By Ray Bowman
When it comes to starting a new business, the temptation is to only think “outside the box” and come up with the newest, greatest product that fills a hole in the marketplace.
Once you have that winning idea, conventional wisdom suggests that the next step is to validate it, doing the due diligence to make sure your product or service can support a sustainable business.
But successful entrepreneurs will also need to look “inside the box.” That means addressing the specific details of their business idea.
The rigor of this exercise brings you back to basic questions you may have overlooked or disregarded while enjoying the sparkle of your great idea. I’d argue that it’s the answers to these questions, and not necessarily the brilliance of your idea, that are critical to your business’s success.
The answers will ensure a strong foundation for building your business and growing it over the long-term. It will also help you achieve greater personal satisfaction.
Here are the back-to-basics questions entrepreneurs need to ask after the great out-of-the-box idea and before launching their business.
1. How much time are you willing to put into getting this venture to be sustainable? It’s not uncommon for people who are enthralled with their new idea not to have an answer. Before starting a business, entrepreneurs need to think about how many hours a day they can realistically devote to the business.
2. How long can you cover your personal and business expenses with limited cash flow? We advise new business owners to project their total expenses and income to see the true economic picture. It may be necessary to find a financial adviser who can help guide you through the process.
3. Are you willing to ask for help? No business owner has all the answers. The best ones know to reach out to trusted experts who can help. Mentors, trusted advisers and employees with expertise or specialized training in key areas can often provide answers.
4. Are you realistic? You may have a great idea, but is the market ready for it? You might need to make adjustments to the idea or educate potential customers about the viability of your product. It is likely that your ability to make adjustments will determine success or failure.
5. Are you objective? You need to think about your business as a scientific experiment. This means validating your business concept through hard data using outside sources like marketing and financial research, and getting feedback from industry insiders and potential customers.
The only way to be truly objective with your business concept is to have solid data that supports why you think this business will succeed. I recently met Kevin Harrington, formerly on the popular TV show “Shark Tank.” He’s made millions of dollars launching various business ventures and products, from his original Ginsu knives infomercial to his over 80 other successful products. He emphasized to me the amount of marketing and price data he collects before making the decision to launch a new business. This process is an essential part of validating your business concept and will help frame your “inside the box” thought process.
No one likes negative surprises, especially when so much is at stake. But anticipating negative surprises and coping with them when they appear are part of what it takes to be an entrepreneur.
The more you know about your business and yourself, the more rewarding and sustainable your business will be over the long-term.
• Ray Bowman is the director of the Small Business Development Center of Ventura and Santa Barbara counties. Reach him at [email protected] or visit www.edc-vc.com.