3 Factors to Turn a Start-Up Idea into a Successful Business
3 Factors to Turn a Start-Up Idea
How many times do we hear about fantastic business ideas that bear the fruits of a successful Start-Up business, yet two years down the line, the idea is a piece of dust in the dirt and the brains behind the idea have moved on to the next one and so the vicious cycle turns.
The vital missing piece in turning this great Start-Up idea into a successful business is in many cases the inability to manage all the requirements necessary to develop the idea into a fully operational business entity.
At a glance the factors to address when developing a Start-Up include:
- Finance | Capital
- Initial Cost Outlay
- Product Knowledge
- Market Demand
- HR Resource
- Business Planning
Among many other variables.
Let’s take a look at the three things we need to assess before we take a step into the business start-up world; Market demand, Competition and Initial Cost Outlay.
Market Demand for a Start-Up
There are a wealth of well-known business brands that have introduced new concepts or product ideas into the market and failed.
Take the Amazon Fire Phone, it was revealed late last year that Amazon had to take a $170 million write down charge on related costs and had a product base left of €83 million worth of unsold Fire Phones in its warehouse according to Time Magazine.
An extreme example yet a concept of reality that is the result of a significant business factor: market demand.
Photo Source (AP Photo/Ted S. Warren)
Did the world really need a new Smart Phone? The product was years behind similar product competitors like Apple and Android producers. So Amazon were fighting an uphill battle from the start as these two smart mobile types had already amassed a huge following of advocates.
With the two giant IOS’s running ahead of the game the product would have to be really innovative and expansive to even stake highly in the smartphone charts. …And it wasn’t.
So Amazon was left with €83 million worth of unsold Fire Phones due to bad decision making when researching the market demand for the product.
High stakes, yet this concept can be applied to smaller entities. If the product or service of your business is scalable then researching the market demand can be implemented at a small level initially. This leaves room to grow as demand increases. This method allows for the utilisation of exclusivity as a marketing technique as queues form for your business.
Test the product with focus groups and whilst doing this make sure you don’t limit your target audience. One group may reject the product whilst, surprisingly, the group that may not be your envisaged target market will embrace it. Diversify the feedback source and get a wide understanding of the potential retail success of your product.
Amazon challenged the major forces of the Smart Phone business yet their product did not match the strength of that challenge.
A research of your competition is vital, yet it is not just the research into their product type and business strategies that matters; their customers, advocates and potential customers play a huge role. Finding out what makes a customer pay for a particular product and service is the key to successful business as this industry knowledge forms the basis for making decisions on innovation and marketing USP’s.
The Fire Phone limited their target audience from the start as, although the phone operated on the Android system, their App store was tailored to Amazon which meant that:
- The hugely popular Apps like Dropbox and the Google led Gmail and YouTube were not available for Fire Phone Users
- Developers would have to create different versions of their apps uniquely for Amazon; and many didn’t.
Their USP was also targeted at a limited market. It gave Fire Phone users the ability to scan mass objects at one time. Which is really targeted at the frequent and prolific Amazon customers rather than the general Smart Phone market. It was not a commercial success and the limitation of features for the average user did not help. Knowing what the customers of your competitors like and are looking for as product improvements would have been a smart move in this case.
Whilst the example of Amazon is extreme when compared with the loss value for small business owners. The impact is the same, if not greater. In many cases, small business starts with the injection of savings or bank loans before progressing to investment funding. If market demand and competition insight is not thoroughly researched then the losses can be overwhelming.
Unless you are 100% certain of success, don’t inject money into large scale ventures. Not until you can logically assess the business risk and layer up slowly. Saying that, if the demand is high and the market is genuine then gain pre-sale commitment. If things do go wrong then your losses are limited.
Once you have an idea or a concept in place then research, research and research.
Your findings will become an integral part of your business planning. It will also enable you to build a business based on insight and solid information.
It’s the first step in turning your start-up into a successful business.