Most of my posts, podcasts, and coaching relate to those who already have a business started. Still, I wanted to take a moment to address another type of inquiry I receive quite often: “How do I turn the idea I have into a business in the first place?” This is an excellent time to address this, as there’s no better time to start a new business than in the new year.
In this post, I will not address preparing a financial forecast, developing vacant land, creating franchises, or creating a business plan. I want to focus on developing an entrepreneurial idea into an authentic, tax-paying, and money-making enterprise.
It may surprise you to hear me say that the right place to start is not with your business plan. Although that is important in the development of a new business, if you are to execute the creation of your business idea properly, there is much more to be done before that. This step-by-step approach will help.
Step 1: Define and Refine Your Idea
Your first step is to define and describe your idea in great detail with the understanding that as you go along, you will become more familiar with your competition, the market, your business model, and other factors. You must also know that the details of your idea might change and improve as you go. Be sure to list all the benefits and features.
Step 2: Analyze Your Knowledge
After that is complete, look at yourself and ask how much you know about your intended industry. Are you aware of any products or innovations that could impact the evolution of your idea? You must understand the important role experience and knowledge in your industry play in the eventual success of your business. Without those two, you are at a considerable disadvantage since building a business can be challenging.
Your idea might be a product, innovation, or an easier or better way of doing something. Either way, you still need to define clearly how it will solve a problem for consumers.
Step 3: Determine Need
At this point, you should be far enough into the process to determine if there is a legitimate need that you can fulfill. Put more simply, you should do some very serious, in-depth market research that will answer the following questions.
– What segment of the market represents your target audience?
– Where is your market?
– What is the size of your market?
– How do potential customers meet their current needs?
– Conduct preliminary market research, asking potential customers if they would be willing to purchase your idea if it became available. If they answer yes, ask why. If the answer is no, ask about that as well.
Step 4: Evaluate Competition
Now, it is time to consider and evaluate your competition. By doing this, you can confirm whether or not there is an opportunity in the market for the success of your idea. It will also identify direct competitors and how you can create your own competitive advantages.
In some instances, it may be necessary to create a prototype. A prototype provides you with something you can see and demonstrate to others. The best-case scenario is that your prototype performs exactly how you think it should.
Step 5: Form Business Model
If all goes well, your idea will have sprouted legs, and it’s time to move on to the next logical step of settling on an appropriate business model. Your idea may be proprietary in nature. If so, you may want to consider licensing it and letting the licensee deal with hiring, marketing, operations, payroll, and other business elements. Otherwise, you may use your operating experience to define your business model to accommodate manufacturing and distribution strategies.
Step 6: SWOT
The next step in this process would be to do a SWOT analysis. With this, you can be as detailed and complex or simple as you want. List what you think are your future company’s strengths, weaknesses, opportunities, or threats. Then, consider ways in which you can mitigate the threats and weaknesses.
Once you have arrived at this point, you can create a business plan that provides you and others with a credible and compelling roadmap, taking your concept from the initial idea and turning it into a product or innovation. It will also spell out how to execute your business model and lead to its success. Your business plan should include the above-described elements: a well-developed financial forecast, capital requirements, profitability, sales results, and cash flow requirements.
Following the suggestions above and some good effort will cost some money. Don’t risk cutting corners. If you are missing the skills, talent, experience, or resources needed to take your business from an idea to a successful one, stop now and get some help. A good option is to connect with other business owners and entrepreneurs to ask questions, get ideas, make connections, and more.