The Business Idea Testing Series – Part Two
This is the second installment in our three-day Business Idea Testing Series with Start-up Business Coach Katie Wyatt, of The Wellness Entrepreneur . Throughout the series, Katie will share some generous tips on how and why you should test your brilliant business idea and what you need to ask yourself before you start. If you missed part one, check out yesterday’s article here.
DON’T START YOUR BUSINESS UNTIL YOU CAN ANSWER THESE 5 QUESTIONS
Hello again, budding entrepreneurs — I’m so glad you’re back with me. I’m excited to talk to you again about the passion burning inside you that you want to turn into your dream biz. Bring it on, Soul Sister!
I suspect if you’re reading this, you’re a multi-passionate person looking for new direction and purpose in life. Am I right?
You see, the problem with multi-passionate people — aside from the fact that we are literally and unforgettably awesome — is that it can be hard for us babes to work out which dream business to start because there are so many ideas exploding in our heads and hearts every day. Am I talking to you, Olivia Overwhelmed?
Come on over and pull up your yoga mat. I’m going to help you get crystal clear with these evergreen questions:
Is my business idea a good idea? Will it make me money, give me joy and create lasting change in the world? Is this the one?
To get there, you just need to answer these five teeny tiny but oh-so-important questions.
Who are you and why are you doing this?
Simon Sinek calls this starting with ‘why’. (If you haven’t seen Simon’s TED Talk, be sure to watch it as soon as you’ve finished this article. It’s brilliant.)
When you’re thinking about starting your business, the why is critical. Starting a business is hard work, and takes time, money and energy. Often, it’s really lonely. To stay motivated, you need to keep coming back to your ‘why’. It’s also the litmus test to know if you are starting the right business.
Sometimes we have amazing business ideas and want to start all of them, though the procrastination of choosing can mean we end up doing nothing at all. Stop waiting for an epiphany or lightning strike — both are unlikely, lovely friend!
We need to get rational in order to let the emotional sort itself out. Interrogate each of your ideas. Imagine working in that business every day and the mundane tasks that are required. Will doing them every day kill every cell of passion you ever felt for that idea? Use this guide as a process of elimination until you land on the right idea for you.
Who is your dream customer and what makes her tick?
Many entrepreneurs start with a business idea and think they’re selling to everybody. Or, they create an idea from something they want themselves — but don’t know if anyone else will want it.
Now is the time to get really clear on your dream customer. Get to know her better than you know your best friend. How old is she and where does she live? Is she married and does she have kids? Where does she work and what does she spend her weekends doing? Does she prefer painting or cooking?
This exercise will help you in everything you do in your business. Every decision you make, you will be able to look through her eyes and make the decision for her — because you know her so well.
Being so specific doesn’t mean you can’t service anyone else, it just means you know where your main game is at. In these early stages of exploring your idea, the clearer you can be on your ideal customer profile, the easier it will be to find people who fit that profile to test your idea with.
Handy hint: if you’re a visual person and you’re finding this task tough, create a Pinterest board about your dream customer. Pin posts and photos you think she would love. This will soon give you a gorgeous, visual picture of what’s inspiring your dream customer and how you can inspire her too!
Who else is selling to her and why are you different?
It’s unlikely you’ve come up with an entirely original idea. If you do have an original idea, there will be existing alternatives. Now is the time to understand what else is out there and how it’s appealing to your dream customer.
Find your top five competitors and identify how you can and will be different. If it’s a crowded market, think about how each competitor positions themselves on key criteria, such as price and customer service. Can you do something completely different to shake the market up?
What is your business model and will it make money?
A passion-led business that makes no money is what we call a hobby. For you to delight your dream customers and find more dream customers, your business must be profitable. How profitable? This depends entirely on you —on your ‘why’ and what success looks like for you.
Now that you understand your dream customer, your competition and how you will create your business to service your customer and eliminate your competition, you need to understand how much revenue you can earn. How will you charge for your product or service and how much will your dream customer pay?
Typical business models you may be considering, include:
- A fee-for-service model where someone pays you, you deliver a service and the transaction is complete.
- A membership or subscription model where customers pay a set fee per month for an agreed product or service.
- A product-based model where you exchange cash for a product.
There are plenty of others — your competitor research will have revealed to you the proven business models in your industry.
Open up a spreadsheet and start to put in some numbers: volume of products or services sold, customers acquired, revenue per sale and any other items that will generate revenue for your business.
You also need to work out how much your business will cost you. You will have three different types of costs:
- Start up costs (the one-off costs to get you going)
- Ongoing expenses (staff costs, rent, equipment hire etc)
- Costs of Goods Sold (COGS), which are costs you incur to produce your products or services. For example, if you create products, your COGS may include the materials you buy to make the product. If you create services like a training workshop, the COGS may include the space you rent to deliver that workshop.
Your gross profit is your total income minus your COGS. Your net profit is your gross profit minus your ongoing expenses.
Why are you the right person to create this business?
Do you have the skills to run this business? Do you have — or can you get — all the equipment, assets and credibility you need to start your business, find your dream customer and have her pay you? It’s time to take an honest look at your skills, capabilities, networks and experiences that will all contribute to your success.
So there you have it – the questions you must answer before starting your business. Let us know in the comments below what you discovered as you worked through those questions. Which question was hardest for you? Most entrepreneurs I know struggle with number 2 and 4, however like many struggles, these are the two most worth doing!
Stay tuned for part 3 of this series, where I will introduce you to some free or inexpensive ways to test your business idea. If you’re struggling to pin down answers to any of the questions above, you will love and need this post! It will also include a free template to help you get really clear on your business idea.
Thanks for reading
I’m building an empire, I’m on the journey. I’m sharing the journey and digging into the empire building stories of those who have made a business out of their personal brand. We talk to entrepreneurs, intrapreneurs, authors, coaches and technical experts to help you, inspire you and guide you on your business building journey