What to do First With a Great Business Idea
Before you try to raise money, file for a patent or write a business plan, heed these words: That’s not what you need to do. Here are the six things you must know in order to even justify writing a business plan, let alone investing money.
You’ve just come up with what you think is a great business or product idea. What now? Glad you asked, because this is where millions of would-be entrepreneurs stumble without ever getting started. Before you try to raise money, file for a patent or write a business plan, heed these words: That’s not what you need to do.
Here are the six things you must know in order to even justify writing a business plan, let alone investing money:
Step 1: Road Test Your Business Idea
This critical but often-skipped step has saved many an entrepreneur from certain failure. Before you write one word of a business plan, or spend a single dollar, you need to honestly – and I emphasize honestly – assess the validity of your idea, or the promise of your product. Think of it as a sanity check on whether your idea is really the basis for a successful business, or more wishful thinking than you first thought.
A business plan won’t tell you this. That comes later once you’ve proven your concept. But that plan is guaranteed to be vastly more effective with the road test behind you. The steps that follow here will help you with your “road test.”
Step 2: Find the Fatal Flaw
Every business that flops has a fatal flaw of some kind; or perhaps many. Your mission is to find that flaw before it finds you. And banish the thought that your idea is perfect. It’s not. One mark of a smart entrepreneur is a willingness to constantly question his or her own ideas.
Ask yourself: What am I missing? What possible pitfalls am I not seeing? How might competitors respond? What on Earth makes me think that my business or product idea will work when the great majority of others don’t?
Now you’re starting to get it. But don’t stop there. You’re not just looking for things that might go wrong, you should also ask yourself how you might be able to fix them once you find them.
Step 3: Shed These Common Myths and Misconceptions
- Here’s a big one: Nobody thought of this before. Really? Such ideas are rarer than rare. Odds are many have thought of it – and punted.
- There’s no competition, and that’s a good thing. Not necessarily. If it’s really such a good idea, others should see that and be in there with you. If not, you’ve got to wonder.
- The concept is great, so the business opportunity must be great, too. “Concept” and “opportunity” are two vastly different things. In short, there’s a huge chasm that stands between a good concept and turning it into a viable business.
- I need to be on the market first in order to win. The business landscape is littered with defunct “firsts.” Watching the mistakes that others make, and then fixing them with your idea, is often a better strategy.
Step #4: Assess Your Range of Risks
There may be more risks than you think. For example, bringing a product to market involves many risks. Can you make it on a large enough scale to pay off? Does your product require users to change their behavior in any way (consumers don’t like to do that). Will it last?
You must also assess risks related to the market, existing or potential competitors, money (do you have enough?) and your own management abilities.
Step #5: Analyze the Market
Ask the fundamental question: Is this really a good market? But in doing that, you must also understand that a “market” means buyers, not products or an industry. Your business or product will have to offer those buyers some clearly visible benefit in order for them to choose you over someone else.
Step #6: Define Your Team
Are you planning to go it alone, or will you need others involved in building your business and executing on your idea? This can mean working with outside advisors, or bringing in partners and employees. In any case, your “team” will be critical to your success.
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