Tuesday, April 18, 2006

Business Plan Article #2 - The Acid Test

Here's the second business plan article.

The Acid Test: The 7 Steps - Will Your Idea Work?
To conclude, run through the following 7 questions and find out whether your business idea will really work. Good luck!

1. Who Needs You?
Making Money: No one shells out hard-earned cash even for a great idea, but they will pay for an excellent product/service that will make their lives better.

Who cares? There's no substitute for talking to the people you expect to pay you – so do some market research. Ask them what they want, what would improve their lives at work, at home, wherever. Then be prepared to change your idea.

Re-Invent the Wheel: You don't have to have a totally new idea, just have something better, bigger, faster, cheaper, more seductive than your rivals. If you haven't got this then get it quickly. Why should anyone buy a new untested name when they can go with a brand they may have been buying for years?

Know Your Enemy: Like any fight, it pays to know your opponent and their tactics. Speak to them, get their brochures, adverts and anything else you can get your hands on. Pretend you are a client/customer. They are unlikely to be much help once they know you are setting up in competition, but try to discover whether they are doing well or suffering. Find out who their clients/clients are and speak to them to find out what they want.

2. Are You Good Enough?
Products and services are people. Make sure you find a top team to make and sell your idea, from staff to shops that will stock it. You may be able to pile up the quantity, but if the quality stinks you’ll go down in flames. Premature birth is risky. Make sure your idea is ready when you come to sell it. Get in the right experts. If you build up client/customer hopes and can't deliver, they won't come back.

3. How You Going to Sell It?
To move with the market you'll need to know all the right steps. Ask friends you think may be interested in buying your product/service for their feedback. Perhaps place a trial ad to see what response it gets. Check out your first clients to see what they think. Then be prepared to change your idea if you need to.

Buyers aren't going to leap out at you, you've got to discover their world and go and live with them. Find out what they look like, what they wear, their favourite TV programs, which magazines and newspapers they read – know them backwards! Your idea depends on it.

If you're selling to another business the people doing the buying are probably bored silly of hearing of new products and services. Mail shots are likely to go straight in the bin, so think of a way of getting to them. Phone them, get them out talking and make them your best friends, then they might listen to what you’ve got to say.

4. Will it Sell?
Ask yourself why anyone will buy your product or service or time. It must be better, for example a more competitive price, a more efficient and accessible service or easier to buy. Ideally, your idea should have at least two plus points over your competition to succeed.

Know your rivals. Measure your offer against theirs to see if you can make your idea more attractive.

Count your competitors. If the market is already crowded, is there room for your product or service? So people will buy your idea now. But will they next year, or in 3 years time? Today’s markets are always changing, so can your idea keep up?

Check that your clients will pay a price that will allow you to make a profit. To know this you will first need to work out precisely all your costs from production and marketing, to sales and delivery. Before committing yourself, find out what potential clients are paying for similar products/services, or the time of people like you, and ask them what they are prepared to pay for yours. If this is not more than all your costs, then you'll need to think again. Ask yourself if it's worth the hard work for the sort of money that is likely to come your way.

5. Can You Deliver?
Will you be able to deliver on time and to quality and can you satisfy your client’s demands?

If you are going to find client demands insatiable, you'll have problems. Frustrated clients soon turn to rivals. Find out if your clients want to buy in ones or hundreds, hours, days or months.

Red tape is everywhere, but ignored rules and regulations are likely to trip you up. Is there any legislation governing what you are intending to supply?

Never pay a bill today that you can settle tomorrow. Make sure you know how quickly you must pay for supplies and labour and when you can expect cash from sales you make on credit. The further apart the two dates, the more stretching you'll have to do to make ends meet.

Reliable supplies of quality materials and labour when you need them at a price you can afford will be essential to your idea’s success.

6. Can You Hear Me At the Back?
Make sure your clients understand why they can't live without your product/service. To do this you'll need to understand the benefits your idea will offer them. Can you make sure your message is easy for others to understand?

Unique selling point (USP). This is crucial to remember. What is it that will make you stand out from your competition? You need to be clear about this so that you can focus on it when talking to clients.

Think about how you will promote your idea: brochures, websites, press releases or do you want to give the impression that it is more exclusive by relying on a slow build up through word-of-mouth recommendations.

BBC - brevity and basics to communicate. Keep your marketing message simple and short. People won’t read or understand it if it is too long or complicated.

7. Have You Got What it Takes?
A lot of pulling power will be needed to drag your new idea into the world, so you'll need the right people on your side to give the skills, attitudes and motivations that make sure you and your idea don't buckle under the strain. Remember, it’s you and the people behind your idea that will make it a success.

Don't be afraid to hire help for things you can't do. This is better than doing the job badly. Employing sub-contractors or staff may be the answer or you may find the solution in a partnership with another trust-worthy like-minded person or getting yourself some quality training.

Be passionate about your idea and prepared to dip into every last ounce of energy you have. If you won't do this, no one else will.

If you’ve made it this far and your idea still sounds good, then you need to work out if your idea adds up. Is your idea a real money-spinner or a financial black hole?