24 Jan, 2013
How To Turn A Good Idea Into A Successful Start-Up – Bev James
I am often asked what makes a good idea a good business idea; and how to turn it into a successful start up. Every business starts with an idea or an opportunity that fulfils a need or a want. Preferably both.
Identify a need or a want; find a way to fulfil it and you have the kernel of an idea for a sound business. But only consider developing the idea further if you feel passionate about the idea.
I have been asked to get involved with setting up many excellent business opportunities over the years – but I know that I could only remain enthusiastic if the whole concept fired me with enthusiasm. There is little point in buying a tool-hire franchise if the thought of doing DIY leaves you cold; or opening a florist if you are allergic to pollen.
Many ideas are good ideas. Whether or not they turn out to be successful depends on your passion for the concept, your belief in yourself, and the steps you put in place to plan your business journey in advance.
Setting up a new business is like planning an adventure holiday, with finite time and resources. To get the most out of your journey you will budget for your costs; your choice of route will match the time you have available; and your choice of activity will depend upon your interests, skills and passions. If you want to embark on something that needs specialist expertise, you will make sure you are trained or supported by those who know what you are doing.
Climbing Mount Kilimanjaro might seem a good idea: but it is only a good idea if you take people with you who know the way and have reached the summit before. It becomes a very bad idea, liable to end in failure (or worse) if you attempt it solo, especially if you have no experience of the climatic conditions.
It is wise to make sure you have taken good advice before you spend a single coin of your money – or an investor’s money. Whether you are a sole trader, a limited company or a partnership, there are certain business essentials to be stamped in your passport before you enter new territory:
Having belief in your idea
Whatever led you to your business idea, your chances of success will increase many times over if you have genuine belief in your idea and a passion for your business plan.
• Self-belief: Belief is what keeps you going when others knock you back; it’s what helps keep you going when you are tired; it’s what helps you to overcome unexpected obstacles and to see challenges as surmountable rather than a reason to quit.
• Plan ahead: Having a strong belief that something can work is not the same as blind optimism or letting your heart rule your head. Pour your belief into the practical structure of a business plan: stating your objectives, your financial plan and including a strategy and a timeframe for achieving your goals.
• Take good advice: Share the information with a business expert: such as your accountant or a business mentor – so that you have objective advice. Once the plan is realistic and healthy in its aims, it will become your anchor: your benchmark for testing whether something is right or wrong for your business strategy.
• Commit to your plan. The plan is an active document that will keep you on track and prevent you from spending too much money upfront on non-essentials, choosing a poor location, or changing direction in a way that is incongruent with your core idea.
• Manage your cash-flow: Money is important in business. You need to manage your finances as is if your life depended on it – because it does. If you are unfamiliar with how a profit and loss sheet works; or you find yourself procrastinating rather than monitoring your cash flow on a regular basis. Hire. Help. Now. Cash-flow problems are a serious threat to businesses of any size: especially during the start-up phase.
• ‘Get real’ about your strengths and weaknesses so that you plan, prepare and put things right before you get started. Knowing where your weak spots lie and seeking professional expertise to balance your skills, will put you in a position of strength.
• Be an expert. Don’t be tempted to set up in business in an area you know nothing about. Refurbishing your own home doesn’t give you the skills to be a property developer. Knowing all the best beers won’t help you to run a country pub.
• Test the market: Never make assumptions about your market, your competitors, or pricing.
Testing the market
Just as wise travellers will ensure they have been inoculated against potentially fatal diseases before they leave home; so too it is important to test your idea and plan ahead for important contingencies: to protect your future business health and give your good idea the best chance of start-up success.
In the musical, Oliver, a rose seller sings as she walks along a London street to sell her wares: “Who will buy my sweet red roses? Two for a penny.” Does she know what her customer needs? Yes: good value for money. Does she know what her customer wants? Yes she does. No-one needs roses for survival – but many people want them and love to receive them; even today they are one of the most popular flowers. Her customers decide that they need their beauty and scent and all that they represent; which is why roses are the only option in her basket. The good value just helps to seal the deal.
Asking yourself key questions about the market for your product or service is useful. Asking potential customers the same questions, and assessing what the competition is doing, is even better – because it will help to build a clearer picture and help you to avoid making expensive assumptions in your business plan. Ask yourself and others:
• Who will buy your product or service?
• At what price will they buy it?
• How will they buy it? (Online, in-store, mail order etc)
• How often will they buy it?
• Who else can they buy it from?
• Where can they get it cheaper?
• What else will they buy?
If you are a retailer:
• What is the average spend that you will need per customer?
• What is the average daily footfall in your location?
• Do the potential customers match your customer profile?
Knowing how many customers you need, on a daily, weekly, monthly basis – in order to make the business profitable – is essential. A common mistake is to over-estimate the number of clients, projects or footfall that you will experience in the first year of trading: or to invest in premises before you really need them. Testing the market before you begin will help you to make adjustments along the way. A useful strategy is to start (very) small and grow gradually. Many a successful start-up has begun at home.
Doing a value check
The early stages of starting up a business are full of excitement and potential. You may feel energised and possibly anxious in equal measure. You are likely to have high expectations for the future. This is also the stage at which you are most vulnerable and liable to make expensive mistakes.
• Doing a value check in the form of a SWOT analysis is a useful way to take stock of the Strengths and Weaknesses of your business idea; the Opportunities to improve and hone it, and the Threats to its success and survival.
• Check that your price point is aligned with your level of service and the quality of your product. If you are focusing on mass market sales of low price items, keep your customer service polite, but fast moving. If you are selling a specialist service to a niche market, you need to provide excellent client care. You will have fewer customers than a mass market business – but the ones you have will want to feel cared for and remembered. It is vital for repeat business.
Whatever your business model – it is important to know what differentiates you from your competitors. Your USP (your Unique Selling Point) will get you noticed. It will set you apart and ensure you are remembered. If you create something so essential or desirable that everyone wants it – they will find a reason to need it too.