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Our article of today focusses on the critical issues that you need to transform a business idea into a business opportunity, and eventually to a successful enterprise.
Start-up statistics show that up to 90% of businesses fail, with the top reason for failure being no market need and this accounts for 42%. This is closely followed by cash or financing challenges at 29%.
Source: https://findstack.com/startup-statistics/
Now, these statistics are honestly worrying. Don’t you agree with me? We can only imagine the financial and other related impacts of these failures. Not nice!
The question we should ask then is: why are entrepreneurs failing to get right the market need agenda? How and why do they spring up with products for which there is no market need?
This hinges on the initials from idea generation, idea screening and validation.
It also involves a sense check regarding the ability of the venture to get good traction and start generating significant cash flows after a reasonable time, and also generate profit.
In this blog I intend to start with the subject of idea incubation and validation together with money-making sense.
Later I will proceed to consider a few other important considerations you need to translate your business idea into an opportunity and eventually a blossoming enterprise.
I mean, you should decide to go for it and commit when you really have a good and viable business idea. Once you start you should not look back.
The opportunity should be good enough to avoid your venture becoming another part of the 90% statistic above. Ok?
1. Idea incubation and validation. Based on the above findings that lack of market need accounts for 42% of start-up failures, any wise entrepreneur would not take lightly the business idea incubation and validation task.
The incubation time simply enables you to go the extra mile to think through your business idea severally, including the products or services and the market.
If done properly it enables you to avoid ending up with a product or service for which there is no market need.
You can only waste this incubation and validation time at your own peril, Got it?
Every wise entrepreneur will deeply refine and shape his or her ideas and confirm the strategic fit for the venture. This involves market research (basically fact finding) and making use of the feedback.
Your value propositions should sync with your target market.
Catherine Cote of Harvard Business School provides for us a useful guide in this respect.
Don’t get scared away by the term ‘market research’ – since you can do this through simple approaches. If you discussed this with a professor of business it could get more complex due to terminologies he/she will use.
Don’t get me wrong. Professors are nice people – but sometimes the academic world gets things too complicated.
Candidly, my dear entrepreneur, you need to get down to fundamentals of customer needs, market segment and size including market share, customer validation, testing your products or services etc. to get this right.
There is no short-cut.
When you test your business idea vs competitors and the market, this will help you to assess whether you have enough market or not. Don’t make a product that only your grandfather or close relatives will buy! Please, don’t.
Start-up Nation also has some good guides about rating your ideas and making forecasts of revenues and expenditures at this validation stage.
You also have to take into account other related feasibility considerations including technological, sustainability etc.
If you must pivot, please proceed and do so reasonably quickly to avoid becoming another failure statistic.
I think we should proceed to the next point now. The good thing is that you have access to limitless resources on the internet to study more on this. Ok?
2. Cash flow and the money-making sense check. Successfully translating your business idea into a business opportunity also involves doing some serious preliminary work on the aspect of cash flow and money-making sense.
Consistent cash flow and profitability comes from revenue generation, and this revenue comes from folks that you have impressed enough with value creation and delivery.
Even if you have tons of cash to start your business with (which is even very unlikely), you need to ensure good revenue streams within a reasonable time period. This reasonable time period depends on the nature of business but usually one to three years, unless otherwise.
You have to assess your potential profitability, and your business model is critical here. The business model guides your enterprises on how to create and deliver value to customers.
Now, this is where the money-making qualities or sense kicks in! Money speaks the language that everybody understands. Someone said business is the art of extracting money from other people’s pockets without violence, and without them complaining.
Of course, there are guys who get very good value and still pay while complaining. A friend recently told me he has a client who must quarrel every time he’s paying money out. Interesting!
People are created and wired differently.
Anyway – and candidly – if your enterprise does not create or add value or solve a problem, in an affordable and nice way to people, then you need to have a rethink.
I’m being honest here! Why? Because if you don’t get paying customers early and sufficiently you will run out of cash and max your debt and close shop.
This means you could be another statistic forming the 29% of ventures that fail due to cash flow challenges.
Cashflow is very important to business and you cannot successfully take advantage of a business opportunity without it. You cannot properly manage and grow a business without proper cash flow.
If you can achieve value and attract ten customers to buy then probably you can attract one hundred and you could breakeven and scale the business.
Make no mistake.
3. Business planning. The third vital thing that you need to translate your business idea into a successful business opportunity is business planning.
You could quickly read my article entitled Top 9 Reasons Why a Business Plan Can Guide Your Business to Success.
Your business plan should incorporate all vital elements of your enterprise, including products and services, market and competitor analysis including sales and marketing approach.
It should also include aspects of organization and management, finance and control, risk management, operations and logistics, investments, human capital etc.
Just a reminder! Your marketing and business development plan and strategy is critical to getting the enterprise to generate revenues fast enough. It is also critical to your survival as mentioned above.
The plan should also include your operations strategy including design and development elements as may be applicable.
Don’t forget the financial elements please – for goodness sake. Your business plan can open funding and investment avenues for you. In fact, great business plans usually easily attract funding.
