Creating a business you love is hard work, but very worth while. Taking it one step at a time can be immensely helpful. Previously we went over the foundation – finding an idea. We discussed why it is crucial to base your business on an idea you are passionate about rather than one that simply looks profitable.
The next step is to determine if its feasible. So lets say you want to build and sell a wearable device that monitors glucose in diabetic cats because your pet fluffy would still be around if that had existed. Okay, this is a weird example, but it gives us a good starting point.
So, let’s examine the idea. You can apply this method to whatever your real idea is and get a feel for what your going to need.
- Do you know how to build the technology?
- If so, what is the cost?
- If not, where will you have it built?
- What is the cost of outsourcing
- How many devices will you need?
- How will you fund the project?
- Is there a demand for the device?
- How will you deliver to your market?
- How will you get it to stay on the pet?
- Are there ethical or medical hurdles to overcome before its rolled out?
- Can the devices survive long term wear and tear/weather?
There may be more questions you can ask but these are some general basic questions to get you off the ground.
At each question there is a hurdle to overcome that can tear down the feasibility of your business, but its better to ask now than after you’ve poured your finances into it. Also, a negative answer doesn’t mean failure, it just means you need to adjust your business until it works.
Looking at the Questions
Do You Know How to Build the Technology, or Will You Outsource?
If you are going to develop your business offering yourself then you will need to be an expert in whatever it is you do. Also, you will need a lot of time to work for very little or no money in the beginning. Outsourcing will free you up but cost a great deal more. How much time and effort are you willing to invest in this business? If you take a look at the project and see that it is going to take more than you are willing to give, consider this unfeasible.
Don’t partially commit to something that’s success will depend on your full time and attention. Don’t partially invest in something that requires more. In business 50% investment does not equal 50% of the desired results. Often times it equals 0% or worse, wasted time and a load of debt.
How Many Devices Will You Need?
Its important to know what sort of starting inventory you are going to need. You don’t want more than you can store or sell, but too few means missed sales and potential life long customers.
Free cash and free cash flow is vital to a small business, especially a startup. Having all your funds tied up in inventory is a common mistake and one that’s cost goes beyond storage fees. Having cash on hand can mean payroll is made, the lights stay on, and your ability to operate another day. In other words, cash on hand can be the difference in having a business or closing shop.
Once you have determined your beginning inventory needs you may find that the cost is greater than the funds you are able to secure. Here you may decide that the business is not a possibility at this time, or you may consider a “soft opening”. Doing so will allow you to open to a select customer group, limited audience, or open with the premise of “while supplies last”. This will allow you to start with a significantly lower inventory and “test the waters” in a way.
How Will You Fund the Project?
There are many options to funding your business. Some choose to save up the money themselves while others pursue investors or loans. There are pros and cons to each, but however you get your funds that money is expected to be returned with interest.
Lenders and investors generally want to know a handful of things before they are willing to issue any capital:
- What are you selling?
- Who is your target market?
- How will you generate income?
- What return do you expect?
- What is your breakeven point?
- When do you expect to make a profit?
- Do you have experience in the industry?
- Do you have business experience?
- Who will manage the business & What are their credentials?
- What is your exit strategy?
I’ll be going over how to answer most of these as I continue through How to Start a Business You Love
If you can’t find a way to obtain funds then your business is over before it began in most cases. However, you may be able to work doing freelancing in order to put back some extra cash while building your connections and experience and start your official business at a later date.
Is There a Demand for the Product/Service?
If the answer to this is no, then that’s pretty much the end of things. You could try to create a demand, but this is extremely difficult. It has been done before, but it takes a great deal of time, capital, and for lack of a better term, luck. You will be much better off shifting or altering your offering to serve some sort of market.
If there is a demand for the product your next question is where that demand lies. Is it in your country, an online market, or it local?
How Will You Deliver to Your Market
If there is a demand but it is beyond your ability to connect your products with those who desire them, you have no market. If your target market lies within your ability to deliver your offering, then you are in a good position.
At this point you need to figure out if you will deliver your Cat glucose monitors yourself or ship them? Will you use a freight carrier service? Would you package the monitors yourself or hire staff to do so?
Much of this comes down to time and money. Remember, hiring out costs money and you will need to make sure your margin is high enough to cover labor costs. On the other hand, doing it yourself may take away from other important activities that could be needful for growth. This can be a real balancing act and requires a good deal of deliberation in finding the right solution.
How Will You Get it to Stay on the Pet?
Obviously you’re probably not working on a device for diabetic cats, but this is still a relevant question. What I’m asking you to think about is basically this- How well will your product fit the clients needs, and what are the possible issues? Will your device “slip off”?
If you have something people want, but your product, service, delivery, or customer service are lacking for a customer then you likely won’t have that customer for long. If that’s the case for the majority of your customers, then your business will be short lived.
Put yourself in the customers shoes and find all the ways things could go poorly from their perspective and work to solve them before they happen. Being proactive is exponentially more cost efficient than being reactive.
Can the devices survive long term wear and tear/weather?
Similar to the previous, your product needs to be one of quality. If you bought a toaster today and it burned out next week would you be interested in buying from that store or brand again?
Maybe they could win you over by exchanging for another toaster, but lets say that one lasted no longer than the first, would you still buy from them?
The same principle applies to whatever your product is and especially services. Imagine you go to a dentist and their service is terrible. They pulled the wrong tooth and forgot to numb your mouth to boot. That will make for one interesting yelp review.
If what you have to offer isn’t worth the price, customers will soon spread the word. You may last for a short time, but as a whole that business model is not viable.
Are there ethical or medical hurdles to overcome before its rolled out?
Various industries run into issues with certifications or license requirements. Of course, something being developed that touches in the medical field would have to go thorough rigorous testing and various quality controls as so forth. Many other, more common small businesses face other challenges.
For example, restaurants face health inspections and have to have food service certificates in many states. Additionally, there are rules regarding seating and facilities in many cases.
If your business requires a license or other criteria you don’t meet, then it may not be feasible just yet. You may try adjusting your business model to avoid actions that would trigger those requirements, or simply invest in yourself so that you are able to meet them.
At this point you’ve found an idea you’re passionate about and want to monetize and you know you can connect with your audience. You’ve questioned it to iron out the details to find out if it can survive as a business. You’ve looked at what it is you are offering and how much it will cost to develop or purchase, who will be performing the work, inventory needs, funding, demand, and possible issues or regulations.
You should be well on your way to developing a business you love. Next time we will look at costs associated and developing a break even point as well as a target profit.
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