idea is needed. You could develop your idea for a latent market and create the demand yourself – larger companies do that all the time – but that tends not to be a cost effective option for start-ups. It’s much more realistic for a new business to address a need, build a cash cushion and work on latent markets at a later date.
4. Is your idea reproducible? If your business concept cannot be reproduced in your absence, your company will never grow beyond your limits. That may be fine in your mind – you never wanted to franchise or expand anyway – but what happens if something happens to you? In addition to getting vacations and enjoying quality personal time, a business that can operate in your absence can also expand and grow with unlimited potential.
5. Did you conduct a SWOT analysis? This is a structured planning method that measures your idea against its Strengths, Weaknesses, Opportunities (problems) and Threats. This can reveal design flaws, incorrect price structures and falsely held assumptions. It will also reveal information about your customers, competitors and collaborators very quickly. SWOT matrix software is available online for free; just download, fill in the data fields and see the result. If you don’t like the results, tweak your idea and try again.
If this quick first-stage test reveals your business concept is sound, you can then move on to stage two. This is a more detailed and tedious version of the first stage – time is measured in weeks and months, not in hours – but at least you’ll be enthusiastically driven by the fact that you’re probably in possession of a winning business idea.
Take the time to do your research; to be forewarned is to be forearmed. Successful entrepreneurs know that to be prepared for victory is preferable to being unprepared for failure.
They also know that chance favors the prepared mind.