To repeat what I mentioned above, the second major reason for business failure is cash flow problem, so your financial plan is a must-do component of your business plan.
Never go to potential financiers and investors with some dumb or lazy approach to how you plan to run your business.
Financiers are keen to know that you understand your business and clearly know the way forward for the short, medium and long term.
I cannot overemphasize the fact that a business plan is important for every enterprise.
By the way, there are some arguments against documenting comprehensive business plans for start-ups.
The reasons given include high level of uncertainty and the fact that the only reliable test is a real one. The everchanging business environment and the need to constantly adapt etc. are also mentioned.
Martin Zwilling, a veteran start-up mentor, documents some of these arguments. Richard Harrock, a contributor to Forbes magazine also states that start-ups should not waste time doing detailed business plans – rather – should prepare pitch decks for investors.
Nevertheless, research evidence still puts strong points for a business plan.
It’s your choice. It’s really up to you. Don’t you think so?
4. The human capital element. Placing importance on human capital is also key to successfully transforming your business idea into a thriving business opportunity.
Homo sapiens can make you succeed or fail. Get this right – for your own sake. Don’t come back yapping about this after you have burnt your fingers.
As you can see from the statistics we showed at the beginning, the wrong team accounts for up to 23% of start-up failures. This is not a number to ignore.
I’m talking about the leadership and teams you have in your enterprise. You need to wisely and smartly assemble the right leadership and team to succeed.
Take a look at one of my earlier articles about the importance of human capital. In fact, the quality of an enterprise can never exceed the quality of minds therein.
Quoting General Colin Powell; “Organization doesn’t really accomplish anything. Plans don’t accomplish anything, either. Theories of management don’t much matter. Endeavors succeed or fail because of the people involved. Only by attracting the best people will you accomplish great deeds.”
Powell further says; “Look for intelligence and judgement and most critically, a capacity to anticipate, to see around corners. Also look for loyalty, integrity, a high energy drive, a balanced ego and the drive to get things done.”
Indeed human capital affects organizational success, and your budding enterprise is no different.
Isn’t this fantabulous and great? Come on! Smell the coffee.
5. Action (execution dynamics) and building momentum. Now, not everything on paper will be reality. Situations change, timing may be incorrect, assumptions change, something exactly like yours might already be existing and doing well or failing dramatically.
What am I saying? Simply learn to connect the dots and adapt through execution. This is one reason why elaborate business plans could be useless sometimes.
The execution culture is very useful in transforming business ideas into reality, ensuring efficiency and effectiveness of operations (which are critical for enterprise success) and progressing onto profitability, growth and enterprise sustainability.
Execution further helps guarantee the success of a start-up.
Please try and overcome perpetual planning and analysis (what some folks refer to as analysis paralysis).
Get into action and move! Ok?
Start positioning your business and branding including your long-term strategic growth through actions.
Build capacity for growth, and before you can say Jack Robinson you will find your business idea becoming a viable and profitable business opportunity.
6. Mentorship network and support. Another powerful approach to assist you move from the business idea level into a viable opportunity is the value of mentorship, coaching and support.
You need a support base to succeed, beyond your work colleagues and staffs. Identify good and useful advisors and consultants (not just anybody who claims to be an expert).
Keep an open mind and reach out when necessary. Appreciate the fact that continuous learning is vital for your entrepreneurial success.
Justin Kulla, a Forbes Councils Member also argues that lifelong learning is a cornerstone for entrepreneurial success.
Build positive relationships with those that matter. These could include industry experts and networks, business consultants, tax experts, accountants, relevant government agencies etc.
When you need to select experts, my tips on choice of experts could be handy.
7. Work on yourself. Finally, you need to work on yourself to be able to successfully move from the business idea stage into a successful and sustainable venture – built to last.
You don’t need to blame me or anybody! If you screw up things because your personality cannot support business growth and success, you are the one who will cry. Not so?
I’m referring to your passion, courage, motivation, the need to stay positive, self believe and being visionary, inspiration and creativity.
These also include timely decision making and prioritization of issues, accommodation of a certain level of risk yet with wisdom and patience, etc. etc.
Certain personality traits are critical for your success in business. These are sometimes referred to as essential characteristics of entrepreneurs.
Additionally, this also requires you getting more organized individually and businesswise. Making your business formal and legal is included here.
Never let success start getting into your head, even if you start making great moves in your enterprise.
I think let’s leave it here for today.
In conclusion, transforming your selected or ideal business idea to a viable business opportunity and later a successful venture is no walk in the park.
It requires effort and focus, with cornerstones such as idea validation, money-making sense check and business planning. Others include the human capital element, execution culture, business support network and self-management (of the entrepreneur) and organization.
Ok. Great!
If you like this blog, kindly give us your feedback in the comments section below, and also share it with as many people as you like.
Till then – take care!
The Wise Entrepreneur
NB. Images Courtesy of:
- Leon on Unsplash
- Jamie Templeton on Unsplash
