Thursday, March 17, 2011

So You Have A Business Idea . . . Now What?

imageThis article was written by Barry McKinley, SCORE Orange County Management Counselor

After providing counseling to over 1,700 businesses. I have seen a trend: The majority of potential business owners have not done enough research. For example, I asked one client company which was struggling if they had “shopped” their national competitor who was less than a ½ mile away. This competitor had over 1,000 locations across the country and was very successful. To my surprise the owner said that they “hadn’t had the time to go by”, and then went on to say they had never been in any of this competitor’s locations! It turned out their pricing compared to the national company was anywhere from 10-25% higher and they did not offer a full range of services like their competitor. There is an old saying “you can lead a horse to water, but you can’t force him to drink”! That was the case with this business; the owner lost a substantial amount of money and was forced to close in under a year of opening. That could have been prevented by taking half a day and visiting all of their competitors within a 10 mile radius.

Investigation

Just because you have a good idea doesn’t mean that someone else may not have come up with the same idea, months or years before. The internet will provide an excellent source of reference. Search for your type of business many different ways. It may not show up in the way you describe but that doesn’t mean it doesn’t exist. Look at your competitors’ web sites to get ideas, and to analyze their strengths and weakness. Use their ideas and build on them!

Research Development

Great! Now you know who your competitors are and what their strengths and weaknesses are. Don’t be shy in calling them and pretending to be a customer to get more information and hear their “sales pitch”. Start developing you own reasons for customers to choose you.

Do you know what demographics you are trying to serve? If you are a physical location, is this the best location for your potential customers? It is not uncommon for the big companies to have an employee sit in a parking near a potential site and count shoppers by age, etc. for a couple of days. Cities can provide you with car counts on most main streets. Most cities’ web sites also provide an excellent source of information on its residences, age, race, income, etc. If your business is web based, is it designed to attract the demographics that you will serve? Is the web site easy to use and navigate? I personally make 10-15 purchases a month online and am amazed at how hard some companies make you work to place an order. Make sure you have “potential customers” visit your web site and place orders without any help from you.

Listen

Ask potential customers and business associates as many questions as you can. It continually amazes me how many clients come to SCORE asking for advice and then want to argue about it when it doesn’t match their thinking or business model. Unfortunately many times the same clients come back a year or less later seeking advice on how to close their business. Sadly, this time they are now much more receptive to suggestions. Listen to what people have to tell you, weigh their knowledge and their reasons and then store it in your business resources. Just because somebody doesn’t agree with you doesn’t mean that they are wrong! I can’t count how many times I have heard a client say “Yeah, everybody tells me that!” Hmmmm, think there is a trend?

Funding

To clear up any misconception the banks, government or angel investors don’t owe you anything. If you are looking for a loan they will expect you to have a good credit score, money to put in the deal, assets to guarantee the loan, a proven track record and a good solid business plan. Without those things you can expect it to be very hard to get anybody interested in your business idea.