Finding an idea worth your money and time is somewhat akin to finding love. When you find the one – the 'perfect one' you just know it. It feels like you have to defy all possible logic against the success of that idea to make it happen. Sense of reasoning and judgement is thrown out of the window; many develop a sort of irrational carelessness. With all these wild feelings coursing through you in excitement, you're most likely going to make mistakes, a lot of them. It is almost inevitable.
It’s no news that starting up a business and sustaining it till it becomes huge is one of the hardest things in the world. Many fail even before they start for failure to carefully analyse their ideas with enough lucid objectivity.
Here are tips in the pattern of a few questions you will need to answer if you want to avoid wasting your money, time and maybe your life on some ideas....
Very important! Too important! You will need to look up your financial backing - cash reserves [personal or not] or possible investments. Does it look good enough to see you through a period of business design and development, and testing without anticipating profit? How far will it take you? There should always be a long term view/plan with the funds. Develop a model which works for your type of idea - bulk financial investment or low capital style. No doubt businesses with early heavy funding get all the attention, often times, low capital style businesses with scalable models develop into sustainable big brands.
There are so many questions to be answered as regards this sub-topic.
Does the idea [product or service] solve a real problem? What would the world need your product or service for? Is the product a luxury worthy of your own money? Do I have an innovative product? Are there any already existing services that are better than yours? Is there something that distinguishes my product/service from already existing ones?
Luxuries are usually more expensive and deliver good profits if they work out, but you might also need to find a real world/life problem to solve rather than just appetites to satisfy. You should also bear in mind that investors want products that would explode into the market unrivalled – they are called 'first movers' - this is to ensure there are no competitors dedicating their time and money to ensure your business dies - a natural or forced death.
'Innovation' is such a buzzword, such a catch word but its importance still remains nonetheless. There are no set rules with innovation, but you might have to tread carefully in order not to push the limits too far. Innovation needs to revolve around being - cooler, faster, smarter and better-looking.
How fast can you exit?
It is only appropriate to look at all possible options - sorry to say, but failure is one of them. As a matter of fact over 80% of start up businesses fail in less than 5 years in Nigeria. You would need to ask, if you can 'get out' of the business if it starts to smell fishy, and how quick as well. I am sure everyone would prefer to bail sooner than later if a business is looking like a disaster waiting to happen. You might also need to find possible exit strategies - compelling ones too, especially if you intend to implore the backing of an investor.
How does the market work?
Different products and services come with their own peculiar market structures. For every different market, there is a different barrier to entry. Firstly, ensure you smartly bypass the possible barriers you might face. Secondly, set yours for incoming competitors.
For the second time in this piece, 'It is only appropriate to look at all possible options' - another is that the market /industry might get crowded on the basis of your success. Therefore, consider how easy it is for other potential entrepreneurs / investors to replicate or even better your idea. This might be a little tasking, but for the sake of your business, you might need to carve a niche which has solid barriers to entry – this is to forestall the number of possible future competitors.
Still on market issues – a great product is never enough, a killer marketing plan over a period is key. You need to get yourself and your product ready for the market. You should also look to get your projected customer base ready for your product. Find if customer acquisition is a trend in the market too, as you might need to win over some customers who are loyal to your competitors.
Then, you have to ask if the market is ripe for exploitation. Case in point - 'outer space travel' - of course those who can afford it would love to travel out of planet earth, but for some reasons which are out of the scope of this piece, the market is not ready, yet.
Do you have a business model?
This is not just about funds. It is about how to keep funds steadily rolling in – a revenue plan. Business models are usually the heart of businesses. If you don’t already have one, create and constantly develop a real and scalable business plan which could help you stay afloat for the foreseeable future.
How affordable is the available talent in the industry? Can you afford the compensation for such talent?
To begin with, you should know that human capital is expensive and somewhat unreliable. Even if you intend to run low on human capital, pay is usually a sticky area and you will hardly get and keep the best hands or heads if you cannot compensate them enough. Very few employees will continue to thrive only on the virtues - 'passion', 'drive' and 'hard work'. Money is usually the motive, so the honeymoon period of accepting meagre compensations usually comes to an abrupt end sooner or later. Find the range of pay offered by others already in the industry and align your package accordingly.
You might want to look to the rising trend of automation as a way out of over-reliance on personnel, but know that you will have to purchase those machines and constantly upgrade them with cash. You will have to hire some people especially as you hopefully grow.
There is always a bias in favour of that idea you have thought out. You should realise that wishful thinking never brings success to anyone. The more hard work - in form of planning you put in at the start, the less heartache and worries you will have as the business unfolds and progresses.
By answering these questions, you may see the death of your possible start up idea. But if it survives, then go for it.
By Paterson Mgbeoji.