Everyone has ideas - some are better than others but those brave enough to believe in their ideas are usually the ones who make them happen. But as you and I all know - ideas are free. In fact, I have a new idea every other day. I'm always thinking of a new way to make a cheese toastie without an oven; or an automated tooth brush machine that helps me get ready for bed. You get what I mean.
But why do some ideas becomes businesses whilst others seem like far, unachievable dreams?
What turns ideas into businesses is when three aspects align - idea, timing and execution.
Good ideas require hard work, research and dedication. Solving your customer's problem is everything you should be obsessed about. It takes time (much longer than you'd expect), constant reiterations and endless questioning of whether all this work is worth the risk in the end. Most important question to ask yourself though, is if there is any demand in the market for your product or service. Would people pay for your solution to solve their problems? Demand means traction and traction means sales. This also means you now have a business.
And if you're thinking that this is going to be an easy journey, then you are definitely in for a ride. Overnight success is a myth! Nobody became successful without hustling, creativity and hunger to sell their vision.
So with the little knowledge and experience I have, I would like to share some tips on what to do if you have a brilliant idea that you want to pursue.
First, you would like to find out if you want to start a lifestyle business or a startup.
For me, the fundamental difference between a lifestyle business and a startup is whether you plan to run this business forever or if you want to sell it at the end of 5 to 10 years. Many people often become overly attached to their solution, holding onto their business like their "baby", unwilling to change or part with it when time calls for it. If you want to run a startup, there is always an exit strategy.
If you have decided to start a startup, please continue reading! If you want to run a lifestyle business, go to this guide instead. Here's what you could do if you have an idea that you want to commericalise and ultimately sell in the future.
1. Conduct Market Research
I know that every entrepreneurial article probably mentions this, but the information gathered from our market research served as the foundation for our next steps in the business. We had to prove that this problem was actually a problem faced by many people and not something we magically created in our minds.
Sometimes, we often overestimate the magnitude of the problem just because it's a problem we face ourselves. So doing market research helps you gain perspective on that and whether to continue working on your idea or not.
When defining a market you want to find out a few things:
How big is the industry?
How many competitors do you have?
How many customers are there?
Who is your target customer?
What are the key problems your customers face?
You can use primary (involves gathering new data that has not been collected before) or secondary research (involves gathering existing data that has already been produced) to gather these information.
Surveys (SurveyMonkey, Google Forms, Typeform)
Focus Groups (How to Host a Focus Group)
Interviews (Always ask interviewee if you can record)
I find primary research the most effective when you are trying to find out specifically what your customers' problems are. I would definitely recommend reading The Mom Test by Rob Fitzpatrick before asking any questions.
Market Research (Statista, MarketLine, Mintel, IBISWorld, BMI Research)
Patents (GOV.UK, EPO, Google Patents)
While you have to pay for some of these market research data, you can try going to your local library and see if they offer databases there.
2. Can I do this alone? Do I need a team?
And the answer is no, you probably can't do it alone. You will need a team! According to the Startup Genome Report, solo founders, take 3.6 times longer on average to scale when compared to startup teams of two or more.
The team is what makes or breaks your idea. Investors always look at the team when considering their investments. This is why having co-founders with complementary skills is so important. This is a well-known venn diagram that says the dream team consists of a:
Hipster: Designer or Creative Genius, in charge of making a product marketable
Hustler: Hustlers are the key to selling a product to the masses
Hacker: Hackers are your typical tech with a knack for spreadsheets, data and all things logistics based
It is okay to spend some time to find suitable co-founders. Good things can't always be rushed. Running a business together takes years, and this means you should probably find people you can work with and also enjoy hanging out with.
3. How much money do I need to start this business?
Once you have established the market and understand your customers' demands, you need to know how much money you need to start the business. Software businesses (online, e-commerce, apps) typically have lower initial capital costs compared to hardware businesses. I know some people who started their online business with less than £1,000 and have gone on to earn thousands in revenue. You don't always need a lot of money to start a business!
Here we have a pretty basic funding timeline for a startup.
The main reason why most startups use their personal savings or money from FFFs (Family, Friends and Fools) at the start of their journey is because the company is in an early stage. You do not want to give up too much equity for a big sum of investment so early, only to be diluted by other sources of funding at the end of your timeline. Being diluted simply means you go from owning majority stakes (100% of the company at the start), to being a minority shareholder (maybe 20-30% of the company). At the end of the day, people are investing in you and your idea so make sure you have enough stakes in the company to make it to the end.
And here, we have a much more detailed timeline of how startup funding works. It's okay if you don't understand any of it. What's important here is realising that startups have an end to the journey - it could be IPO (where your company becomes public and people get to buy your company's shares), mergers, acquisitoins or even just hiring capable management to run your company while you become a shareholder and take a backseat.
These are my top three "next-steps" for those of you who have ideas but don't know how to continue. I'll share more about the basics of running a startup next time!
Reference Chan, J. (2015). How To Create An Epic Founding Team (Of 3 Or Fewer People). [online] Foundr. Available at: https://foundr.com/founding-team/ [Accessed 30 Oct. 2018].