Every great business started out as a great business idea. Maybe you have a thought or two about the kind of company you’d like to start but you’re not sure if your idea has the strength to go from concept to reality.
Read on as we take a look at the steps any budding entrepreneur should take to test their business idea before they make moves towards implementation.
1. Determine If There’s a Market
You might have an idea that is entirely unique but that’s not a guarantee that it will make you any money. You need to be sure that your idea is solving a problem or fulfilling a need for people, and that means you need to do your research. Read up on businesses that already exist or offer a similar product and serve a community that’s similar to yours. What is their revenue like? Who are their competitors? Do they have enough clients to keep them in business?
Understanding how other similar businesses serve the market can provide you with a blueprint for how to realistically structure and run your business.
2. Know Your Differentiating Proposition
Before you make the leap from idea to implementation, it’s critical to understand your potential competitors and know exactly what it is they offer their customers. This will allow you to tailor your business model to fill a void left by those companies. You also want to be aware of how many competitors there are in the market and the percentage of market share each of them has.
If you’re looking to start a business in a location that is saturated with competitors who are all established brands dominating the market share, you might want to rethink your business concept or, at the very least, be clear about how what you’re offering is different and highlight those differences to potential customers.
3. Do a Test Run
Before you fully commit to whatever your idea is, you’ll want to put together a prototype to make sure the concept is viable. This is true whether your idea is a new app or a bakery. If it’s tech, be sure you’re able to build the item or write the code to make it work. If it’s cookies, be sure you have a recipe you can mass produce.
The prototype does not have to be perfect (in fact, it’s often called an MVP or minimum viable product for this reason), but it does have to be close enough to the real thing that it can demonstrate to you and to those you share it with for input that your great idea is one that can realistically be the seed used to grow a bigger business.
4. Run It By Your Mentors
Entrepreneurs often have an idea for a business for a long time before they actually take steps towards creating a company. This means there’s a lot of time to get caught up in your own thoughts or to get too deeply entrenched in lines of thinking that are ultimately unhelpful.
Once you have a basic prototype of your product and a business plan that’s rooted in your industry research, you’ll want to share this with a handful of trusted advisors. How you select your mentors is important; you want people who are knowledgeable, trustworthy, honest, and who you respect enough to actually listen to–even if they’re telling you something you don’t want to hear.
5. Get Input From Your Future Customers
Once you’ve tested your idea out on trusted advisors, taken their feedback and made the appropriate changes, the next step is to reach out to the public. Allow your potential future customers, people who have expressed an interest in similar goods or services in the past, to take your product for a test drive. Ask them for their honest feedback. Do so in a structured way–either through carefully designed questionnaires or through in-person focus groups.
Be clear about the kind of feedback you’re looking for, and be willing to hear these people out. Most importantly, you need to ask a large enough group to serve as an adequate sample of the general population.
6. Evaluate Your Finances
Running your own business can be costly, and there’s typically a fair amount of capital that needs to be invested up front to lay the groundwork for a successful business. While no two businesses are alike, a 2009 study from the Kauffman Foundation indicated that the average cost to start a business is $30,000.
This starting costs calculator from Entrepreneur can help you to get a sense of what your specific costs would be. If you’re falling short on funding, you’ll need to think about seeking out financing from loans or asking friends and family for their support.
If you have an idea for a small business that’s really exciting and compelling to you, it’s understandable that you might want to leap headfirst into building a business around it. But testing the viability of your idea is critical before investing the time, money, and long-term effort. Following the steps above can help you to test the strength of your concept, and give you the tools and information to make it even stronger.