The best time to start a business was yesterday, the second best time is today. So what’s stopping you? Before you can get to the fun bits around setting up a website, choosing your project management software and taking the perfect Instagram picture you have to decide what it is you’re business is going to do.
Yes, for the record I do indeed think it’s fun to evaluate and pick out project management software. No shame in my game.
Are you a service provider?
Selling a product you created?
Selling other people’s products?
Offering a subscription for access to content you’ve created?
Created a marketplace to help buyers and sellers find each other more easily?
Who are you serving?
How will your offer transform your customer’s life? Make it easier? Prevent stress?
That’s only the tip of the iceberg when it comes to asking the questions that will help you focus the idea you have right now into something that can be consumed, utilized and ultimately transform the life of your perfect customer.
In this post I’m going to teach you how to vet a business idea in six steps or less. The idea here is to help you move through and explore your business ideas quickly to ensure that you’re spending your time (and money) as efficiently as possible. What this post does not do is guarantee your success. You’re responsible for that one but I can help you figure out if the idea that’s rattling in your head now or scribbled on the back of that napkin is worth giving an honest try for at least the next twelve months.
1. Look around.
What does the current competitive landscape look like? Are there businesses that do exactly what you do? Are there businesses that offer a close enough solution to make the choice a little difficult to your target market? I would challenge you to look long and wide for all the existence of as many possible substitutes to your offer as possible. The exercise of looking at the competition has to be purely observational at first. It can be all too easy to work your way down the rabbit hole of your competitive advantage. I want you to save that energy for later. Right now it’s about piecing together a picture of who your competitors are, how big the market for your offering is and trying to figure out the perceived effectiveness of your competitors. That includes looking for reviews and evaluating the content those brands share. You’re not just going up against a bunch of businesses when you start from scratch, you are also competing for the attention of their (sometimes) pre-established tribes.
2. Who are you serving?
Truly understanding your target customer is critical. Lots of business coaches and gurus would advise you to create a persona or set of personas for your target customers. These are profiles you build that match the lives of the people you hope to serve. The goal is to use these profiles to help you better craft your marketing, brand and sales messages to this audience. It can also help to manage the expectations of the customer experience once they do buy from you. Building customer avatars is not bad advice at all. But, building your perfect customer isn’t always a luxury or a reality your starting your business into. Here’s how you can bridge the gap between building the hypothetical perfect customers and talking to the real people that exist right now that would make for your perfect customer. Talk to as many real people as you can. Talking to as many real people who are close to your ideal customer will help you get to know what they really care about, struggle with and spend money on. Having a Platonic idea of who your customer means nothing if that customer never puts their credit card information into your sales page. Real people spend real money every day. The rub is trying to understand what might motivate those real people to spend their real money on you. In the Lean Startup world they call this customer interviews.
3. Value Proposition.
There’s nothing worse than solving a problem that nobody has. When you’re veting your business idea the size and scope of the problem your solving matters. Why? Because it’s the people with that problem that will be buying your solution. Solving a problem that’s too narrow with a population of people that are too small might not be a sustainable business in the long run. I love the idea of you starting your business because you are “scratching your own itch”. It’s a great place to start! Just make sure you can be reasonably sure that you’re not the only one with that problem. You should have a pretty good idea about how to position the value you plan on delivering to people after you get through steps one and two here. This is also the place where you get to splash in some thoughts on how you’re going to differentiate yourself in your market.
4. Size Matters.
The size of your market matters because it will influence the model you choose and how you communicate with people. Are you a brick and mortar business only supporting your local community, like a restaurant? Or are you shipping your products internationally. Getting a handle on the size of your market affects how you price, the inventory or materials you need to deliver your value and who you expect to show up on as regular a basis as possible. Understanding the size of your market will also help you get a sense of the expectations around pricing and how to position yourself against existing competitors.
5. Competitive Advantage.
We can finally get to one of the things that feels like real work when you’re building a business. Competitive advantage is what makes you special or unique in the eyes of your customers. Competitive advantage are capabilities that allow you to deliver your value better than any of your competitors. It can be a proprietary recipe, maybe you have an exclusivity agreement with a supplier or the intellectual property that only you can deliver. It’s not just the stuff that allows you to charge lower than your competitors, I would recommend you stay away from just being the cheapest. It’s also not some generic statement like “we have the best customer service”. It’s specific, measurable and directly relates to the value you deliver and the problem you solve. It’s also not sustainable! One of my biggest pet peeves is when I hear bad advisors talk about sustainable competitive advantage. Your customers tastes and expectations are going to change over time (just like yours do). Technology is going to get better. Industries are going to get disrupted. That means, in order for you to stay special you have to keep an eye on what’s going on around you and do the work to keep what makes you special growing and adapting to the times you’re in.
6. Teamwork makes the dream work.
Just because you don’t have the budget to bring on a full time staff doesn’t mean you don’t have a team. When you’re starting out it’s important to bring people on board who will help guide you and who you can get honest feedback from. It’s also a great litmus test for your value proposition. Getting your mentors on board or getting a few people to be on a board of advisors is a great buy-in test for your business model. As for any day to day support, look to the people that are closest to you to help spread the word, find resources or just to lend a helping hand. Be careful about managing expectations here though, lots of people will be totally willing to support you on your journey and it’s up to you to manage those relationships so they don’t feel used or abused. At the end of the day anyone that you can involve early on in the process will be invaluable advocates and evangelists for your business as it starts to grow.
The ideas around building a business is simple. You’re solving a problem for a big enough group of people that will allow you to keep solving that problem over time. It’s putting those ideas to work that’s tough which is why choosing the right idea, for the right market and with the right support is critical. The best part, you’re never really going to be sure it’s going to work. The best you can do is to keep good data and HONESTLY measure your progress regularly. Launching on a not great idea doesn’t make you a bad business builder - staying married to a bad idea for too long does. Use this post to help you think through your ideas so that when you do decide to launch, and give yourself that twelve month runway to try, it’s something that has the best possible chance at finding success.