You have heard the stories about start-ups and how easily they fail but you aren’t put off. You know you have a great business idea and you’re determined to show the world what you can do.
That determination is a great motivator and energiser but whether you’re making a sales pitch or applying for funding, you need to show that you’ve done your homework.
Check the gap
The product or service you are aiming to sell may be different from what is already available. But are people prepared to pay enough for you to build a sustainable business?
Related: Mind The Gap
It is not just in South Africa that start-ups struggle to survive. Statistics vary depending on how you define start-up and what time period you fix to survival but Forbes magazine says only one in 10 start-ups survive. Others suggest one in two will survive at least four years.
6 Steps to a better start-up
Step outside your fantasy start-up into the real world and start conversations with prospective customers. These will guide you in following our six steps:
1. Develop a customer profile
Everything sells to a section of the market. So as you talk to people about your start-up, take note of: whether they are male or female; what they are looking for; what media they consume; and what they worry about. This will provide a picture of where your market segment lies and guide you on how to position your business.
2. Test your idea with this customer
If you can’t find this person then how are you going to find them when you launch your business? People usually don’t want to be unkind, so observe their body language and tone of voice to be sure that their enthusiasm is genuine. If the nature of your idea allows, try making an actual sale.
That is the most powerful test and the basis of the lean start-up movement – interactions with real clients as early as possible.
3. Find your competitors
If you find no competitors for your business, ask yourself why? It doesn’t mean that you shouldn’t pursue your idea but you should pause. Ask yourself whether there is a good reason why this isn’t the most sustainable business idea.
4. Network with other start-ups
Speak to someone who has done something similar. Find out their challenges and whether they would choose to start this type of business again.
5. Write down the numbers
How much do you need each month to cover your costs? How much will it cost to develop your business idea? Always build in some extra to cover unforeseen circumstances – something always happens.
6. Make a plan
Write a one-page business plan explaining your concept, the target market, what makes you different and your expected timelines with basic financial projections. Ask business-savvy friends to read this and provide honest feedback.
Related: 5 Things Small Businesses Should Do To Make It Big In South Africa