Have you ever had an idea for a product or service that you wanted to develop, but you didn’t know where to start? Developing a unique idea is only a small piece of the business-creation puzzle. According to the U.S. Small Business Administration (2012), about half of small businesses do not survive their first 5 years. This isn’t because there’s a shortage of great ideas and unique products. It’s because some developers become so blinded with excitement that they fail to do the necessary research on their idea’s true viability before they go full speed ahead. Below, I have summarized five critical steps for determining if you have the makings of a viable startup.
Step 1: Identify Your Product or Service
The following brainstorming activity can help you figure out what product/service you may want to offer—or at the very least, it can point you in the right direction.
- The things I am most passionate about are _______.
- I am very knowledgeable on the topic(s) of _______.
- I wish there were a ______ (insert product/service).
- I would like _________ (insert product/service) so much better if only it had ______ (benefit or function).
- Of the two or three products I’m interested in pursuing, ________ is associated with the largest market.
Step 2: Do Your Homework!
Don’t skip this very important early step, only to learn later that you’ve wasted money and time overestimating the market, underestimating the cost of production, wrongly assuming customer needs/wants, or failing to uncover the existence of similar products/services.
Check the internet, and research the items below.
Preliminary investigation. Search for all the available information about your concept. Google it!
Your target customers and the size of that group. If the target market for the product/service you have in mind is difficult to define or is limited in number, you’ll struggle to make a profit. Estimate the percentage of total marketshare you can expect to carve out for your business.
Company name/trademarks/domains. Before you invest time and money, make sure your desired product name and business name are available, including a good top-level domain name. Conduct a trademark search for free at uspto.gov/trademarks-application-process/search-trademark-database. Find out—at networksolutions® (networksolutions.com) or GoDaddy® (godaddy.com)—if your preferred domain name is available.
Complete analysis of the competition. How much of the market do your competitors currently secure? Where is their product or service lacking? What is their price point? How and where do they advertise? Where is their product sold?
Analysis of current industry trends. What are experts forecasting for the future of your product or service? What do current trends tell you about the lifespan of your idea?
Complete cost analysis to bring to point of sale. Consider all potential expenses, including insurance, business licensing, research and development, trademark filing fees, attorney fees, design costs, packaging, labeling, shipping, leased space, equipment, employees, consultants, surveys, prototypes, and other miscellaneous costs.
Funding options. Check into self-funding, secured lines of credit, SBA loans, grants, funding campaigns, venture capital and loans from friends and family. All funding options deserve serious consideration and require planning.
Production/manufacturing (who/where/how/lead time). Find the least expensive method of manufacturing a high-quality product. Note, however, that while rock-bottom price is important, a good working relationship with a company you trust is priceless. If you’re offering a product that is to be manufactured overseas, include shipping costs in the mix.
“How-to” books, articles, internet research. Research on your own as much as possible. From trademarking your product/service to designing your packaging, learn to do it all—or at least understand what’s required to get it done.
Your chances of success increase if you choose a product or service in your area of greatest expertise or enthusiasm. If you’re not already an expert, become one!
Step 3: Create Your Product
If your idea involves a tangible, physical product, it may take several prototypes before you get to the final version. Some manufacturers can do everything, from the design/formulation/prototype process to packaging and full production. It’s best to get multiple bids from researched or recommended manufacturers. Each company will have different requirements: minimums, fees and terms, lead times, delivery charges, etc. Analyze what works best for you. Test your product vigorously.
Step 4: Build a Company
Name your product/service to give it its own identity, and contemplate a stylized logo. The more professional the look, the more seriously you’ll be considered. Business cards, stationery and support literature are basic tools of commerce, but you don’t have to spend a fortune to create them. Check for competitive online services and software to help you get the look you want for less. I am partial to Vistaprint® (vistaprint.com), which offers a wide variety of printing services at low prices.
Next, write a business plan. It’s a blueprint for how you will run your business. Most plans include an executive summary, history and position to-date, market research, strategy, operations and financial projections. There are many free examples and templates you can access online for reference.
You’ll also need the expertise of professionals such as attorneys, bookkeeper/accountants, graphic artists, website designers and distributors. Get recommendations and quotes for specific services. Always research competitive prices so you can negotiate the best deal possible.
Step 5: Market and Sell Your Product or Service
Marketing is what companies do to reach and influence prospective customers. Sales is the process of completing the deal. There is a great temptation to run out and spend your marketing budget on an expensive advertising push. However, betting wrong on a large initial campaign can be devastating to a startup. Increase your likelihood of success by starting small, testing which distribution/marketing channels work best, and then proceeding in that direction.
Here are some important questions to consider before you launch:
What unique characteristics are most important to feature? This should help you decide on the focus of your campaign and determine what is most important to your prospective customers. Conduct surveys.
Where can I reach the greatest number of target customers most cost-efficiently? Social media and the internet are the most powerful ways to sell your product. Find the best fit, hone your campaigns, and ramp up your budget if it becomes apparent that your promotions are working.
What are the best distribution channels? There are really three options: selling directly to the end user, selling to a retailer (who sells to the end user) and selling to a distributor (who sells to the retailer). You can command the highest profit margin per sale by selling directly to the end user.
If you take the steps outlined in this article, you’ll be that much closer to sharing your brilliant idea with a market that’s just waiting for your unique solution.
U.S. Small Business Administration. 2012. Small business facts. Accessed Sept. 12, 2018: sba.gov/sites/default/files/Business-Survival.pdf.