Have you ever come up with an idea for a product and then learned that something similar was just introduced in the marketplace? Are you the kind of person who constantly thinks of ways to improve existing products? Do you have a desire to launch an innovative service that will allow you to become your own boss?If you answered yes to any of these questions, you just may have what it takes to be an entrepreneur!
Developing a unique idea is only a small piece of the puzzle, however. According to the U.S. Small Business Administration (SBA), more than 50% of small businesses fail in the first year and 95% fail within the first 5 years. These depressing statistics cannot be blamed on a shortage of great ideas or unique products. Instead, the most frequent mistakes of would-be entrepreneurs are to do things in the wrong order and to skip their homework by not investigating the viability of their products.
To avoid common business mistakes and successfully bring your new product or service to market, follow these 5 key steps.
Step 1: Identify Your Product or Service
Some of you may already have a clearly formed concept of a particular product or service you want to market. Others may wish to create something but feel unsure how to zero in on a particular product. Regardless of where you are today, taking the time to honestly complete the following statements can help you figure out where you want to be tomorrow.
1. The things I am most passionate about are _______.
2. I am very knowledgeable on the topic(s) of _______ .
3. What really gets me excited is _______.
4. I wish there were a _______ (product/service).
5. I would like this so much better if only it _______ (benefit or function).
6. People tell me all the time that I have a real knack for _______.
7. The one product I often visualize myself developing is _______.
8. Of the two or three products I’m interested in pursuing, the one associated with the largest market is ___________.
Now that you’ve done this brainstorming exercise, take a close look at your answers. To help get your creative juices flowing, match your answers to one of the fitness-related product categories listed in “Intriguing Industry Ideas” on page 67.
Step 2: Do Your Homework!
Now that you have identified your personal areas of interest, how do you go about determining the viability of a specific product or service? Well, if your product is a magic pill that miraculously turns fat into muscle overnight, there’s no need for research because your success is a sure thing!
But if you’re like most people, you are going to need to do some homework before you go any further with your product or service. Many would-be entrepreneurs skip this critical step and waste thousands of dollars and priceless blood, sweat and tears, only to learn the hard way that they overestimated their market, underestimated production costs, incorrectly assumed customer demand or failed to uncover the existence of a similar product. Here are some simple and inexpensive research strategies you can employ to ensure you don’t make similar mistakes along the way! (Many of these strategies can be done using the Internet to expedite the process.)
Determine and Quantify Your Target Customer Base. If the product or service you have in mind has a target market that is difficult to define or limited in number, you will struggle to make a profit. One way to increase your chances of success is to identify a sizable market and then create a specific product or service to fulfill an existing need. For example, if you’re marketing an introductory cycle training program, your target audience is active fitness instructors—but not those who are already trained to teach this format! If you’re clever, however, you will realize that your market base can be expanded to target cycling students and enthusiasts who have the desire and ability to someday become trained instructors.
Conduct a Name Registration/Trademark Search. Is the name of your new product or service unforgettable? Make sure that the business name or Internet domain address you select is available before you invest time and money on marketing or promotional materials, letterhead, etc. You can conduct an online trademark search for free at www.uspto.gov/main/trademarks.htm.
At www.networksolutions.com, you can find out in less than 30 seconds if your domain name is available.
Learn Who Your Competition Is. What percentage of the existing market does your competition “own”? What is it that makes that company’s product or service unique? Are there any areas in which the product or service is lacking or can be improved? What is the price point? How and where does the company advertise? How long has it been in business? Where are its products manufactured? In other words, what can you do better?
Analyze Current Industry Trends. What do your target customers want? What do industry experts forecast for the future in terms of similar services or products? What do current social and economic trends portend about the expected life span of your idea?
Research the Market’s Existing Customer Base and Its Potential for Growth. Estimate the percentage of total market share you can reasonably expect to carve out for your business. To determine this, you need a strong understanding of your “unique selling proposition,” or what sets your product or service apart from the competition.
Calculate the Total Costs Needed to Bring Your Product to the Point of Sale. To ensure success, you need to consider all the expenses you will incur in bringing your product to market, including insurance; business licensing; research and development; trademark filing fees; attorney fees; design costs; packaging; labeling; shipping; leased space; employee hiring costs, salaries and benefits; consultants; industry or product surveys; product prototypes; and other miscellaneous costs.
