Seventy-five percent! Yep, that’s the number of new businesses that fail in the first year. This doesn’t account for the businesses that take a few years to accept they’ve been failing and wave the white flag, so that number is really more like 90%.
However, you can save yourself a lot of time and money by asking a few questions before (or after) getting knee deep into a new venture.
It’s awesome to be excited about a new idea, but a business can’t be built on passion alone. Working through the emotions, you have to ask yourself, “will other people be in love with my idea?” You’ll never know until you test it.
The biggest companies are built on assumptions.
Think Zappos: This company started by taking pictures of shoes at a retailer and putting them online to see if people would buy via the internet. Nick Swinmurn (founder of Zappos) didn’t take a business loan or rent warehouse space before knowing he had a valuable business. He tested his idea against a small market without investing much time or money. He first made the assumption – that people will buy shoes online – and tested it, proving that people will in fact buy shoes online.
And that’s the first question you have to ask yourself…
1. Do I have a product [ a lot of ] people will buy?
Selling stuff people don’t want isn’t marketing at all. If your product doesn’t have some kind of viral appeal that gets people excited and talking about it, then chances are, you’re going to waste a lot of money on advertising and promotion that just doesn’t work.
It all starts with the product. This is marketing in a nutshell: product people want meets trustworthy business that sells product people want.
If neither of the two are true for you, then don’t bother answering the next question.
2. Does my product drive repeat business?
Because you can’t sustain a business without repeat sells, it’s imperative that you produce a product or service that drives repeat business.
I was talking with my friend Mike today, who is the CFO of a very valuable company. We were discussing ways his company can grow. This brand has reached its ceiling, and in order for it to grow, it must broaden its product selection for loyal customers, while it continues to bring in new customers. Otherwise, the company will run out of offers and their most loyal customers will drop off, weary from a redundant product selection.
You have to be able to retain customers. It’s hard to grow a business if you have people coming in from the front and dropping off at the back.
So make sure you have a product that requires repeat sells. This can even mean making your offer subscription based. That’s why products like Photoshop and Microsoft Office have now turned their products into subscriptions… you need people to buy more than once.
3. Do I have a good marketing plan?
A lot of small businesses remain small because they don’t understand the importance of a good marketing plan. There’s a reason US distribution (marketing, advertising, sales) Is a $500 billion dollar industry. And there’s a reason marketers are paid more than engineer’s. It’s working for somebody! 💡
Having a good product you know people want isn’t enough. Once testing your product against a small audience, it’s time to spread your ideas to the broader market. How will you get your product in front of a larger audience? What will your main distribution channels be? Will it be face to face sales, advertising, online marketing? What’s the best way to reach people that want your product?
Face to face sales
Companies that sell medical supplies and network marketing companies like Tupperware and Avon, depend heavily on door to door sales. This strategy doesn’t work for everyone, but starting out, you don’t have advertising costs or a need to pay employees up front. But you do need a sound marketing strategy for your sales team to follow, as well as a way to educate people about your product and bring new team members on board.
If you’re not engaged in face to face sales, at some point you have to advertise. Almost every company needs some form of advertising. Using free channels like social media, email, and partnerships are tedious and can only get you so far.
Small businesses should not invest in traditional media like TV and radio unless your product is local specific. Even so, these channels are very competitive and can get really expensive, so it probably makes more since to engage in online marketing.
As I mentioned earlier, marketing is when you have a product people want and make it easy for them to get. If they trust you, it’s easy. If they like you, it’s easy. If there’s a simple way to buy and the price is right… it’s easy. This is marketing.
4. Is there a lot of competition?
One thing you don’t want to do as a small business is compete with others. Even if you have similar products, avoid competing in the same space. Unless your product is 10x better than what’s already available (Facebook vs MySpace, iPhone vs BlackBerry, Google vs Netscape) try to avoid competition. A larger company will overpower you with their money and strength (Instagram vs Snap) and a company your size will force you to spend more and lower prices (Wendy’s vs Burger King).
5. Is it the right time for a product like mines?
Take a move right out of Apple’s playbook, their timing is always right… Well, this wasn’t the case when Steve Jobs was removed and Apple prematurely released the Newton in 1987 – a tablet way before its time.
Apple’s innovation comes from building on products at the very time people are interested. Should I give you a timeline?
Hot product: PC. Apple: Apple 1.
Hot product: MP3 Player. Apple: iPod
Hot product: Palm Pilot. Apple: iPhone
You can even look at a company like Tesla, it came at a time when electric cars were becoming the thing. The Prius hit the market with no competitors, so it was all the rage. But the Prius was a simple looking car, with no real appeal other than playing on the “going green” trend. Elon Musk saw an opportunity to make electric cars cool, thus came the Tesla Roadster.
So do you have what it takes to be a successful entrepreneur? You probably do. With a good product and some smart marketing, the possibilites are endless.