So, you have an idea! Now, how do you turn it into a sustainable business?
With the ABS reporting in 2015 more than 60% of small businesses fail within the first three years*, starting up a brand-new business can seem like a daunting and scary process. So how do you know when and how to start the process?
The first step is to find out if your idea is a good idea.
A good idea comes from a product or service that solves a problem and satisfies a desire or need. Ask yourself; what problem does your idea solve? Why would people want to spend money on your idea? And, how is your idea different to similar products or services already in the market? These aspects are the foundations to a successful business idea.
Next, look into the customer base for your idea. Creating a list of characteristics and behaviours of people suited to your idea, and keeping this market in the back of your mind throughout the process, will help you target the most appropriate audience. If you are having trouble thinking of the right audience, try asking these questions:
This is not a reference to which TV station you think you should advertise on! Think of every avenue available to make contact with your customers. Consider the behaviours of your audience and reach them through the channels they use naturally. Find out where and how your target market get their information and use those platforms to speak directly with them.
You can do this by putting yourself in their shoes. Practise thinking like your target market and visualising what their typical day looks like and try to understand how and where they consume information.
Once you’ve decided on your market and how to reach it, it’s important to think of what kind of relationship your business venture would have with consumers. This really focuses on how much time your business will be investing with customers. Is it a one-off or on-going transaction/relationship? What kind of installation time period will be involved? And what after-sales services, rewards or loyalty systems will be offered?
Perhaps the most important factor in planning out your business is the financial side of things. There isn’t much point in beginning a business if you can’t sell the product for more than the manufacturing costs. Beginning market research includes speaking with the target market about how much they would pay for the product. Surveying and communicating directly with the market you’d like to reach is a good way to start. By understanding what customers expect to pay for your idea, you can set a price point and work backwards, through all your costings, right to the manufacturers, to find out quickly if the idea is realistically profitable.
Key activities are the activities your business will have to do on a regular basis to function. These include the design and development, manufacturing, marketing, sales, logistics and distribution of the product. It also refers to the business development of finding employees and supporting services, such as accountants and mentors, to help with the functions of your business. It’s important to know these activities do you are able to develop and refine the next step.
Everything you need to own or access to launch and grow your business is considered a resource. From the physical needs of the business, such as buildings, computers, and product packaging, to the intangible requirements, such as networks, intellectual knowledge, and financing. Having a good list of necessary resources will help you to visualise exactly what you will need to begin the business venture and lay out the costs associated with acquiring these resources - giving a good estimate for how much you will need to invest in your idea to make it feasible.
Resources are important but so are partners to a company. The main question is, who do you need to partner with to be successful?
You’ll have to decide on your suppliers, investors, manufacturers and distributors and decide the key roles they will play in your business. Once these have been determined, you will have to plan how to connect with these partners and develop relationships with them. Networking events and trade shows are a great place to start!
The costs of the operation should be continually emerging throughout the development of your business plan. Everyone knows it costs money to make money, which means cost is a major part of the process. Your cost structure should cover every element of the operation outlined in the above sections. It should also consider the economic variables and set out realistic forecasts in relation to losses, break-even and profit margins.
This business model should help you to take the first steps towards developing a business plan and work out if your idea is worth investing in. However, it’s important to remember that business plans are ever-changing and adapting as you move forward.
If you would like to further enhance your entrepreneurial skills, you can register for the Entrepreneurship 101 Series. This is a series of interactive programs designed to educate students on how to start a business enterprise.
*Charleston, LJ 2015, ‘Why Small Businesses Fail In Australia’, The Huffington Post Australia, <https://www.huffingtonpost.com.au/2015/09/28/small-business-failure_n_8187166.html>.