As we experience constant change in microchip technology, the opportunity to become more innovative increases.
Particularly for entrepreneurially-minded people; there is so much resources at our disposal to transform the world. Unlike 3 decades back, the cost of starting a small business or developing a new product is considerably low in present time. Nevertheless, the odds of building a successful business is not getting any better.
Despite the huge resources available on the Internet, more than 75% of all new businesses and products still fail. Many entrepreneurs have suddenly come to the realization that starting, managing, and growing a successful business is as difficult and challenging as falling in love and nurturing relationships.
Starting a small business isn’t only about turning ideas into reality. The challenge of managing a successful profitable business is equally important and small businesses owners need to prepare for it also. Below are five simple steps that can help you to start a small business.
1. Start with an idea
Finding a business idea is the first and easiest step towards starting a business. Even if you are not ready to launch yet, it is crucial to find and nurture an idea you can build on later. Contrary to the opinions of many, it is not advisable to keep new business ideas secret unless for proprietary reasons. About 90% of all new business ideas have been started by other people in existing markets. Your focus should be to find better ways of improving what is already in existence. You can find new business ideas in an existing market. But be sure that the ideas are things you are passionate about and can improve on. For example, Sir Richard Branson founded Virgin Airlines to solve the problem of flight delays and cancellation. Startups should not waste time searching for “Big Ideas.” To my mind, no business idea is useful until it is tested and validated in the market.
2. Put your idea to test
Once you have found an idea you love, the next important step is to test it to determine whether it can be of value in the marketplace. For an idea to add value in the market, it must be capable of solving a problem or meeting the need of customers within a segment of the market. Putting an idea to test will also help you to estimate the size of the market, and determine whether the number of people having the pain that your idea would resolve is big enough to sustain your business. You can learn more about how to test and validate a business idea with The Entrepreneur’s Handbook.
3. Design a business model
A business model is an important piece of document or tool that explains how your business will make money when it starts operation. Many small business owners often can’t distinguish between a business model and business plan. A business model helps startup entrepreneurs to make useful assumptions about how their business ideas would create value for their customers. It is also used to determine how to capture part of that value back into the business. Alexander Osterwalder’s Business Model Canvas is great for designing a business model and contains the following nine blocks:
- Value propositions,
- Customer segments,
- Customer relationships,
- Revenue streams,
- Key resources,
- Key partners,
- Key activities, and
- Cost structure.
Each block allows you to clearly envision how your business will evolve as you begin to implement actions and make changes later on in the process to shape it. A business model is the basis for the initial groundwork towards starting your business or developing the product or service. The process of designing a business model helps you to think through your idea and gradually turn it into the product of service that your customers can pay for. Pay attention to the Value Propositions block and ensure that it aligns with your prospective customer’s needs.
A value proposition answers the following three important questions:
- What pains is my product going to eliminate?
- What gains am I creating?
- What is my customer segment?
By implication, value propositions give clear description of the product or service you are offering, and identify the target market and problems that your business will solve.
4. Get out of the building
After testing your idea and designing a business model for your business, it is important therefore to get out of the building and talk to potential customers about what you are about to bring to the market. Your goal for “Getting Outside the Building” is to determine whether your prospective customers have the problems or needs that you think they have in reality, and if so, to discuss with them and learn more about their pains first hand. Like it or not, this is a crucial step in your quest to understand how to start a small business. Since your business models are build on series of assumptions, “Getting outside the building” allows you to test those assumptions and be sure that they right. Also, it helps you to understand the severity of the pains, as well as have a fair estimate of the number of people having similar pains (market size).
Below is a guide for getting outside the building:
- Before getting outside the building: Make a list of up to 100 people you can talk to. You can find them on social media. Also make note of the questions you will ask, and rehearse your script several times. Keep your conversations informal, engaging, and powerful.
- Outside the building: Stay focused on your goal and ask great questions that validate the need and pain of the customer. Your aim is to validate the existence of the prospect’s need and ensure that your value propositions match them. When interviewing them, do not sound as a salesperson, instead you can start by saying something like: “I’m here to understand how your business works and how I can make it better.” Allow your conversation to flow naturally. Depending on your product or service, questions such as “Tell me a little about you/your company/etc” or “What part of your work do you enjoy the most?” can be very useful.
- Back in the building. Once you are back in the building, you will start analyzing your data to gain insight into the feedback you have just received. Analyze the feedback and start creating solutions that meet their needs. This is the process of building a minimum viable product.
5. Build a Minimum Viable Product (MVP)
A minimum viable product (MVP) is the fastest way of getting your product into the hands of customers without wasting too much time, money and other resources. The concept of MVP is helpful in learning from customers, and building exactly what they want. It’s also useful for measuring the impact that your value propositions will make. Contrary to popular opinions, MVP is not the smaller version of a big product. Instead it is the product or service created with sufficient features, enough to meet the immediate need of the customer without wasting too much time or money.
The goal of an MVP is to validate that the product has a Market Fit. A market fit exists if it is proven that there is sufficient customers in the market having the pains or needs that the product is seeking to solve. In other words, it establishes that demand exists for your product or service.
This post is essentially about how to start a small business. If you have found it useful, leave a comment or question in the comment box below, and remember to share it with your friends.