Starting a successful business is hard, but let’s not presume that entrepreneurship itself is intrinsically riskier than other things that popular culture deems as “acceptable.”
You’ll never be able to completely avoid risk, either in your personal or professional life, but you can mitigate it significantly by having a solid game plan in place. You need a proven system that will help you determine which ideas are worth pursuing so that you don’t become a statistic of America, Inc.
You want to be as certain as possible that your business will succeed before you launch. In other words, you need to “fail proof” it. Luckily for you, I’ve developed a process to get you as close to 100 percent sure as humanly possible.
I call this process “Three Question Validation.”
At it’s core, Three Question Validation involves answering three pivotal questions to determine if your business idea is viable and likely to succeed. It’s a compact method to test if your idea holds water before you waste the time, energy and money on something that isn’t going to work.
If you can say “yes” to all three of them, you have an idea that’s likely to do very well. If you can’t say “yes” to all of them, it’s time to go back to the drawing board.
1“Is there competition in my space?”
Contrary to popular belief, you want competitors in your space. If you find a market that’s 100 percent unoccupied you’re either the first one there (risky in that nothing has been tested) or you didn’t get the memo (other people have tried unsuccessfully and abandoned the market).
Being the first isn’t horrible, but there’s less of a roadmap to follow. Being last doesn’t mean that you can’t find a way to make your idea work in the marketplace…but that will take considerably more work.
Remember, the purpose of this freelance business doesn’t have to be finding the #1 thing you want to do for the rest of your life. It’s a bridge to freedom. It’s a tool to earn some more money as you get the rest of your life in order. Over time, you may find other things you like more. That’s totally OK.
For now, let’s try to pick something that has a high probability of succeeding so that you can build your confidence, business savvy and skill set.
Pick something where there appear to be many other people doing what you’d like to do. If you can answer “yes” to this question, it’s time to move on to the next question.
2“Are my competitors making money?”
A bit of a no-brainer, but very important to consider: Even if there are people doing what you want to do, you need to make sure they have enough clients and are making the type of money you’d like to make.
This step will ensure that it’s worth your time to invest in your idea. There are a bunch of different ways to tell how well your competition is doing. You could look on their website for testimonials and client success stories. Browse through their portfolio if they have one.
Related: 10 Business Ideas Ready To Launch!
You could stop in (if they are local) and talk to them, or give them a call over the phone. Ask about rates, schedule and typical client experience. (Obviously, don’t tell them why you’re doing the research.)
I love looking at unbiased third party sites like Yelp to see what their rating is, and what customers have to say. You don’t need to get exact revenue numbers. The point here is just to get a general sense for how they’re doing. If other people are successfully getting clients and customers, so can you.
3“Can I do my product/service/idea differently and/or better?”
This is the question that ties everything together. You’ve found your competition. They appear to have some business. Now what?
It’s time to make your stand by standing out.
For customers to buy your idea instead of, or in addition to, another company’s, you must show why your product or service is different and/or better. If you can show why you’re unique, you’ll attract just the right customers who are perfect for your business. The type of clients who will buy from you time and again, and who will continually refer you to all their friends.
This point of difference between you and your competition is called a USP, short for “Unique Sales Proposition.” Here are five examples of how to stand out with a Unique Sales Position:
- Better/lower price
- Better quality/aesthetic
- Better variety
- Better customer service or guarantee.
There’s no “right” USP, and you don’t only have to stick to one. Test your market. These are some ideas to get you started immediately.
This article was originally posted here on Entrepreneur.com.
Entrepreneurs! Do You Know What Your Customers Want?
Take off those rose-tinted spectacles and start looking at your business the way your customers do.
Do you know what your customer’s need? Have you really looked at their problems and challenges and asked yourself how your product or solution helps solve them? Do you even know if your business addresses any one of the myriad pain points they face every day in their personal and professional lives? If your business talks to other businesses, are you speaking in the language they want to hear? If you don’t answer a definitive YES to every one of these questions, then you need to start paying attention…
Put in the effort
Research, research, research. Find out what people need through all the myriad of digital and physical research channels available to you. And when you engage with your customers in person, ask them questions and write those insights down. Listen.
