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.
- 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.
- 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.
- 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.
- 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.
Put On Your Wellies: It’s Time To Wade Into Risk
Entrepreneurs aren’t all leaping into the unknown like lemmings off a cliff, but they do need to consider it…
You’ve had a great idea. You’ve looked into its development. You’ve recognised that it has potential beyond just what Auntie Mabel and Mike From The Grocer think. And you’ve clearly nailed a pain point that can make money. Now it is time to take the risk of running with it.
Every big idea comes with risk. You can’t step out into the world of entrepreneurial thinking and business development without it. Your idea may fail. It will also be time consuming, demanding, hungry for money, and hard work. It is unrealistic to expect that your project will leap out into the world and be an unmitigated success.
It is also unrealistic to assume that it isn’t worth taking this risk.
There are steps that you can follow to ensure that your risk is managed so you aren’t blindly leaping off that cliff…
Step 01: Do your research
No, canvassing your neighbours, friends and family is not doing research. You need to know that your idea will appeal to a broad market and that it will have significant legs. This may sound like daft advice, but you would be surprised how many people think an idea will take off just because Susan in Accounting said so.
Step 02: Understand the costs
Projects are hungry for money and investment. Realistically work out your budgets and how much it will cost to take your project off the ground and then stick to it.
A calculated risk is a far better bet than one that shoots from the hip and hopes for the best. You can also use this as an opportunity to draw a clear line under where you will stop investing and end the project. If it keeps eating money and isn’t getting anywhere with results you need to be able to walk away.
Step 03: Know when to walk away
As mentioned before, this can be defined by a line you’ve drawn in the proverbial sand (and budget) but no matter where you draw this line, you have to stick to it. Often, when time, money and energy have been poured into a project it can be incredibly hard to walk away.
You think ‘but I have put so much into this, just one more’ and then it gets to a point where the ‘just one more’ has taken you so far down the line that walking away feels impossible. Leave. Learn the lessons. Apply them to your next project.
Mind The Gap
The entrepreneur’s guide to finding the gaps and building the right solutions.
Innovation may very well be the key to business success but finding the gap into which your innovative thinking can fit is often a lot harder than people realise. Some may be struck by inspiration in the shower, others by that moment of blinding insight in a meeting, however, for most people finding that big idea isn’t that simple. They want to be an entrepreneur and start their own high-growth business, but they need some ideas on how to find that big idea.
Here are five…
It sounds trite but networking is actually an excellent way of picking up on patterns and trends in conversation and business problems. The trick is to note them down and pay attention. Soon, you will find patterns emerging and ideas forming.
2. Look for pain
Just as networking can reveal trends in the market, so can spending time reading. The latter will also help you find common business pain points. These are the touchpoints that frustrate people, annoy business owners, affect productivity, or impact employee engagement.
Be the Panado that fixes these pains.
This is probably the most annoying of the ideas, but it is unfortunately (or fortunately) very true. Luck does play a role in helping you capture that big idea. However, luck isn’t just standing around and random people offering you opportunities. Luck is found at networking events, it is found in research and it is found in conversations with other entrepreneurs.
4. Luck needs courage
You may have found the big idea through your network, a pain point or pure blind luck, but if you don’t have the courage to take it and run with it, you will lose it to someone else.
Being bold in business is highly underrated because most people assume that everyone is bold and prepared to take big leaps into the unknown. However, not all brilliant entrepreneurs were ready to throw their family funds to the wind and leap into an idea – they were courageous enough to figure out a way of harnessing their ideas realistically.
5. Pay attention
This is probably one of the most vital ways of finding a gap in the market. Often, people are so busy that they don’t really pay attention to that niggling issue that always bothers them on a commute, or in a mall, or at a meeting. This niggling issue could very well be the next big business opportunity. Pay attention to it and find out if that issue can be solved with your innovative thinking.
5 Things To Know About Your “Toddler” Business
As you navigate this new toddler phase of your business, here are five things to bear in mind.
Ah, toddlers. Those irresistible bundles of joy bring a huge amount of energy, curiosity and fun to any family – but there’s also frustration and worry that comes with their unpredictability, as they grow and start to become more independent. If you own a business and it’s successfully past its “infancy” of the first year or so, it’s likely it will also go through a toddler stage of its lifecycle.
Pete Hammond, founder of luxury safari company SafariScapes, agrees with this. “Our business is now three and a half years old, and we’ve found that we’re not yet big enough to justify employing a large team of people to handle the day-to-day admin tasks, yet we still need to grow the business as well,” he says. “As a result, our main challenge is finding the time to step back and see the bigger picture. Kind of like when you are raising a busy toddler and you spend most of your time running after them!”
As you navigate this new toddler phase of your business, here are five things to bear in mind:
1. This too shall pass
Everything in life is temporary – and that goes for both the good and the bad. It’s as helpful to remember this when you’re facing the might of a toddler temper tantrum, as it is when you’re facing throws of uncertainty in your business. If your new(ish) venture is going through a rough patch in its first few years, it can be easy to think about giving up – but don’t. As long as you have an overall big idea that you believe can add value to your customers, keep pushing through the rough parts until you come out the other side.
2. Appreciate what this phase brings
The toddler years mean that the initial newborn joy is officially behind you. But these small humans also bring their own kinds of joy, as you watch them learn new skills, say funny things, and give affection back to you. While your two-year-old business may not hold the same exhilaration for you as it did during those first few months, there are now different things to appreciate about it: Maybe you’re expanding your product range, or employing new people who can take the workload off you.
3. Establish boundaries
Toddlers thrive on boundary and routine – and your toddler business will too. As it grows into a new phase, try and establish limits in terms of the type of clients you want to work with and the type of work you’ll do. It’s also a good idea to make a decision about the hours you’ll work and when you’ll switch off, which will help you establish a good work-life balance.
4. Take a break
Every parent with a toddler needs a break every now and then, even if that means a walk around the block (on your own!), a dinner out with friends, or even a few days away. The same is true for a demanding small business: every so often, remember to take time out to rest properly, where you switch off your laptop and completely unplug. You’ll return much more inspired and resilient to deal with the everyday uncertainty that it brings.
5. Give it space to make mistakes
While the unpredictability of a young business can be stressful and tiring, it’s also a time for trying new things without the risk of huge consequences if they don’t quite work. After all, it’s much simpler to change your USP if you’re a small business employing a few people, rather than a big company where 50 people are relying on you for their salary, or where you’ve received a huge amount of investment capital. While you may fail in some of the things you try with your business (in fact, this is almost guaranteed), see it as a toddler that’s resilient enough to pick itself up, dust its knees and keep moving forward.
During this phase of business growth it’s also essential to have the right type of medical aid cover. There are medical schemes such as Fedhealth which has a number of medical aid options and value-added benefits to ensure that your health and wellness is taken care of too. After all, the healthier you and your staff are, the more productive your business will be – during the toddler (business) stage and beyond.
While this phase can be frustrating, it’s a sign that your business is growing and adapting, rather than remaining in its infancy, and that can only be a good thing! So embrace the difficulties, learn from them, and watch as your business strides forward confidently into the next exciting phase.