Investigate Funding Options. Once you have estimated your start-up costs, it is time to explore funding for your business. There are many options, such as self-funding, secured lines of credit, business loans, SBA loans, government grants, and loans from friends and family (either interest free or interest bearing).
Develop Production/Manufacturing Contacts. In all businesses, from the smallest to the largest, corporate leaders must
always be on the lookout for a less expensive method of manufacturing a high-quality product. When estimating production/manufacturing costs, make sure you consider all aspects of the manufacturing process, including allowing adequate lead time for production. Although the rock-bottom price is important, a working relationship with a company you trust is simply priceless.
Read Every Related “How-To” Book and Article You Can Lay Your Hands On. If you’re not already an expert, become one! Save hundreds of dollars by checking first to see if there’s a “how-to” book for whatever it is you need to do. From trademarking your name to designing your packaging, the motivated entrepreneur can learn to do it all!
If you are lucky, you will find a trusted mentor to help you make your way; if not, see “Lessons Learned From the School of Hard Knocks” on page 66 for more helpful advice.
Step 3: Create Your
Product or Service
Products. Many steps are involved before you will actually have a product in hand. For example, if you are producing a piece of fitness equipment, a prototype has to be constructed prior to manufacturing. Some manufacturers will be able to handle all phases of production, from the formulation/prototype process, through package design, ending with full production. It is best to get at least three bids from researched and recommended manufacturers. Each company will have different requirements, such as minimum production quantities, fees and terms, lead times, delivery charges, etc. Be sure to compare apples to apples when looking at the bids. Create a comparison chart with all itemized charges and time frames, since detailed analysis at this point can be crucial in making a proper decision as to which manufacturer will best suit your needs.
Services. Launching a service is a bit different from taking a tangible product to market. The trick here is to find a way to fulfill a need in your target market at a price point your customers will find valuable. The key to any service-based business is to provide outrageously good customer service—especially if you are offering a service that customers could perform for themselves. When Chalene created Turbo KickTM, a prechoreographed class that mixes kickboxing, dance and sports drills, she asked her potential customers what they most and least liked about companies that provide similar classes. By paying attention to the answers she received, she was able to build her company’s mission statement around those factors. Chalene attributes her company’s 7-year staying power to continuously listening to her customers and changing or adding services accordingly.
Step 4: Build a Company
Whether you’re developing a tangible product or a new service, you should create a company name that gives your enterprise its own identity and credibility. You should also come up with some type of stylized logo that sets your company apart from the competition. The more professional your company looks, the more seriously consumers will consider your product or service.
Business cards, stationery and support materials are basic tools of commerce, but you don’t have to spend a fortune to create them. Sometimes, simply using a unique type font for your company name will do the trick. If you also want to use a complementary graphic but don’t have the financial resources to hire a graphic artist, consider trading graphic design for fitness training or whatever other talents you can barter. Software is readily available that will give your materials a professional appearance.
Business advisors usually recommend that all new business owners develop a business plan. This document becomes the blueprint for how you expect to run your business. Depending on the size of your company and your specific needs, the business plan can run the gamut from being quite simple to extremely complicated. However, most plans will include, as a minimum, an executive summary, the company’s history to the present date, market research, business strategies, planned operations and financial projections. Every so often, you should review the plan to compare your original forecasts to actual current operations data and revise your projections as needed.
As your company grows, you will likely need the expertise of certain professionals, such as attorneys, bookkeepers/accountants, graphic artists, website designers, distributors, etc. For example, if you have no background in corporate structure, you might want to consult with a lawyer or an accountant about the three basic ways to structure your company: as a sole proprietorship, a partnership or a corporation. When hiring any expert on a per-project basis, always get a quote for a specific job and negotiate the best deal possible by researching the competition’s prices. Aileen learned this lesson the hard way when she hired several highly recommended consultants who each accepted a sizable retainer up front and then failed to deliver on their promises. With a retainer, there is no financial incentive for an expert to complete a project as promised or in a timely manner. Make sure you are satisfied with the quality of contracted work before paying the majority of the fee!
Step 5: Market & Sell
Many people equate marketing with sales. The
reality is that marketing is what companies do
to reach and influence prospective customers, whereas sales is the process of completing the deal.
You may be tempted to run out and spend your marketing budget on expensive advertising in order to recoup as much of your advance money as soon as possible. However, incorrectly betting on a large initial campaign can be devastating to a start-up business. Similarly, expanding your base of operation (e.g., opening a huge chain of stores your first year in business) may sound like you’ve hit the jackpot, but it is far more likely that you will sustain success if you start small, see which distribution channels work best, and then proceed in that direction.