Bad feedback is great feedback
If clients are unhappy, they talk to you. This is good news. Use this feedback to build solutions that change these issues into advantages. This is when you should consider building an open feedback loop or mechanism into your business to ensure that you are getting the best possible insights from your customers. I
It’s also a good idea to check their criticism against reality before you spend thousands on fixing a problem that doesn’t really exist. For example, if they complain about poor customer care, assess your process and see how many complaints you have. It may be that one customer happened to deal with that one unhappy employee.
Understand their business
Your client has their own clients who have their own clients, and so on, and so forth. Take the time to get to know their business and their market. Often entrepreneurs don’t get to know how their client’s businesses work and they miss a crucial trick. By spending time with them and listening to them you get to understand their pain points and their needs. This way you can be the one who helps to fix their problems properly.
Don’t stop innovating
Don’t fear the ability to change something to suit a client’s needs. Your products and services have to evolve constantly as your market and consumers are changing constantly. You need to add value, change features or adjust your services dependent on the business you are in. Pay attention and innovate.
Why Failing Is A Necessity Proven To Guarantee Success
We should always have this at the back of our minds whenever we have that nudge to give up on our dreams.
There comes a time, especially after a terrible defeat, when we feel like giving up or even quitting. The defeat clouds our minds and make us forget completely what victory feels like. We forget the successes and judge ourselves solely on the defeats. This feeling isn’t unique to a single individual as even the most successful businessmen, inventors, politicians, world leaders have experienced failures at different points in their lives.
We all love success stories. It’s a matter of fact that behind every success story is a large amount of failed attempts. The notion of overnight success is a myth. It took the Wright brothers between four and seven years of scientific experimentation and several failed attempts before their maiden flight covering a distance of 852 feet which lasted a mere 59 seconds was achieved.
History is replete with instances of individuals who were written off after a terrible fall from grace. These individuals, against all odds, didn’t give up.
Tiger Woods, for example, has for the most part of his adult life being in the public eyes. That’s why when he went to his very public divorce, tales of womanising, dabbling with prescription drugs. Also plagued by injuries, his golf was seriously failing and in danger of being a “has been,” analysts advised he should just retire. It was obvious Tiger had a different plan up his claws by winning his first PGA tournament in five years.
His recent resurgence in form is testament to the fact that no one has the stop button to our life or life’s dreams and ambition. No one but you. It’s only when we stop innovating and trying that we’ve failed. Having lost a business deal that had the chance to change our lives positively forever isn’t the end of the world. Hence we need to reinvent and innovate.
If achieving success was easy, the vast majority of people would be successful. We have to put in the work and our skill to be able to achieve success because the most worthwhile things don’t come easy.
Defeats, if seen from a positive perspective, bring out the best in us. Victories don’t. Victories swell our egos, fill us with the air of invisibility, and this is dangerous. Hence we need a large dose of failures and defeats to bring us down to earth, to make us learn and better appreciate success the moment we’re able to achieve it.
What then do we do when we experience a poor run of defeats that make us doubt our abilities. Being fixated on the defeats for one, isn’t the solution. It has the tendency of making us forget what it felt like to win and totally derail us from our set goals. This, in itself, is a problem as it may lead to a state of unhappiness.
The bad results we might have experienced isn’t an indication of our inabilities, it’s an opportunity for us to look at the venture from a different perspective and take necessary action to improve or try a different approach towards achieving our aim.
Defeats can be depressing when we have dependents who rely on us for guidance and in some cases sustenance. Dependents could be in the form of a spouse, children, wards, parents, even staff. The pressure can be enough reason for some to give up and settle for the safer option.
With the decision to settle comes the likelihood of regret which may be more depressing than the expectations of dependents. Fortune they say favours the brave and nothing worthwhile was ever achieved without the possibility of failure.
Why You Need Smart Legal Foundations For Your Start-up
The legal background to a start-up might not be the most exciting area for an entrepreneur, but it’s your foundation for growth. Are you aware of everything you need to have in place?
One of the best parts of what we do is helping start-ups — the right legal foundations can mean the difference between a start-up that’s geared for scale, and one that needs to retroactively put agreements, checks and balances in place. If you’re aiming for growth, you want to get these foundations right from the get-go.
