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Start-up Advice

Researching Entrepreneurial Ideas

New entrepreneurial ideas are a dime a dozen but if you do the proper research your business idea could be worthwhile. Here’s how.

Greg Fisher

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It takes a combination of discipline and intuition to distinguish between just another entrepreneurial idea and a valuable opportunity worth investing in.

The problem for many entrepreneurs is that they become infatuated with a new business idea before they have properly evaluated whether it is worth their while to invest time, effort, and financial resources in pursuing it. Like an immature teenager falling in love for the first time, the excitement of the idea overshadows any objective judgement of reality.

How do you critically evaluate a business idea to assess if it is a worthwhile opportunity? After carefully observing how experienced early stage investors assess potential new venture opportunities, I have developed a framework to guide entrepreneurs in assessing and developing new business ideas.

An idea for a new business can be assessed on four dimensions:

  1. Technical feasibility – is the business idea doable?
  2. Market feasibility – is there a need?
  3. Financial feasibility – is the business idea profitable?
  4. Team skills and desire – do we want to do it?

Typically a new entrepreneur will concentrate on only one or two of these dimensions. People with a financial orientation may focus on the financial viability, while an engineer may be overly concerned with the technical detail. A person driven by emotion will look at team skills and desire. An individual with a marketing background will be interested in market feasibility.

The key to success is to evaluate an idea in a balanced way: recognise its strengths and weaknesses, discard ideas with too many flaws, look for innovative ways of overcoming any weaknesses in ideas that you wish to take forward, and ensure that you make the most of the strengths inherent in an idea.

Questions for assessing and developing a new entrepreneurial idea

Each of the dimensions in the framework for assessing and developing new business ideas can be evaluated through a series of questions. These questions are tough to answer, but if you are serious about being successful as an entrepreneur, you should:

  • Be able to answer all these questions confidently and comprehensively with data to back up your responses
  • Be comfortable that the answers to these questions are favourable so that even the most cynical investor could get excited about the idea
  • If you were to pitch your idea to outside investors, they would seek detailed answers to these questions and want to be exhilarated by what they hear. Adopt the perspective of a skeptical financier to really stress test your idea.

1. Technical feasibility – is it doable?

  • Is the technology for your product or service already available, or is it still in development?
  • If it is still in development, what stage of development is it in and what can go wrong?
  • If it is already available, is anyone else using it to develop the same product or service as you? If not, why has no one done so yet? If so, who are they and how does that affect your prospects?
  • What kind of entry barriers does your technology provide? How long would those entry barriers last should your idea prove to be a high potential opportunity?
  • What are your technological risks? List reasons why the end user might not want to use your technology, even though your product or service may be technologically superior.
  • What other nascent technologies might become competition in the future – one year from now, five years from now, a few decades from now?

2. Market feasibility – is there a need?

  • What exactly are you selling? What is your value proposition?  Can you clearly express this value proposition in an elevator pitch?
  • How do you define your niche? How large is the market? How fast is it growing?
  • Who is your customer? Describe a typical profile.
  • What is the customer’s need?
  • How is the need currently being filled?
  • What critical factors will lead you most quickly to your customer base?
  • Who or what is the competition? What are the advantages and disadvantages of your product or service over the competition?

3. Financial feasibility – is it profitable?

  • What are the sources of revenue for the business? What will the customer pay per transaction?
  • How many transactions will you do in a day, week, month or year?
  • What are the major costs for the new business? What is the nature of those costs – fixed, variable or semi-variable?
  • Is there a good profit margin in the basic economics of the business? Test it out by using this simple equation: (volume x price) – cost = profit.
  • What size capital investment is required to launch and sustain the business?
  • What would convince an investor to contribute those funds?

How is the financial health of the business affected by the timing of cash flows – when revenue will be collected and when costs will need to be paid?

  • How long will it take the business to break even?
  • State the primary financial assumptions for your projections.
  • How sensitive are your projections to changes in price, technology, competition, and your own growth?
  • Develop best-case and worst-case financial scenarios.

4. Team skills and desire – do we want to do it?

  • What special strengths do you bring to this enterprise?
  • Why are you or your team likely to be more successful in this business than others?
  • What are your relevant weaknesses and how will you overcome or compensate for them?
  • Does this business really turn you on? Do you get carried away thinking and talking about it? Do you have the passion and commitment?
  • Why do you want to do this – really?
  • Are you willing to live with uncertainty.
  • Will you be able to bounce back from potential failures?
  • Can you adapt and refocus on a continuous basis?
  • Is this the right time for you to do this? Your family?
  • What are your exit strategies or options?

Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.

Start-up Advice

How To Apply Lean Principles To Your Start-up’s Productivity And Time Management

Focusing on one thing at a time is a very good start.

John Rampton

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If you’ve recently launched a start-up, I’m sure that you’ve heard a lot about being “lean.” But I’m not here to discuss the methodology popularised by the likes of Eric Ries.

