So that idea is still nagging you? Feeling ready to start a business? Before you risk your time, security & savings, there are some things to do first.
Either many entrepreneurs are cocky, or cocky people become entrepreneurs. Sure, a degree of self-assurance is required to be successful. Where things go awry is when you become so caught up in an idea, just knowing it’s going to work, that you don’t stop to find or seek out some social proof. An untested idea is a shot in the dark. But knowing that people really need and will use your product is incredibly validating & the first step to a successful venture.
I strongly encourage everyone that has an idea to pursue it. Jump right in & see what happens. What’s important is that pursuing it the right way can protect you from spending your savings or cold-quitting your job before you’ve validated the idea. What you think you want to do may not be what customers need.
By trying it out, getting feedback & applying it, you may end up pivoting and morphing into something else (whether related or unrelated), and that something else could be wildly profitable. To illustrate, a recent New York Times article, The Dark Side of Opening a Store, shows the downfall of blind assurance, albeit from a brick-and-mortar perspective. Here is an excerpt:
In 2004, Ms. Schmidt moved from New York to Colorado Springs, Colo., to join her future husband. She became fascinated with local history and culture, but she was disappointed when she had trouble finding cowboy boots in colors other than brown and black. She started to contemplate opening a store where she would sell a greater variety of boots along with other high-end women’s western wear…
During the 2006 holiday season, she introduced Girl of the Golden West as a pushcart in a Colorado Springs mall. Sales were dismal, but Ms. Schmidt attributed them to a mismatch between her high-end merchandise and the lower-income customers the mall served. So, she moved to temporary space in a more upscale mall. And when permanent space became available she seized it, paying monthly rent of about $2,500 plus a percentage of the store’s still anemic sales.
Then she began approaching banks and learned the hard truth that they generally don’t lend to start-ups. Nor was the Small Business Administration, which guarantees loans made by banks, the source of financing she had imagined. She even sought venture capital.
Despite these setbacks, Ms. Schmidt, who describes herself as an optimist, was undeterred. She had $500,000 from the sale of her Manhattan apartment and decided to sink all of it into the store. About $300,000 of that went toward renovating the new space at the mall. Ms. Schmidt, who had five employees at most times, still wasn’t covering her rent…
In a final effort to breathe life into the business, Ms. Schmidt left the mall, relocating in a pedestrian-friendly strip in Manitou Springs, a historic mountain community. She no longer had to hand over a percentage of sales to a mall or staff the store during off hours. But it didn’t help enough, and she finally decided to close last summer.
She lost her entire investment, owes back taxes on the store and has filed for bankruptcy. “My credit rating is ruined, and if I weren’t married, I’d be homeless,” she said.
How can you avoid this? Test your idea before going all-in.
If you’re a brick-and-mortar venture:
Survey your friends and friends of friends. Study the competition, both locally & regionally. Distribute some flyers with your phone # or email address on them. Track how many calls or emails you get & what people want to know. Most importantly, think of ways to minimize your initial investment. For example, if you want to start a furniture store, don’t sign a three-year lease in BirminghamsSoHo or another top-dollar commercial district right away.
Rent a booth at a local antique marketplace or attend regional shows first. Start building a loyal customer base people who love what you do & are excited about it. Leverage these people to help you spread the word. Before long, if you get a real sense of other peoples excitement and passion these are your future customers.
If you’re a tech startup:
Don’t sink $20,000+ into a website or mobile application before you’ve done your homework. In fact, you should be able to validate your idea, test market trends, and get some initial traction for as little as $300 + with some basic technical know-how. First, choose & buy your domain. Then, create a landing page. Reveal what your site or product does (or will do), that its in private beta testing, and offer an email signup field. Use WordPress if you’re not a savvy coder.
Next, add Google analytics then sign up for a Google AdWords account. Create a handful of ads, choose 5-10 applicable keywords per ad, then monitor impressions & click conversions over the next few weeks. Spread the word on Twitter&Facebook to your own friends. Track site hits & email signups, then start a conversation with your subscribers.
Don’t just send out newsletters survey their opinions, such as which features they want, how they’d use it, if they’ll be willing to pay, etc. This should be your starting point & will either validate or invalidate your idea.