by Tim Knox
http://www.timknox.com
© 2006
Q: I want to start my own business. I have
tons of business
ideas that all sound great to me, but my husband is not so sure.
He says that we need to figure out a way to test my ideas to
pick the one that has the best chance of succeeding. I’m
ready to just pick one and go for it. What is the best way to
determine if a business idea really is as good as it sounds?
-- Hannah C.
A: Heather, I know you probably don’t
want to hear this, but your husband is right (first time for
everything, huh): before you just pick a business idea and go
for it you should test the feasibility of your ideas to make
sure they really are as good as you think they are.
Every business idea, no matter how good it sounds
while bouncing around inside your head, should be put to the test
before you invest time and money into its execution. Success lies
not in what you think of your idea, but what the buying public
will think. Many entrepreneurs find out too late that the public’s
opinion of their idea differs greatly from their own. Wasted time
and money aside, the last thing you want to do is hear “I
told you so!” from your husband, so take a deep breath, slow
down, and let’s look at the ways you can test the feasibility
of your idea.
There are many ways to test an idea’s feasibility,
though some
ways are not nearly as effective or accurate than others. Most
people start out by asking everyone they know what they think
of their big idea. This is a good way to start the wheels
turning because you may get feedback that you have not
considered before, but be warned: this is NOT the best way to
test the true feasibility of an idea. Never start a business
simply based on what your friends and family think.
There are two things that will happen here. First,
your mother
will tell you what you want to hear and your best friends will
be equally kind. No one who really cares for you will want to
rain on your parade no matter how insane your parade might be,
so take the wisdom you gain here with a hug and a grain of
salt.
On the flip side, your coworkers and casual acquaintances
will
probably tell you the opposite of what they really think. If
they think your idea stinks they’ll tell you it’s great
and if
they think your idea is great they’ll tell you it stinks.
Please don’t preach to me about human kindness. Human kindness
is often bested by human nature and we humans, by nature, are
an envious lot. We hate to see anyone doing better than we are
doing and we hate to see anyone who has the potential to leave
us behind. Go watch the movie “Envy” and consider this:
why
would someone who is broke or stuck in dead-end job with no
other prospects want to see you succeed? They wouldn’t. End
of
story.
Instead of conferring with friends and family
you should run
your idea past a number of neutral third parties who are
knowledgeable about business and will give you an honest
opinion. Contact the local Small Business Administration (SBA)
or The Service Corps of Retired Executives (SCORE) offices and
ask to speak with someone knowledgeable who has time to listen
to your idea (don’t run it past the receptionist). Or speak
with the small business liaison at the Chamber of Commerce. Or
seek out a successful entrepreneur who is willing to listen and
give you an honest opinion about your idea. Just remember,
opinions are like belly buttons: everybody has one and they are
all different.
A more accurate way to judge the feasibility
of an idea is to
create a SWOT analysis. SWOT stands for Strengths, Weaknesses,
Opportunities, and Threats. A SWOT analysis will not only help
you gauge the feasibility of your idea, but also help you build
on your idea’s strengths, identify and correct the weaknesses,
and spot ways to take advantage of potential opportunities
while avoiding potential threats.
Here’s how to perform a simple SWOT Analysis.
On a piece of
paper draw a vertical line down the center of the page. Then
draw a horizontal line through the center of the vertical line.
The paper is now divided into four quadrants. Label the upper
left quadrant “Strengths.” Label the upper right quadrant
“Weaknesses.” Label the lower left quadrant “Opportunities”
and
the lower right quadrant “Threats.”
Now fill in each quadrant based on what you see
as the
strengths, weaknesses, opportunities and threats of your
business idea. You should repeat this process for every idea
you have and each quadrant should have something written in. If
you can think of no strengths, weaknesses, opportunities, and
threats for a particular idea, that means that you do not have
enough information to complete the SWOT analysis, which means
you also do not have enough information to effectively execute
that idea.
Strengths are those things that make your idea
a strong one.
Strengths can be personal or product-oriented and may include:
prior business experience and success; sufficient funding to
start the business; having a customer in hand; having a unique
product or service to offer; having an established market; etc.
Next list all of the weaknesses of your idea.
It is important
that you are honest with yourself and list as many weaknesses
as you can. Don’t pretend that your idea doesn’t have
any
weaknesses because every idea does. You will hurt no one but
yourself if you pretend that your idea is bulletproof.
Weaknesses might include: lack of capital to start the
business; lack of business or management experience; a crowded
market place; large competitors; etc.
Opportunities are those things that you can tap
into that might
fast track your business idea. We’ve talked about opportunities
before and how smart entrepreneurs seek out new opportunities
rather than waiting for opportunities to come to them.
Opportunities might include: a potential partnership with
someone who sells products in the same market; a prime
storefront location that is coming available; a competitor
going out of business, leaving a hole in the market that may be
right for you; etc.
Threats are those things that threaten the success
of your
business idea. Threats might include: uncertain marketplace
conditions; strong competitors in the market with lower prices;
possible laws or taxes that may impact your idea; etc. Like
weaknesses, it is vital that you are honest when it comes to
identifying threats.
Once you have filled in all four quadrants, you
should have
enough information to begin testing the feasibility of your
idea. Do the strengths of your idea outweigh the weaknesses or
do the weaknesses outweigh the strengths? Are the opportunities
available to you ample or nonexistent? Are the threats many or
few?
With this information in hand, you can move on
to the most
accurate method of testing your idea and that is the creation
of a detailed feasibility plan, which we will discuss next
time.
Here’s to your success!