The lean principles from a Toyota exec

I’m actually writing about the term and concept of “lean” that was originally developed by Toyota executive Taiichi Ohno during the reconstruction period in Japan following World War II. The process was so successful that more and more organisations around the world began to embrace it. However, it didn’t hit the mainstream until James P. Womack and Daniel T. Jones released their book Lean Thinking, in 1996.

Applying “lean” to productivity in start-ups

Today, lean principles have been applied to almost every industry both large and small scale. For instance, lean principles in the healthcare industry have been able to reduce costs, while improving efficiency. On a smaller scale, employees have used these principles to organise their workspaces.

Related: What Business Should You Start In Africa?

Here are four ways you can apply lean concepts to your startup to improve both productivity and quality.

1. Improve your workplace using the five principles of lean

According to the Lean Institute, which was established by Womack and Jones in 1997, there are five core principles of lean:

Value: Value means putting yourself in your customer’s shoes and knowing what their needs are. This helps you determine timelines, pricing and expectations instead of constant trial and error. For your team, letting them know how they fit into the bigger picture can keep them motivated.

Value stream: Value stream is where you create a “value stream” of all the steps and processes required in getting the final product or service to your customers. This could include design, production, delivery, HR and customer service. Knowing this information allows you to eliminate any wasteful steps.

Flow: After you’ve removed any unnecessary waste from the value stream, you want to make sure that everything runs smoothly. Flow means not having any interruptions or delays. The flow involves breaking down steps, leveling out workloads, creating cross-functional departments and training your team so they can develop multiple skills.

Pull: When flow improves, so does the time it takes to get your goods or services to customers. As a result, they can “pull” whenever needed so you’re not constantly under- or overproducing inventory, content, etc.

Perfection: Even after successfully completing the first steps, you still need to constantly keep working to improve processes so that you can eliminate waste. Perfection may be an exalted goal in whatever endeavour we are pursuing – but we still must always be moving forward toward being the best and achieving the best.

2. Use the concept of 5S to get yourself organised

5S stands for sort, set in order, shine, standardise and sustain. You can use this concept to organise your workspace so you and your team are more productive by doing the following:

  • Remove any items that you no longer need (sort)
  • Organise your remaining items so you’re more efficient (straighten)
  • Keep your workspace clean and tidy so you can find items and identify problems more quickly (shine)
  • Color-code and label files and calendars to make you more consistent (standardise)
  • Develop repeatable behaviours and habits that will keep your workplace clean and organised, such as completing one task before moving onto the next (sustain).

You and your team – even if they’re virtual employees working from a home office – can get started by throwing away anything unneeded. Place files into cabinets – colour-code your calendars – and keep items you frequently use nearby.

But these principles aren’t just limited to physical items. Digitally, you can use a project management system to assign tasks, quickly see the progress of projects and share files and comments in one organised dashboard.

3. Standardise your work to become more efficient

In manufacturing, there’s a standard process for everything. The reason? By doing something the same way time and time again you will eliminate waste since you’re not constantly trying out new techniques. Standardising also prevents errors and forgetfulness because there’s a checklist for ever step of the journey. For example, when a car is on the assembly line, it can’t move forward if someone forgot a bolt or installed a faulty steering wheel.

4. Standardise what makes sense

Start by keeping a time log to see when you’re most productive and how you’re spending your time. You may notice that you’re most productive in the mornings. If so, that’s when you should work on your most important task.

If you discover that you’re checking your email and social accounts too often, schedule specific times throughout the day to check them. To prevent wasteful meetings, you can standardise meetings. Make sure these meetings are necessary and include only key people pertinent to the information. Keep all meetings as short and concise as possible.

Get into a good flow to optimise your and your team’s performance

Flow is simply how work can progress through a system. When your system is running smoothly, flow is good. When flow hits a snag, it slows down the process and waste occurs.

Manufacturing facilities make it a point to ensure that the flow is good. Unless it’s an emergency, production lines rarely stop running. Everyone has a specific job to do, and that’s all they’re focused on. That’s not the case at your start-up. You must wear multiple hats, as well as deal with constant interruptions. How many times have you been in “the zone” and gotten distracted by a phone call or have no choice but to go put out a fire?

Remember focus

One way you can improve flow in your start-up is by focusing on one thing at a time. That means no more multitasking. Give your 100 percent focus to what you’re working on at the moment and then move on to your next task. This may take some self-discipline. But you can start by turning off all push notifications, closing your door, block scheduling and setting boundaries.

You can also help your team improve their flow by setting “do not disturb” zones and time frames. Another tip is to schedule a “no meeting” day. This way you and your team can maintain focus without getting interrupted by a meeting.

Finally, you may want to consider outsourcing and delegating certain tasks. Instead of worrying about your inbox all day, hire a virtual assistant to manage your email. If you need to get your books in order, then bring in a bookkeeper. This frees you up to work solely on growing your startup.

This article was originally posted here on Entrepreneur.com.

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Start-up Advice

Which eCommerce Platform Should You Build Your Store On?

