Testing your Business Idea

Testing your Business Idea

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I say this because so many would-be entrepreneurs have not done their homework and base their business on what they think people should buy, rather than what people really want or actually do buy.  Testing the market thoroughly could mean the difference between a good and a great business, success or failure.

Here’s another way to look at it giving a simple example. People buy shoes every day and it’s not that difficult to put a number on the size of the shoe market. Additionally, because our global population grows every day, I can be quite sure the market for potential shoe owners will continue to grow and people will buy multiple pairs of shoes in the years ahead. However, most inexperienced business people would opt for the whiz-bang widget business. They become enamoured with a potential market they can’t quite measure or identify.  They think everyone needs it and will want to buy it.  They spend a fortune and land up with a warehouse of stock they can’t even give away.

How can you avoid this trap in your own start-up?

Here are four simple and inexpensive action steps you can take before you get into business to make sure there is a viable, sustainable and growing market for your proposed product or service.

  1. Identify your market. How big in terms of rands is the current market for your product or service? Is it a new or a mature market? Are you in a new or mature category? A lot of these questions can be answered with a few hours of online research or from the industry associations.

Another good tactic is to go to a trade show or exhibition and look at your prospects as well as your competition. What does your potential customer really want? Who are they? What is your competition selling and at what price? Can you deliver the same at a lower price or can you add value and charge a premium? Is the sales cycle long or short? Is the exhibitors’ list growing or declining from year to year?

Answers to these types of questions will give you a big advantage in getting a handle on the opportunities within a marketplace and if your initial assumptions about your product or service really hold true.

  1. Identify your customer. Develop a list of questions to profile the “perfect customer” for the product or service you are trying to sell.  Include questions such as: Is the target male or female? How old are they? Are they married? What was their main motivation purchasing a particular product or service? This knowledge will give you additional insight into how your own sales process should be structured. It will also help you operationally tailor your product or service offering to better fit your audience.

For example, if you are looking at a dry cleaning business, you may discover there is a want or need for a higher-end delivery service to professionals in your area. Given that, you might be able to re-orient your distribution and delivery systems to meet an unmet demand.

  1. Test and measure demand. Big companies spend lots of resources testing ad campaigns and hiring focus groups.  However, you can do a lot more effective research on your own by simply starting small then testing and measuring everything you do.

If you perceive testing and measuring to be expensive for little or no return, just imagine spending 10 to 100 times that amount without generating any sales or revenue simply because you didn’t measure the desirability upfront.

  1. Start a list of contacts. At this point in your start-up and planning phase, you may have a list of vendors, suppliers or even potential customers. If so, great. Keep building that list and start to develop a communication strategy to keep in contact with that list on a consistent basis. Today’s contacts may be tomorrow’s customers. More importantly, they have access to entire networks of people who may want or need your product or service.

The real goal of networking is not making a sale to your direct contact, it’s about creating a relationship with that contact that leads to referrals and word-of-mouth leads down the road. Whatever you do and however you keep track of your list, make sure you protect it and treat it like gold. For most businesses, your contacts database often becomes the most valuable asset you own.

In the end, there is no fail-safe formula for business success, although people are always trying to find one. The best indicator is a proven market with room for growth, populated by people willing and able to pay for something unique or different that helps them make their lives better, easier or happier in some way. It’s the business that does the usual in an unusual, unique or different way that wins customers and keeps them coming back for more.

Harry Welby-Cooke
Harry Welby-Cooke is the Master Licensee for ActionCOACH South Africa. He is also the President of COMENSA (Coaches and Mentors Association of South Africa). ActionCOACH is the world’s largest executive and business coaching company with operations in 39 countries. It is also on the list of the top 100 franchises globally. As a highly successful Business and Executive coach, Harry is a master of teaching business owners how to turn their businesses around and accelerate their growth. Email him at harrywelbycooke@actioncoach.com or call 0861 226 224
  • wow, nogal i’m doing something wrong with my business..damn..thanks for a great article and will follow the lessons