Whether you’re looking at introducing a new service to your business, or planning on starting a business, you must be convinced of the viability of your idea. Viability is an interplay between what you can produce, and what the market needs or wants. In our marketing series, our own Kalido marketing guru, Greg, gives helpful tips on how to conduct research to ascertain the latter. In this post, we discuss the former. In order to determine whether you should even bother taking an idea into market research, you must know that it passes muster on the following:
1) You have a clear business plan for it
If the way to hell is paved with good intentions, the road to failure must be paved with half-baked efforts.
20% of new businesses fail in their first year, 30% fail in their second year, and 50% fail in year 5. These are pretty daunting statistics. The most common reasons for new businesses failing are poor management, lack of planning, insufficient capital, and cash flow problems. As we’ll cover in more detail in point 2 below, having insufficient capital to set up the business properly, or trying to run a business while constantly being in debt, are not recipes for success. Unfortunately, you have limited control over whether a bank will offer you a loan, and what your suppliers charge. However, you do have full control over how you run your business.
There is plenty of advice floating around on how to manage a business properly, but most of it can be boiled down into one simple truth: you must have a clear idea of your past, present, and future.
Having a clear idea of your past means knowing things like: what market niche you wanted to fill in the first place, what was supposed to make your business different, and how you planned on addressing common industry problems. Business coaches encourage drafting company vision statements to help you articulate these. The basic idea is to have a map of where your business needs to go. When you’re up and running, you’ll often be bogged down with the minutiae of everyday admin. In order to avoid losing sight of the wood for the trees, it’s helpful to have a high level statement to refer to periodically.
Knowing your present means you’re confident that you have the skills you need in your organisation, your expenses are kept lower than your income, your processes are smooth, and you’re getting honest feedback from your customers. In other words, it’s having a clear picture of where you are now as a business.
Having vision for the future gives you purpose – something to strive for. Ultimately, where do you hope to take the business? Do you want to run it until retirement? Do you want to leave it in the hands of descendants? Do you want to list it as a public enterprise?
Your idea may be a service or a product. Either way, in order for it to live in the world, it needs a coherent and realistic business plan.
2) You have the means to move forward with it
You may be inspired by stories of entrepreneurs who sunk their last penny into their business idea, and are now millionaires. However, for every success story, there are untold failures. In fact, 82% of small businesses experience cash flow problems. Every new business idea will require a significant outlay of capital and time. You should have sufficient reserves of both before you pursue an idea.
For example, if you approach a bank for most of the capital needed to start up, you’re at the institution’s mercy for years. You’ll be responsible for the repayment, often on draconian terms, whether your business works out or not. Perhaps you’ve just started a family. If you’re juggling baby feeding duties at the same time you’re setting up a business, are you sure you’ll have the time to do justice to both?
Of course, there may never be a perfect time to implement your idea, however, there will be a better time. Instead of diving headfirst into a venture, it pays to plan ahead. You may want to amass some savings first, to bring down your loan requirements. You may want to make changes to your lifestyle (downsize the family home or car or find a babysitter you trust). Having the means to move forward with an idea means you aren’t putting all your eggs in one basket. While being optimistic of your success, you should have contingency plans in place in case things don’t work out as you wanted.
3) Someone in the industry thinks it’s a good idea
If you’re familiar with the industry already, that’s a bonus. Your own expertise and knowledge has told you that you’re onto something. However, you should always get a second (or third and fourth) opinion. Just as a writer needs an editor to cast an objective eye over the material without the bias of being its creator, you’ll need someone to point out the things you’ve overlooked. If you have a mentor, that’s a natural choice. A colleague in the industry whom you respect is also a good option.
If you’re completely unfamiliar with the industry, you should consult even more sources. They’ll be able to tell you exactly what the gaps in the industry are, what problems it faces, and what obstacles stand in the way of change. If you’re trying to solve a problem, it’s likely someone else has already tried to do so. And there might be very good reasons why they’ve not been able to do it. If someone who knows the industry well thinks your idea won’t work – that’s a very serious warning sign. On the other hand, if they think it could work, that’s a very strong endorsement.
‘Hang on,’ you may be thinking at this point ‘Surely this goes against all the career advice to swim against the current and forge your own path in life?’ After all, belief in oneself in the face of naysayers is a mark of determination. Certainly, you should trust your instinct and stand your ground. That’s why at the idea generation stage, you shouldn’t restrict yourself. This is when you should be pulling things out of left field, and coming up with the most creative and innovative things you are capable of. Getting the opinion of an outside party comes in the elimination stage, when you’re deciding which ideas to go forward with. A second opinion is to help you judge your ideas more objectively, and make you aware of vulnerabilities in it.
Perhaps you’re someone who comes up with 10 new ideas a week. Perhaps you’re someone who’s had one good idea in 10 years. What matters is knowing which ideas lend themselves to becoming a viable business, and which ones do not. If you have a clear plan for turning the idea into a business, you have the means to do so, and your research indicates that there’s a need for it in the world – you’re onto a good thing.