To be an entrepreneur is to be somewhat of an adventurer. Think about it: you're setting out on an unknown path, risking it all on the power of an idea that you believe in. But as you write your business plan, the most important aspect is to know whether your idea is good enough. This means that before you get started, you need to pause and analyse it.
Having an idea is a powerful feeling. It excites you and encourages you to start something. Therein lies an important problem. Just because you believe in it doesn’t necessarily mean that it has potential. So, one of the smartest things you can do while you make your startup business plan is to objectively analyse your idea.
To become a thriving entrepreneur, you need an idea that’s viable, functional and profitable. Here are four ways to achieve that:
In the classic business school model, you’re expected to know your customers. You’re supposed to learn their problems and how your product or service would solve that or enrich their lives.
But merely reading about them won’t work. That would give you second-hand accounts or filtered academic views. What you should do is identify your potential customers and talk to them without any preconceptions.
Talking to several potential customers will reveal the problems they have, the solutions they would have sought, their experiences with other products or services, what they expect from a solution and the price at which they expect it.
Most entrepreneurs believe that an idea is what it takes. That’s also the reason most startups either fail or take much longer to make it. An idea is only half the story. The most important part is whether someone will pay for it and importantly, how much they would be willing to pay.
If your idea is in an established sector with similar products or services, it may be easier to find out the price points. But remember that a new entrant will find it difficult to break through the clutter with similar prices.
If yours is a new product or service, you’ll have to identify and talk to potential customers or clients to figure out how much they would pay. But give yourself enough room to adjust your prices as the market forces would necessitate it.
Ideas can be great, but we often only think that because they are our own. It takes someone else to objectively review them. But often, people talk to their family, friends or colleagues who end up validating the idea because they don’t want to discourage them. While you should talk to them, it’s more important to find a mentor who will criticise it.
You could find a successful entrepreneur, venture capitalist, banker, financial analyst or journalist. The person you choose should have industry experience and not be an investor in your firm.
Instead of asking them what they like about your idea, you should ask what they dislike about it. This is important because it will encourage them to be honest, which will help you identify the weak spots in your proposal.
Even if you’ve written a great business plan, remember that execution is everything. If your startup offers an academic course, ‘all college students’ is a viable but exceedingly wide target audience. How about starting small with a college in your city?
That will show you what needs to be added, deleted or improved. It will also tell you whether your product or service should have a free, paid or freemium model. Remember that a paying customer is more important than a thousand nods of approval.
These steps will reveal whether your idea has the potential to build a business with a strong revenue model. You should be ready to let your business idea go if your research shows you that:
There isn’t a market for your product or service
Nobody is willing to pay
Anyone can replicate what you offer
Several others with similar ideas and models have failed
There's too much wishful thinking in your idea
You don't have the funds to start or sustain your operations
Few entrepreneurs make it on their first attempt. It might take several tries before you find an idea that’s scalable and with a robust revenue model. But with the right business plan and adequate research, you can significantly increase your chances of getting it right.
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