We’ve all been excited about an idea for a new business. It can be euphoric and/or scary experience. Also, it can be tempting or downright impossible not to pull the trigger before jumping head first into the fray. Before you take your first steps or take any irreversible actions, read through these five important questions to determine if you are ready now or still have some groundwork to lay. Rome wasn’t built in a day, and neither are many of the world’s most successful businesses.
1 What is the market size (consumer base) for your product, service or offering?
In the past, many entrepreneurs were solely focused on a 30,000 foot view of the land. For example, if Chicago is a populated city of 2.7M people and I can sell to 1% of that population (27K customers) at my average cost of $35; I’d make nearly $1M in my first year. Well that’s great math skills you displayed there, but we are still missing the mark. Your target market is defined by the number of people likely to buy your product or offering, not by the total population in a given area or segment.
Your target audience should be:
- More interested in your offering that this of your competitors
- Able to afford your pricing structure
- Within reach of your marketing efforts
So how do you go about finding and identifying with this market? Start by finding people who are passionate about your products and services. Initially this may be friends and acquaintances but continue further. You can find them through social media, market research as well as through community networks. Once you have a strong cadre of people buying into your messaging then dig into the demographic groups with many of these same characteristics.
Finally, allocate a marketing budget and look into your ability to communicate with the most attractive customers in these segments. There is no point in aiming for a segment you don’t have the cash to reach.
2What will it cost to address your audience?
Communication costs money. With the many types of marketing vehicles there are, your costs increase with the number of prospects you aim to reach. You won’t be able to reach the whole world in a day, so calculate the size of your potential audience by starting with what you can afford to spend.
Is your audience one that can be reached primarily through Facebook, Twitter and others? This may enable you to initially spend less (notice we didn’t say free), particularly if you can encourage strong word-of-mouth advertising. Be sure you have a shrewd marketing pan that will get your message to the right people on a budget you can afford.
3What differentiates your business from others like it?
Today’s corporate buyers and consumers are used to evaluating multiple options before they decide to go with a particular vendor or product. So you have to be able to clearly articulate what’s different and better about your offering than the alternatives in order to win over your potential customers.
To verify you are meeting an unfulfilled need, adopt a target customer’s point of view. Shape your offering to score high on factors that are valuable to them.
4Can you pool enough resources to get started?
Beyond marketing (see #2), your new venture will require funding for day-to-day operations. Think through your business idea in enough detail to quantify the need for equipment, supplies, facilities, staff, furniture, services, and other resources – even if you plan to set up shop at home. Make sure you have enough capital to get where you want to go. Capital is one of the most important first steps. Think of what you’d like to accomplish not only right now, but in 3-5 years. Will you grow the capital through your business to sustain that level later?
While you are at it, honestly compartmentalize your own skills and those that will be necessary to realize your vision. Unless you currently have them all (which none of us really do), figure out how you will find the people who can fill the gaps in your knowledge base and how you will motivate them to join you!
5Can you pay your own bills?
It’s not just the business that will consume resources, you also have to eat, pay rent or a mortgage, get insurance, and cover other expenses. It is extremely rare for a startup to generate pure income in its early phases, make sure you have enough money on hand to keep your head above water – not for days or week but months up to a year or two.
If you’ve answered yes to the above 5 questions, awesome! You are really ready to start tackling the world of entrepreneurship.