When Benji Coetzee launched EmptyTrips, a hot up-and-coming start-up 16 months ago, Legal Legends was on the ground floor with her. Although your start-up trajectory may not be identical to that of EmptyTrips, many of the foundational principles canvassed in this article will apply at some point in the lifecycle of your business. They highlight what you should be thinking of from the word go.
Laying the right legal foundation
By the time we were introduced to EmptyTrips, they had already registered their entity as a company and had started to prepare for their first beta public launch in April 2017. When our dealings with the start-up began, the business had already enjoyed a quick and accelerated cycle.
As with all start-ups, the founders had a clear vision and objectives. Unlike too many start-ups however, Benji understood how important the right legal foundations would be, particularly as the business matured and required different support structures.
The following three actions are a good example of the legal foundations all businesses should consider, particularly if growth is a part of the founder’s vision:
1. Why you need trademark protection
Given that EmptyTrips is a digital solution, with limited physical assets, protecting intellectual property as ‘soft’ assets was critical to its differentiation and valuation given the recognition of brand value over time.
At first, we set out to ensure that EmptyTrips’ marketing materials and properties, such as company name, slogan, and product names were protected sufficiently from use by others. This was done by filing for various trademark registrations.
A trademark is a sign or symbol that is unique to your business, and which distinguishes it from other businesses. The most common forms of trademarks are business names, product names, logos and slogans.
By registering a trademark you are granted exclusivity over the use of the name, slogan or logo, and may prevent others from using similar names, slogans or logos in their business in the future.
When it came to EmptyTrips, they had already filed a trademark for their business name, so we focused on protecting the names of the different service offerings on the business’s platform as the solution evolved and pivoted. These included Trip Exchange; Freight Open Exchange; SureFox and RailFox. As the business grows and product lines are added, we will continue to update this list.
2. The importance of website legal documents
EmptyTrips is predominately an online marketplace solution to enterprises. It is a digital transport brokering agency that has been developed to source, match and market available transport capacity (empty space on trucks, trains, vessels and so on) to commercial freight with on-demand supporting financial products (insurance etc).
Each company’s Terms of Service will be unique to that business, market and customers, but privacy policies are universally required by law.
3. The legal frame work around outside investment
Like many high-growth starts-ups, Benji and her team reached a point where outside investment was needed. This is an area where your legal partner is key. Apart from attending to various due diligence meetings and ensuring proper governance controls, we were tasked with ensuring that the contracts for external investment were prepared in a manner that sufficiently protected the interests of EmptyTrips and its founding members.
It’s common during a seed or series A round of funding for an investor to present the start-up with a term sheet detailing the nature or basis of the intention and extent of their investment, as well as all the terms relating to the governance of the company that they would like to put in place.
In this case, the institutional investor presented EmptyTrips with a term sheet that detailed the monetary investment that the investor would provide over a number of years, the monthly draw-downs of the investment that EmptyTrips would be entitled to, the number of shares that the investor would be issued for their investment, as well as the manner in which the governance of the company would be changed in order to protect their investment.
Often, and this applied to EmptyTrips, the terms contained in the term sheet require a new shareholders’ agreement and/or memorandum of incorporation in order to protect the interests of the minority shareholder (the investor).
A shareholders’ agreement governs the relationship between the shareholders of the company and their ability to administer the company.
A memorandum of incorporation governs the relationship between directors, shareholders, prescribed officers and the company. A standard memorandum of incorporation is issued when a company is registered, but it will often need to be amended at a later stage if, for example, measures to protect the minority shareholders are introduced.
A memorandum of incorporation can regulate the same aspects as a shareholders’ agreement, however, the main difference is that it is a public document available for inspection by anyone, whilst a shareholders’ agreement is a private document.
In addition, if there is any conflict between a shareholders’ agreement and a memorandum of incorporation, the shareholders’ agreement will not apply and will be voided to the extent of its inconsistency. This often means, as was the case with EmptyTrips, that certain aspects of the shareholders’ agreement that provided for protection of the investor required a redraft of the memorandum of incorporation so that the two documents were aligned.
A shareholders’ agreement might not be enforceable until a memorandum of incorporation has been aligned with it.
Read next: 5 Lessons From The Legal Legends On Pivoting
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