Being an entrepreneur at heart and having a product or a service worth tuning into a business will by no means ensure business success. Too many entrepreneurs start a business because of an idea, without taking the first step in business, to identify a need in the market.
When that million dollar idea pops into the head of an entrepreneur, it is normally all systems go and involves a lot of passion and drive. But is there a need in the market for what this idea will offer? Only when there is a need is the idea an opportunity. So step one: find a need in the market. The possibility exists to create a need, for instance, twenty years ago nobody needed cell phones, but to create such a need takes a lot of capital.
Filter the idea
Step two is to filter the idea, or opportunity through three filters; operational, financial and marketing. Is it at all possible to execute the idea? Are the necessary skills and resources available? Is it possible to provide the product or service at a market related price?
Being a start-up company, competing against bigger competitors, can the product be provided at a price lower or at least equal to the competitors? Are there cheaper imports in the market? The last filter is the marketing filter. Does the market want the product?
Can it be supplied according to customer requirements, at the right price, place and time? Many a retrenchment or retirement package has been wasted due to entrepreneurs investing in an idea without doing the necessary research.
Once the research has shown that the idea is executable and definitely an opportunity, it is important to define the target market clearly. Even if it is possible to service the whole world, affect the entire global population with this solution to a global need, there is not an entrepreneur in the world that can immediately take on a global campaign, marketing wise or logistically.
A well-defined target market will describe the age group, income group, qualifications, geographical area and gender of the target market, at least. In the case of a business to business product, describe the geographical area, the size of the company and the industry in which the product will be distributed.
The importance of research
Once the target market has been defined, in-depth research and development can start. The entrepreneur now knows who will buy the product, but what are the specific requirements? Would they rather buy a pink than a green one, would they like it delivered or prefer to buy it from a supermarket, what size would be most convenient for the customer.
In the service industry, extracting client requirements is even more important. Lots of efficient work can be done, but if it is not exactly according to customer requirements it will not lead to a good customer experience.
Step five is to develop the product or service, document what it is and set specifications and standards. Even if it is a service rendered, “productise” it.
Then enters the elusive and mystical business strategy part, that part that business consultants tell entrepreneurs to pay big money for, to go away for a couple of days with them and then to hand over the cheque in return for a thick book, that entrepreneurs proudly put on a shelf in the newly furnished office.
When starting a new business, strategy can easily be done without paying any money for it. What is your vision? In other words, what do you want to achieve with the company. What contribution will your newly developed offering make to the target community? A vision is a one line statement:
“To offer a high quality product to a specific market in order to fulfil a specific need.”
What’s your mission?
The next component of the business strategy is the mission. How is the vision going to be achieved, according to which principles and at which standards? Be specific. “To be the best service provider globally” doesn’t cut it. Identify each component that will contribute towards achieving the vision.
Goals and objectives should be mid-term while vision and mission are long-term. In other words, once the vision and mission has been established, set specific steps necessary to achieve the vision and mission, allocate resources and set time lines to form the goals and objectives. The final part of the business strategy is the roll-out plan. Merely a step-by-step plan of how the business will be established, managed and marketed.
The next step is to structure the company. Decide where it will operate from, what resources such as furniture and equipment will be necessary, what roles need to be fulfilled, how many people will be required and, most importantly, how much capital is required to set all this up.
Entrepreneurs are known for under-budgeting. A good rule of thumb is to do the calculations and then double the amount. That is probably what is required to set up the business.
Once all that is done create operational excellence through setting and documenting quality parameters and service standards.
Develop and map processes of how every task in the business will be executed, create policies and service level agreements, develop role definitions for employees, with clear key performance indicators to inform them about the task as well as required standards, and put measurements in place to identify any variance from the standards and objectives immediately.
A common cause of business failure is the lack of proper planning and marketing a dream rather than a reality. When the business strategy is in place, there is clear direction. When the business has been established operationally with regards to human resources, supply chain and logistics, technology, financial processes, quality control and production, it is possible to walk the talk when the market is told about your business.
The good entrepreneurs fail due to too much business. Rapid growth at the start of the business phase will put pressure on finances, capacity and operational structures. The art of entrepreneurship is to balance capacity with marketing in order not to over or under sell.
The wise entrepreneur sells exactly what can be delivered at a standardised high quality. But a key word here is marketing. When there is no marketing, or sales, there is no business. In order to offer a product or service it is necessary to tell the market that the product or service is available.
When the need is real, the offering is in line with customer requirements, the operational capacity has been established and the sales drive is executed in an integrated manner, all that remains is to collect the money. But even in the collection of the money, failure can occur. When work in progress is not invoiced, debt collection days are longer than payment days, or incorrect invoices are issued, the brand and cash of the business will be seriously affected.
Excellence and efficiency
The ultimate ingredient to the business success recipe is excellence and efficiency. To do everything in a well-planned manner, to build quality into every step of the production and non-production processes and to create a cohesive team, all with one vision and mission in mind.
Even when this is achieved, however, entrepreneurship is still a gamble, requiring a lot of tenacity, risk taking propensity and an incredible ability to handle stress. At least when all the steps are properly followed, the stress will be manageable. In fact, that is what business is about, plan, lead, organise and control.