Research from online print and design company MOO reveals that more than eight in ten (82 per cent) Brits had a business idea in the past year, with 5.5 million of these planning to launch their venture in the next six months.
Your business idea may sound great for your family and friends, but to turn the idea into a real business you need to prove to yourself and others it will be successful, especially if you will need to raise funding for the business.
There two ways of proving if your business will work. Method 1 is by launching a Minimum Viable Product (MVP).
A Minimum Viable Product (MVP) is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
An MVP is basically a functional prototype of your product or service which you can deploy quickly to your target market and gather feedback. This method has gained popularity over the past few years due to the success of the “Lean Startup” book by Eric Ries and because it just makes sense to test your product with potential customers before you launch.
What is really good about this method is that you find out what your customers want straight away, rather than spending weeks, months or even years developing features that may not be valued by your potential customers.
The second way of testing if your business will be a success is through conducting a feasibility study. This is a more traditional and theoretical way of accessing the strengths and weaknesses of your business but if done properly it can be almost as effective as testing your product with potential customers.
The main components of a feasibility study are:
Unique Selling Point (USP)
Having a unique selling point (USP) is crucial to your business‘s success. Ideally, you should try to distinguish your business from the competition by providing a product or service that customers can only get from you. Even if you are in a market with several similar competitors you can still distinguish yourself from the competition through a process or the delivery of your product or service to your customers.
Proving that your business is better than your competitors is crucial, you need to explain why your product or service will beat the competition.
The main ways to beat the competition:
Price – are you cheaper?
Convenience – are you based locally to your target market?
Quality – is your product faster or more efficient?
Guarantee/Warranty – Will you guarantee your product or service for longer than your competitor
Market Environment Analysis
You need to prove in this section that a market exists, or will exist for your product or service. Some market research is essential here. If you cannot afford a market research company it is possible to research your market for yourself.
Google – search engines contain lots of useful information, but be prepared to spend a long time looking for what you need.
Libraries – most local libraries contain trade journals and local information you may find useful. If you live in London or are planning a trip there I would recommend a visiting the British Library, the Business & IP Centre is a fantastic resource for researching your business.
Social Networks – Use a service to send mail out surveys to via email and your social networks to find out what people think of your idea. A couple of well-written tweets in peak hours may also generate some valuable feedback.
Technical & Operational Requirements
In this section, you need to cover the basic requirements your company will need to operate. It’s always best to plan the first year in detail, then look at the next two years on a summary level.
Things to mention:
Making money is the most important part of going into business, be very careful when you are working on this section.
You will need to explain:
- Start-up costs
- Revenue expectations for the first year
- Ongoing expenditure for the first year
- Cash Flow Statement for the first year
If you are finding it difficult to plan revenue and expenditure it may be a good idea to download the annual statement of a start-up company in a similar sector.
Even if you are in a hurry to start your business it is always advisable to conduct a practical or theoretical feasibility analysis of your business idea. Spending a couple of weeks gathering information from potential customers or researching the market could save you a lot of money in the future. Perhaps the most important element of a feasibility test is to find out what your potential customer’s value and how ready is your business to provide them with this.
When you focus on giving the customer what they want, you are halfway to building a real business.
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