This is an important decision to make and with so many options out there it can become a bit overwhelming and confusing to decide which platform is the best option for you. So which platforms are best suited for a South African eCommerce entrepreneur?

Warrick Kernes

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Having owned and run websites using XCart, Magento, Shopify and WordPress, I’ve made enough mistakes and learnt enough lessons along the way to be able to help guide you to make the right decision about which platform is right for you…

When looking for options you’ll come across platforms like Prestashop, WordPress, WIX, Shopify, Squarespace, OpenCart, Magento, Shopstar, OneCart, ShopOn, LiquidBox, BigCommerce and endless more. All of which are trying to convince you that their platform is the best for you to use.

Reading international blogger reviews is helpful but they don’t account for how these website platforms perform in South Africa. They don’t review what the support is like in SA and which local software services are compatible. You see, these points are often neglected until you need them further down the line and only then find out how important it is that the platform you’re running your store on is made to work in SA.

Having worked with all the major website platforms I understand the importance of website support and how the site integrates with the local services which will make your life easier and your website better. Services like this include integrations into Rand (ZAR)  based payment gateways, integrations into local courier services, API connections into marketplaces like Takealot and Bid Or Buy, and API connections into price comparison sites too.

Related: 6 Steps To Building A Million-Dollar Ecommerce Site In 60 Days

The final factor to consider is the reputability of the website platform itself. There are many new and upcoming website platforms which I would love to support but when it comes to choosing a platform on which I’ll be building my business I need to know that I am going to be selecting a world-leading service provider.

So with this in mind I can help to narrow down your options to two platforms being WordPress with WooCommerce and Shopify. Which of these two is right for you will depend on how much you value your time.

Shopify will cost you $29 per month but the ease-of-use is such that even a novice can get a site live within a week. Operating WooCommerce on WordPress is complex for beginners and it will take you much longer to figure it all out before you can take your site live but the plus side is that it is free to use.

So ultimately you need to consider which of these two is right for you and your business but the most important thing is that you don’t spend any more time researching, take action and get started sooner rather than later so you can start to grow your online empire.

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Start-up Advice

6 Ways Starting A Business Is Like Raising A Child

Here are six ways that embarking on your own entrepreneurship journey is like raising a child.

Catherine Black

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While you may think work and parenting are worlds apart, when it comes to starting a business versus having a baby, the two have more in common than you think.

After all, both involve bringing something new into the world, preparing for the unexpected, and riding the storm when things don’t go as planned. Here are six ways that embarking on your own entrepreneurship journey is like raising a child:

1. It involves new expenses

From nappies and school fees to food and clothing, there are a whole lot of new expenses involved when it comes to kids. In the same way, starting a business also involves various costs – whether it’s paying accounting fees, setting up your website, buying stock or employing people. In both instances, having a good financial plan in place can go a long way to help you manage these expenses.

Related: How To Start A Business With No Money

2. It’s an emotional rollercoaster

Parenting invariably means you’ll experience every emotion under the sun, from unmatched joy when they’re born, to frustration at toddler tantrums, to wonder at seeing their little personalities develop. The same goes for a new business: Expect a range of emotions, from the highs of getting your first customer, to the satisfaction of making a profit, to anxiety if the market doesn’t respond to your product as you envisioned.

3. Expect the unexpected

Few things are as unpredictable as babies: One minute they’re gurgling contentedly, the next minute they’re crying for reasons you may or may not know. Just like babies, businesses can be highly unpredictable too. Product prototypes can fail and cause delays, employees get sick, an unforeseen tax bill could arrive on your desk – you’ll need to get comfortable with expecting the unexpected. And, if you run your business full time, you’ll need to bid farewell to your predictable monthly paycheque too (at least in the beginning).

4. It requires stamina

Late night feeds, helping your child with homework, washing, cooking, cleaning, answering all their burning questions – there’s no parenting “off” switch. In the same way, being an entrepreneur means it’s hard to stop thinking about your business at the end of the day as you would with a regular 9 to 5. This constant call for attention means it’s crucial to schedule in some downtime for yourself so that you get time to decompress and refresh.

Related: What Business Should You Start In Africa?

 5. You’ll need safeguards in place

While their immune systems are immature, young children get sick, which typically involves trips to the doctor, medication and possibly even the odd hospital stay. Having a good medical aid means you’ll be financially prepared for these intermittent expenses. And, just as you should ensure your child has the right medical cover, your business and your employees should also be covered properly. Fedhealth is one example of a medical aid that specialises in providing medical cover for SMMEs.

6. Love will get you through

As hard as parenting can be, the enduring love most parents have for their children means they keep caring for them day after day, no matter how exhausting it is. Similarly, if you love the industry your business is in and the work you do, you’ll have the fortitude to keep at it over the long term.

Both parenting and starting a business are hard work, but they’re hugely rewarding too. With both of them, it’s true that what you put in, you get out. Seeing your child grow into a well-adjusted, caring adult can be as satisfying as watching your business mature into a something that’s profitable and self-sustaining. Upon reaching these milestones, most people will agree that the journey to get there is definitely worthwhile.

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