Here are some important marketing- and sales-related questions to consider before you launch your new business:
What Unique Characteristic of Your Product or Service Is Most Important to Feature in Your Sales Literature or Marketing Campaign? There are so many things you want to tell the world about! How do you decide which characteristic is most important to your prospective customers? Simple: Do some surveys, host a few focus groups, interview club members or clients, or hire a market research firm.
What Will Persuade Your Target Market to Make a Purchase? The uniqueness of some products can be conveyed through print campaigns, whereas other products will require a hands-on demonstration. For example, if you’re selling a new piece of fitness equipment, your customers will probably want to experience the workout personally.
Where Can You Most Cost-Efficiently and Effectively Reach the Greatest Number of Target Customers? You could spend a lot of money on a nice, glossy ad in the hottest fitness magazine and reach boatloads of subscribers. But if you are marketing a more comfortable bike seat, you’re probably better served allowing your customers to “try it out” at a cycling or fitness convention.
What Distribution Channels Are Best for Your Type of Product or Service? You have three main distribution options: selling directly to the end user; selling to a retailer, who sells to the end user; or selling to a distributor, who sells to retailers. Although you can usually command the highest profit margin per sale by selling directly to your customers, be advised that this will require a lot more time and work on your end.
Who Will Sell the Product or Service? There are three main options here, as well. You can sell it yourself, since most company owners are in the best position to sell their own wares. Or you can hire and train a sales force to do the job. Finally, you can employ the services of a broker, who can act as a salesperson for hire in exchange for receiving a commission for each sale made to direct retailers or distributors. It may be more convenient to hire someone with industry connections to make sales calls for you, but anyone who works on commission will give the greatest focus and time to those product lines that generate the most profit. “Pioneering” a new product usually means someone hired on commission will have to work hard to establish your brand with very little compensation at first. Many will ask for a retainer in this situation.
Don’t Forget the Personal Side
Even if you complete these 5 steps, you also need to consider how your personal life will affect your new business venture—and vice versa!
Are you extremely busy? If you’re thinking that starting your own business will give you more free time, think again. Although business owners can set their own hours, be prepared to put in 12-hour days, most days of the week.
Starting a new business can also drain you financially. Optimally, it is best to start a new venture while you still have the comfortable cushion of your current paycheck. It’s also a good idea to pay off your existing debts before you start the process. Many entrepreneurs ask family and friends to help them finance the launch of their companies. Although this kind of support can be a big boost, never underestimate the potential fallout should your business fail. Are you willing to jeopardize your relationships to realize your dream?
If you do decide to take on a business partner, choose someone whose personality complements—rather than replicates—your own. For example, two strong-headed, creative types do not make for ideal partners. A better choice is to seek out someone with financial expertise if you are the creative force behind the business. Last, given the delicate nature of working relationships, avoid entering into a partnership with anyone whose friendship is more important than the business.
You also need to consider your personal work ethic. Can you get the job done, no matter what challenges you encounter along the way? The ability to make quick decisions, prioritize and plow forward separates those who dream from those who do!
To stay on track, make a to-do list every day. Too often, the most energetic people spend the whole day running at breakneck speed, only to wonder why they didn’t get the most important things done by close of business. Throughout the day, stop to make sure you’re tackling the items that move you closer to your goals.
Persistence, energy and optimism will help you through even the darkest days, which, by the way, you will have. Things are bound to happen that will be out of your control. Don’t expect immediate success. You need to learn strategies to work through your disappointments and self-doubt. Remember why you started, be true to your core values and remind yourself daily what’s most important.
Above all, be kind to yourself when you make a mistake. Recover quickly, learn from your errors and move forward.
You know that you can do it! We wish you the best of luck in your next enterprise.
- Create a to-do list every day.
- Find the most cost-effective way to do everything.
- Never compromise quality or customer service.
- Ask an expert, then become one.
- Know your competition inside and out.
- Find ways to add the personal touch in everything you do.
- Learn how to shift and move on a dime when problem solving.
- When dealing with others, expect them to take twice
- as long as they tell you they’ll need.
- Write down everything; take copious notes on conversations, transactions, appointments, etc. (E-mail is a great way to record promises!)
- Avoid paying a retainer for services in advance whenever possible.
- Always send thank-you notes and/or gifts of gratitude, which can make a lasting impression on others.