From the Wright brothers who finally realized their dream by managing to take off and land “the world’s first engine driven flying machine that led to the development of air travel, to the Sir Richard Branson of Virgin who dropped out of high school and started with a small idea of running a student magazine, that turned into a his BIG dream of Virgin and even to the likes Steve Jobs who dropped out of university and focused on his small idea of changing the design of personal computers, that became his BIG dream of Apple, that went on to change the way we communicate, listen to music and consume information, we find entrepreneurs who turned their ideas into ACTION.
What idea or ideas are YOU working on?
Having a business idea is one thing, but knowing whether or not it will turn into a sustainable profit-generating business is another matter altogether. A good place to start is by doing thorough research. Here are a series of questions that each entrepreneur must ask him/herself if he/she is to create a viable profitable business:
1. What is the opportunity?
- What is my purpose as an entrepreneur and does my purpose align to my business?
- Clearly define what it is that you want to do and why.
- What customer problem are you trying to solve?
- How will your opportunity solve this problem?
- Does the solution create a tangible and sustainable business opportunity for you?
Tip: go into the marketplace and ASK potential customers what they think about the opportunity. Test and learn as you go along. If you think that your idea is going to be the next best thing since sliced bread, either you are the next billionaire in the making or you have not done proper research on your opportunity. In 99,99% of the case, it’s the latter.
2. How does it work?
- Explain exactly what the product or service is and the entire process from beginning to end.
- Where and when does the customer fit in?
- Are there multiple sources of revenue and expenses?
- Where are the most resources required?
- Who exactly is going to do the work?
Tip: remember the following – make it better, make it cheaper, make it faster or a combination of these.
3. What is the size of the market?
- Who and where are your customers?
- How do you know that they would be prepared to pay for such an offering?
- How big is the size of the market?
- Is the market local, regional, provincial, national or global?
Tip: the market should be large enough and robust enough to make it viable for you to operate in.
4. Is there a product-market fit?
- Is there a genuine need for what you have to offer?
- Are customers really ready of for the offering now?
- How can you attract the market with your offering?
Tip: the product should be suited to the market that you are targeting.
5. What is the revenue and profit model?
- How will revenue be generated?
- Is the revenue once-off based per sale or is it annuity-based (recurring).
- How will you derive the revenue (i.e. what is the selling price and expected volumes).
- How did you determine the expected revenue and what are some of the key assumptions?
- What is the cost structure to deliver your offering?
- What are the fixed costs?
- What are the variable costs?
- What are some of the other costs that you may have left out?
- Have you factored in a fair salary for yourself?
- – Have you factored in a fair profit that you can then use to grow the business?
Tip: revenues less costs must generate a net positive profit. Think about how you can be innovative around pricing. Pricing has been a game changer in re-inventing and re-shaping old business models.
6. What are the main features of the business model?
- What is the value proposition of the business and what sort of resources – financial, physical, intellectual and human resources do you need?
- What key activities are you going to execute to deliver the value proposition to your customers? – Which customer segments are you serving?
- What channels are you going to use to reach your customers?
7. How scalable and sustainable is the opportunity?
- Can the business grow its revenue and how quickly can this happen?
- What will happen to the business model if the business grows?
- Can the business grow or is it just a lifestyle business?
- Can the business scale and grow to employ more than just the owner?
Tip: Scale simply means that over time, volumes increase without the same increase in costs, thereby potentially leading to increased profits. One of the key ways in which companies grow is through profits.
8. How do you know that the idea will work?
For example: Have you done enough market research to know that there is a market for this product or service; despite competition that may exist. Do you have the knowledge, skills and expertise?
Tip: have 50 ‘coffee chats’ with 50 people and test your ideas with them. You will learn incredibly from this, as well as develop a massive caffeine boost!
9. Is the cost structure of the start-up business at a level that can be sustained for at least 36 months?
Research indicates that 97% of all start-ups fail within the first 3 years. How have you structured the costs so that the risk of failure is minimised to a level where its sustainability can be ensured over at least 36 months.
Tip: be extremely cost-efficient in all that you do. Try to find the most economical way to serve your customers and pass the costs on to your customers.
10. Is there a strong link between this business and your personal values and true passion?
- Do you love what you are about to do?
- Can you put in the hours and do ethical business?
It’s important that you write all this information down. Seeing it on paper will provide more clarity and many of your answers will form part of your business plan. Most importantly…have fun in what you about to embark on. If you don’t find it fun and if your purpose is not aligned into your business venture, you will find it increasingly challenging to find the energy you need to take you forward.
By: Bashir Khan