We are creatures of habit. Sometimes to our own detriment. I thought about how we are creatures of habit this morning on my run when I came across some rubbish piled at the corner of one street. A few months ago during the cold someone had smashed open dirt bin and made a fire from the rubbish to keep warm. Much later the concrete dirt bin was removed for repair and all that remained was the circle or base in which the dustbin was previously seated. But pedestrians still take their rubbish to the same spot and place it there although there is no dustbin anymore.
My point: when you are starting something from scratch, starting a new business, coming up with a new idea for a product or service, be mindful of your habits, your familiar mental pathways. One of the biggest dangers that I see often is that entrepreneurs underestimate the costs involved in a new project and overestimate demand. Why is this so? Is being optimistic a sin? Not at all. It’s just that we jump to conclusions hastily. We don’t provide supporting evidence to ourselves.
Take a quick look at these 5 essential questions you need to ask before launching a big new idea or entrepreneurial venture:
1 What benefits are you offering potential customers?
2 How are customers presently addressing this need?
3 Who are your customers?
4 What is the size of your potential target market?
5 What competitors are ready offering a similar solution? (Also ask yourself what substitutes are available?)
These questions are designed to remind you of the fundamentals. You can’t build a home without a foundation. Having a superior solution in your product or service is essential. Knowing or having a good idea after you’ve done your homework of the potential demand is critical. There is an important relationship between the demand that you estimate and the costs or initial investment required. If this is out of balance you’re going to shoot yourself in the foot before you get out the starting blocks.
One business owner I know some years back started a coach building business, sank his entire retirement savings into the business and only subsequently found out that he needed more investment capital and his estimated demand was far lower than his optimistic projections, plus a large competitor entered the market.
Use these five essential questions to take your new business idea for a quick test drive. If you find holes, go back to your drawing board, sit in a quiet place without distraction and figure out whether it’s worthwhile to gather more data or to move onto something else.