A person I met recently talks about starting a hamburger restaurant business. At every opportunity he wants to talk about his hamburger restaurant business idea. But unfortunately he doesn’t get around to taking even one step towards realising his dream idea. Talk won’t get you anywhere. You’ve got to have a vision and a plan.
Here are seven things that you must absolutely know before you start any new business venture whether it is based on a product or service:
– How do you know you have a market? I am starting with this first because without the market you won’t make sales. Obvious, isn’t it? But not for many. It’s also important to realise that your tastes aren’t always the same as other people. What you think will please yourself and what customers may necessarily buy are two different things. What does your potential market want? Figure this out and you could be onto a winning formula.
– Have you estimated market demand? What sort of testing have you done? Have you done desk research or field research? One way to test the market is to find 20 paying customers. That will at least give you an indication of whether what you are doing is for real.
– Have you worked out your cost price and your selling price? You need to determine whether your product or service is economically viable. Collect all the costs associated with manufacturing or producing your product. You need to realise that your product or service will also have to carry overhead.
– What is your distribution method? Will you sell to wholesalers or direct to retail stores? Will you open your own retail outlet? What will it cost? If you can find an innovative way to distribute your product, you may have a winning edge in the marketplace.
– Have you evaluated the businesses break even and expenses? A breakeven analysis will tell you what sales volumes are required to break even – this means when no profit or loss is made. It’s actually a way to find out what turnover you need to cover all expenses before making a profit. Fixed expenses will need to be paid monthly irrespective of your sales volume. Variable expenses increase with a rise in sales volume. Work out both fixed and variable costs.
– Have you analysed and evaluated your competitors? Who are your competitors? How strong are they? Do you anticipate new competitors entering the market? How will you counter an attack? How difficult is it for competitors to copy your products/services?
– Do you have a clear, written business model? A business model is the way you will provide value to customers and in turn will be rewarded. I’ve left the business model for last because it needs to encapsulate everything you will do to make products, sell them and secure satisfied customers. Your value proposition must be clear and compelling. A start-up can be defined as an enterprise in search of a business model. This means you will refine your business model as you go along, testing what works and doesn’t, and correcting as you gain market and operational experience.
It’s important to at least have thought through these seven valuable aspects of starting any business. Remember that things change and you need to plan for the unexpected, setbacks and assumptions that don’t pan out. This is where you need to “pivot”. This means not being locked into any direction but being able to explore other possibilities and opportunities and move in a new direction.
There’s a lot more you need to know than these seven things but they are key to your success. You’ve got to know them before you start.
If you would like to know more from a concise source of professional and easy-to-follow recommendations and suggestions for starting your own venture from scratch, have a look at this.