You may think that you have the next billion dollar idea or the solution to a serious, widespread problem. However, deciding to start a business is a huge undertaking. Statistically, only 10% of new businesses survive after the first year. What separates the minority of businesses from the rest? There are many different reasons, but often, it is because they didn’t know or ask the right questions before deciding to dive in.
After starting several companies of our own, the 10twelve team has gone through all of the stages of business development. Asking the right questions at the right time can save you a lot of wasted time, resources and energy on a doom-to-fail venture.
Before you commit to an idea in the early stages, test it out with these questions.
1. Is your idea actually good?
If you are entrepreneurial, you have probably had countless business ideas pop into your head. You probably also know that for every good idea, there are hundreds of bad ones. Yet, it can sometimes be difficult to tell the difference, because they are your own. You can ask trusted friends, mentors and confidants, but their opinions will also be biased.
There is one technique that you can use to get valuable and unbiased feedback from people whose opinions you trust and respect.
The issue with asking those close to you is that it will be biased─if they know that it is coming from you. Find out what they really think by framing it, so that the idea is not yours. For instance, say that you are thinking about investing or working for a new company. Explain the idea and ask for their advice.
It is important to decide whether or not an idea is worth pursuing. However, it is even more important to decide if you are the right person to execute it.
2. Are you both passionate about and qualified to do it?
This may seem like an obvious question, but people often get caught up in finding the next billion dollar idea that they overlook the execution. However, that is a fatal flaw. The execution is far more valuable and influential to your success.
In the early days of a company, you may be running every aspect of your business. Building a company is at times exhausting and stressful, so it is easy to burnout. If you aren’t completely dedicated to executing your idea, you’ll give up. If the skills needed to make it a reality are too far from your reach, you’ll fail.
3. What products and/or services will I offer?
One of the best indicators for business outlook can be found in product development. It is now easier and more cost-effective than ever to create a Minimum Viable Product (MVP). These are early versions of your product, website or services that are used to gauge user interest and collect feedback. They provide insights on how your product can be improved without investing large resources to a final product.
When selecting your offerings, remember to compare the overall cost to make, distribute and market them with the projected revenue. Your product may need to evolve or you may have the opportunity to expand your services into verticals as your company grows. Establishing a way to collect continuous user feedback is essential to help you identify possible new revenue streams.
4. Is there a market?
In a study of over 100 failed startups, CBInsights found that the number one reason for their failure was the lack of market need. There are a lot of variables to consider when determining the market need for your product or service. These are the key aspects that you should research to determine if the market exists and if it is strong enough for business success:
● Industry and economic outlook. Is the industry thriving? Does the area that you are pursuing have projected growth or is it declining? The Small Business Administration (SBA) has a collection of online resources to help you research everything from general business statistics to economic reports.
● Level of competition. If your market is heavily saturated with companies that have similar offerings, then it can be incredibly difficult to enter.
● Buyer interest. Does your product or service hold enough value that people will not only be interested, but will commit to buying it and will tell their friends about it?
Conduct market research. If your research finds that there is an opportunity, then devote the time to learning more about your target market.
5. Who are my competitors and what can I learn from them?
One of the keys to identifying your market is assessing your competition. It can be incredibly difficult to enter a market, in which there are already a lot of companies addressing the same problem or offering similar services.
Aim for the sweet spot─when there is a little competition but also high demand. You can start to identify competitors with a quick Google Search. Input some keywords and track what companies appear in the results. If you are locally-owned and operated, narrow it down by including your location.
6. How am I different from the competition?
If there are competitors, study them. What are they doing that works, and what could be improved? Most new businesses are an imitation of a business that came before it. Even Apple, Google and Facebook are imitators. However, they outlived many of the ideas that came before them, because they improved on some aspect. They saw what their competitors lacked and executed a better solution.
Identify what makes your business competitive. It could be your personalized customer service, efficiency or high-end tech, as long as it makes your company stand out.
7. Is it the right time?
Timing is everything, especially in the business world. For instance, the sharing economy only became popular recently. Would businesses like Airbnb, Uber, or Rent the Runway have been successful 10 years ago? Many great ideas were not successful, because they were ahead of their time. Not only does the market need to exist, it needs to be the right time.
8. What will my company name be?
If your answers to the above questions have convinced you to take your idea to the next level, it is time to make it official with a company name. Naming a company is one of the most difficult tasks for entrepreneurs. Some labor over finding the right one for months while others seem to pick one at random or jump on the next .ly or .ify naming trend that pops up.
As the primary association that people have with your business, your name needs to be memorable, available and search-engine friendly. Although your company name is a huge and important part of your business, the process doesn’t have to be so strenuous.
For more help to name your company, here are some naming techniques that we use at 10twelve. Once you have decided on one and verified that it is available, protect it by registering for a trademarkhere.
When you have a great idea and the skills needed to execute on it, your startup business is more likely to succeed. However, to transform ideas into reality there is a lot of work involved. Learn more about how to get your business off the ground at 10twelve.