Business ideas are a dime a dozen these days—everyone has a good one. What separates the successful entrepreneur from a dreamer is their ability to turn that idea into a plan.
There is a common misconception that the moment you are struck with a valid business idea, you need to write a business plan. But in reality, there are several steps that need to be taken before you delve into the nitty-gritty of writing your actual business plan. This process—preparing your business idea to be shaped into a plan—can be overwhelming, but there are a few tips that will make it easier.
One of the hallmarks of good leadership is knowing when to ask for help. Ideas can’t become fully formed unless they are brought into the world and communicated to another person. When you think you have a brilliant idea, the first thing you need to do is run it by someone you trust.
This can be anyone, or even a few people—a friend or family member, a colleague, a former college classmate. When you share your idea, include some questions to draw out specific advice from your listener. You might ask:
- Is this business monetizable?
- Would you buy this product/service? Why or why not?
- How can this idea be improved? What is it missing?
Each time you explain an idea to someone, it grows and changes and evolves. This practice is invaluable in terms of helping your business idea graduate to a fully-fledged plan.
Market research is a foundational component of entrepreneurship. To know if your business idea is worth pursuing, you need to know your customers’ buying and selling habits. This might seem intimidating—even the term “market research” can sound daunting—but it can be as simple as a quick chat with someone you think might like your product.
Once you’ve found a sampling of this target group, you’ll want to interview them with the goal of creating a clearer picture of who they are. What do they do for a living? How much money do they make? You’ll also want demographic basics like age and sex.
After you’ve gathered that information, you need to delve into their buying habits: what do they buy? How often? Where? Why? (This last question is often the hardest for sources to answer, but also the most important.)
The market research stage has been known to leave entrepreneurs back at the drawing board. That’s okay! At least you didn’t waste time on an idea that wasn’t going to work.
Crunch the Numbers
One of the first questions you need to answer is this: is your business idea financially sound? There are plenty of great gadgets and services that you could create or offer, but not all of them are going to make money. There’s been plenty of controversy lately about the financial stability of the big-screen subscription service Moviepass. While their success remains to be seen, a simple financial assessment can often be made before you even write a business plan.
Assessing the profitability of your business idea often goes hand in hand with market research because, naturally, demand and industry trends are going to impact how much money you can make from your product or service. You need to examine how much it will take to fully realize your product or service and how much people will be willing to pay for it. If the cost of making the product a reality is greater than the amount people will pay for it, your business won’t stay afloat. While this sounds like a simple equation, there are many numbers that you’ll need to research to get to this stage. Do this now—not after you’ve already written half of your fifteen-page business plan.
Don’t Waste Your Time
The benefit of these steps keeps you from wasting time on a business plan that will ultimately go in the trash. Rather than getting caught up with the detailed format of a formal plan, do your research to find out if this idea is worth fleshing out. You might even learn something that leads you to a newer, better business idea.
Business ideas can be exciting, but they’re not all worth the time and effort of writing a plan. Do your research first and save yourself some time.