Written by Francesca Escoto for Startup Princess
Is this a good business idea? Am I good enough to make it happen? These are the two questions that people are really thinking about when they are considering a new business venture or launching a new project.
As a Startup coach, I work with entrepreneurs who want to turn their ideas into money, but have not figured out how to get from point A to point B. Here are the three questions I walk my clients through when they come to me during their first year in business:
- Is your idea worth something?
What is your product or service worth to your potential client? Is it the relief of pain? Or is it the realization of dream, fulfillment of a passion? People will buy something only for one of two reasons – they really need it, or they really want it. You might have multiple business ideas running through your head right now. Evaluate which of these ideas is actually addressing something painful, and which is making dreams come true. The one that can do at least one of these two really well is your winner.
However, there are other people out there making dreams come true and relieving pain. So another set of questions must also be answered:
- Do you do this better than the competition? This is a question of quality as it is perceived by the customer. For example, you might be into helping relieve headaches. You provide a natural alternative to painkillers. Your clients want fast relief from headache. Although your product has less side effects and has better long-term results, it does not relieve existing pain fast enough for your potential clients. So, either you sell to people who want less side effects, or you improve your product to relieve pain faster.
- Do you do this cheaper than the competition? Continuing the analogy, perhaps you have found a way to alleviate existing headaches just as fast as your competitors, but you can do it at a fraction of the cost. You can choose to price your product identically with your competitor and simply make more money in every sale. Or, you can choose to pass on some of the savings to your client and compete on price.
- Can you do this faster? Faster is sometimes difficult to define, depending on your industry. It can also be a tricky proposition. For example, think of coaches that practically guarantee that you can have a thriving business in three months instead of one year. Again, depending on your industry, waiting one year to start making profit is actually a very good expectation! Most businesses don’t even break even until Year 5! If you truly can help your client achieve results faster, or if you can manufacture the widget faster than the competition, you can capitalize on the “early adopters”, the segment of your market that likes being the first to try new things.
- Is your idea a disruption in the market? Perhaps you go about solving the problem in a way that nobody else does. Therefore, you don’t compete on quality, price or speed. You compete on innovation. Your solution is truly different when it changes human behavior. For example, mobile technology has changed how humans interact with information. The mobile phone is not just cheaper, higher quality or faster than a landline. It is a different tool altogether, used to make phone calls among other tasks. The evidence of this is that most people have both a landline and a mobile phone! Mobil technology did not replace landlines, it solved problems that landlines could not solve.
- How to Test Your Idea
Once you select an idea, ask yourself: why will people spend a dollar on this product or service? Write down all the reasons you come up with. Then, narrow it down to the top three reasons that, if you are wrong, would actually have the biggest impact on your success. For example, if you are thinking of creating a line of tropical-fruit flavored sherbets, your top-three list of assumptions might be:
– People enjoy tropical fruit flavors
– People enjoy sherbets
– People will buy sherbets year-round
If people don’t enjoy tropical flavors, you’re out of business. If your ideal clients like tropical fruits in smoothies, not in sherbets, then you’re out of business. If people will only buy your product during certain times of the year (and you are not prepared for a seasonal business model), then you might be out of business.
Before you invest your life savings into remodeling a 3,000 square foot sherbet-making facility, come up with the simplest, cheapest, easiest way to validate your top three assumptions. In this scenario, that could be as simple as making a weekly batch of sherbet, each a different flavor. Do that for one month, and each week have different people taste your product. Ideally, you should charge for your product because it will tell you if people like it enough to pay for it. Without any ego, listen to the feedback.
- Incorporate the Feedback
Sometimes we assume people don’t know any better, and we dismiss their opinions and feedback. You don’t have that luxury. In rare cases, you will be much wiser than your market. For example, Ford could have built a better wagon to be pulled by horses, or he could have invented an engine. Although his market did not know what a motorized wagon could even look like, Ford was able to lead his market with a vision of the future. It worked. If you are promoting a disrupting innovation, then feedback might or might not be as relevant in this phase. However, lets assume that you are doing something really cool, though not as revolutionary as inventing the first car.
In that case, you will take the feedback you receive and iterate. Like crazy. Every week, you will improve the sherbet experience: if people complain about the spoon, then you try a new one. People suggest that setting a couple of tables would go great with the ambiance – so you do it. Most of your clients tell you that the coconut sherbet does not have a pleasing texture – so you change it.
At some point soon, you will have a good-enough-to-launch model. You are getting barely enough consistent feedback that you are onto something good. That is all you need! You are ready to launch your idea. You are not completely out of the woods – now you have to prepare to serve a larger number of people. There is a next set of assumptions that you can go prove:
– If enough people know about this product, they will buy
– When people try the product, they come back for more
– Children will enjoy birthday parties here
You create new “tests” to find out if this set of assumptions is true.
Depending on your product or service, and the business model you are implementing, you can turn your idea into cash within three months. This does not mean that you will have a thriving business overnight. It means that, by starting with the simplest version of your product, you should be able to start selling within a short period of time.
What is your business idea? What is keeping you from taking it to the bank?
Francesca Escoto is speaker, author, and Founder & CEO of the Innovators Institute. She’s also the host of her own radio show on the Woohoo Radio Network. She’s also a bestselling author. You can find her at http://francescaescoto.com/product/innovation-lab/
Originally Published on StartupPrincess.com on October 4, 2013