The BizFilings blog covering business tips and trends.
Try Out Your Business Idea Before You Dive In
Published on Jun 30, 2013
Read 'Try Out Your Business Idea Before You Dive In' at 'Time to Start Up,' the small business blog by BizFilings.
You’ve sketched out a business idea and you’ve finished all of your initial analyses. You’re excited about a potential money-making opportunity, but before you begin the business incorporation process, you must dedicate some time to testing it out: How many other people will think you have a good business idea? How many will pay for that idea?
Establish a Value Propostion
What specific feature and benefit will your idea provide? If your idea can answer this question then you have a unique value proposition that will resonate with people. This is especially important if you will be competing in a crowded industry or providing simlar products and services as your competitors. A good value proposition can help you predict whether your business idea will be accepted by customers and what demand to expect.
The value proposition has one flaw: it predicts the acceptance of your product or service by the average consumer within a climate of similar products or services, but it doesn't tell you how many people will accept or desire it. Market research and testing are two ways to get a sense of those numbers. Here are some tips and tricks to researching your idea before moving on to the next step – incorporating your business.
Mainstream versus Niche
If your product takes a new approach to a common idea within a market, researching its value will be easier. Let’s say you’ve developed a sock designed for runners that provides better support to the foot while running. Most runners wear socks, so you perform some research as to how many people take up running every year, how discontinue the sport, and the percentage that purchase clothing to enhance their running experience.
There’s plenty of history regarding consumer purchasing behavior when regarding sock purchases. However, what if your business idea is on the ‘fringe,’ meaning there isn’t much data related to the purchasing habits of customers who may want your product? You may be absolutely committed to the belief that people will want your product, but how do you seek out an unbiased truth? Before formally forming a corporation, trials and focus testing are the most efficient way to estimate market response.
Know Your Customer
You believe people will purchase your product, but who are those people? How do you know what consumers to target, or how to target them? Go to the mall, relevant trade shows, and anywhere else people may purchase your product. Study consumer behavior – watch people as they inspect wares and take note of their decision-making process. Develop a list of attributes that will help determine your target audience. Your list may include the following:
Amount of time spent on their purchase
Amount of money spent on their purchase
Although it may be a guessing game at the onset, things will become clearer later during the process of company formation.
Get Product Feedback
To successfully test out your business idea, you’ll need a prototype of your product or a tangible demonstration of the service you plan to provide. If your idea is in the prototype phase, it’s well worth the cost and effort to get your product into the hands of customers to receive feedback – sooner rather than later. Some may consider this an expensive, unnecessary step, but it’s far cost-effective to make 100 prototypes of your product than 100,000 units that ultimately sit in a warehouse because no one is interested in purchasing the product.
If you’re unable to provide a preview of your product, compile a ‘product portfolio’ – photos of your product from several perspectives. Find trade shows, expositions, farmer’s markets, and local stores that will allow you to set up a small table where passerby can check out a first glimpse of your product.
Providing potential customers an early look at your product will provide you the opportunity to gather feedback, makes changes to your product based on this feedback and test your salesmanship. When first presenting your idea to potential customers, consider the following criteria through the eyes of the consumer:
What’s the most important aspect of this idea for the customer?
What aspects of the product does the customer find most appealing? Unappealing?
What are the decision-making criteria that the customer uses when purchasing this kind of product?
If undecided, what feature in the product would make the customer purchase it?
These questions will shed some insight into the thought processes and buying habits of your potential customer.
The Customer Is Always Right
This is true, no matter how good your business idea is. If customers stand in line to buy your product, then your idea has been proven a good one. If you find selling your product is a struggle, it doesn’t necessarily mean your product wasn’t a good idea – there’s just insufficient demand.
Make your business idea public, and start getting input – the good and the bad. You’ll learn how your product would benefit consumers and what changes would make it even better. Depending on the results of your outreach, tweak your product and take the necessary steps to ensure you’re prepared to meet the demands of your potential customers when you finally incorporate a business.