Coming up with a groundbreaking idea is only a small part of the entrepreneurial journey; the real trick is to be able to determine, with some certainty, whether it can be turned into a viable business.
How does one come up with a business idea? There is no prescribed way - the process varies from looking for a solution to something that is bothering you, to an innovation in a sector that seems to be in a technology-development curve. Settling on an idea is often done by confirming and checking its merits carefully. Avoid the trap of having a solution and then looking for a corresponding problem it could solve.
During the initial stages, a common misconception among budding entrepreneurs is that they need to come up with a new idea. The Global Entrepreneurship Monitor report for 2016-2017 revealed that only 22percent of South Africa’s entrepreneurs had products that were new, compared to 30percent in 2015.
While being an entrepreneur might involve inventing or reinventing the wheel, more often than not it is about improving the wheel by offering a better service or product than existing competitors. An example would be a new butchery that offers a better quality product.
Entrepreneurs are often a mix of inventor and innovator as they recognise a trend or identify a shortcoming, and then create a solution in order to meet demand or solve the problem.
Every good business begins with research. When new business ideas fail, it is often not because of the idea but due to insufficient research. A few vital aspects to consider when researching include customer insights, product or service supply and demand, competitors, financial viability and the availability of funding.
One of the best tools is a Swot analysis used to define a business’s strengths, weaknesses, opportunities and threats.
Some vital elements to consider:
Passion: If you are not passionate about your business, you will be tempted to give up sooner.
Central idea: Your idea seems perfect to you, but how unique is it? Any good business needs a unique selling point (USP). Research whether the idea has been done before, what the USPs are for the competitors, whether there is a legitimate need for another provider and whether the idea has long-term sustainability.
Defining the market: Analyse your target market in order to establish what your customers want and how they communicate. It is important to research and analyse your competition, including their strengths and weaknesses. This will give you an indication of where to position yourself in the market.
Calculate the figures: Calculate your running costs, cost of sales, pricing structures, profit margins (both gross and net) and cash flow forecasts. Conduct two different forecasts - one for the worst-case scenario and one for the best. Then start researching potential sources of finance.
Persevere: Entrepreneurs should not be disheartened by the need to constantly rethink, retool or redefine their offering. Refocusing should be taken as a predictor of future success.
It is crucial to remember that entrepreneurship is a constant work-in-progress, and success takes research, planning and hard work. Those willing to go the distance will have the opportunity to hear many of their detractors acknowledge that they knew theirs was a good idea all along.
Ben Bierman is the managing director of Business Partners Limited.
- BUSINESS REPORT