This, my friends, is one of my favorite conversations to have with someone. It just so happens I am having this conversation tomorrow with a potential Colorado client over a cup of tea on a sunny patio with Pikes Peak for a backdrop.
It’s a conversation I will have next week with a young woman in Uganda who is the sole provider for her family, whose work opportunities have recently diminished as a result of COVID. Both women have different motivations for beginning a business in their unique communities, both women's planning process will look essentially the same. Begining with a narrative that I suspect will go a little like this:
Neema: So you’re thinking of starting a business? Tell me more about that.
Client: Well yes, I’ve been thinking about it but I’m not sure if it’s such a good idea.
Neema: OF COURSE IT’S A GOOD IDEA! YOU SHOULD JUST GO FOR IT!
Ok, not really. I wouldn’t be much of a consultant if I just told everyone to “go for it” and ended the conversation there. But in all honesty, there are a million ideas out there and very few are ever pursued because not enough people are being told: "Yes you can. You CAN do that thing you’ve been dreaming about doing. You DO have what it takes. Yes, it is going to be risky. How can I help?"
If you or someone you know is sitting on a business idea, then we hope this article can help provide a process for you to evaluate whether your idea is indeed a good one, and offer some next steps that will allow you to move toward pursuing that beautiful business dream.
YOUR WHY
First and foremost, you need to know concretely WHY you are getting into this business. How will this business solve a problem or make the world around you better? Hint: the primary answer to this question should not be “to make money.” The WHY behind your business is what will keep you going during the lean start-up years and allow you and your future staff to authentically sell your product, create a loyal customer base, and draw professionals to want to work for you. We love fair trade boutique owner Emily's WHY:
"It’s been a passion of mine since I was a young girl to be a fashion designer and to treat people with dignity throughout the whole process from design to manufacturing to distribution. This passion is what drove us to have the honor of purchasing Yobel two years ago. Owning Yobel has been my side hustle and I’ve been so grateful for the chance to carry out my dream through the products we carry in our shop!"
YOUR CONCEPT
First and foremost, a good product - whether a good or service provided - is going to meet a need in your community. Put simply, if your community is not asking for what you are offering, you will not have any customers. Now, you may have created something innovative that the good people do not yet know that they need, and if this is truly the case, you will succeed when you have convinced them that they do indeed need what you have. Enter marketing.
MARKETING
Product: We have started talking about this one already. You cannot effectively and consistently sell something that you do not personally believe in. Your product needs to be something that you are excited about and capable of bringing to market. Whether you create it, manufacture it, import it, or hire someone else to provide it, your proprietary touch needs to be clearly seen.
Place: From where will you market this product?
Online?
Will you have a website? Who will design it?
An Etsy site?
A Facebook page?
An IG account?
Brick and mortar?
Where is it located? Is it convenient to access? Well-trafficked?
How is curb appeal?
Can you afford it?
How will you design and merchandise the space?
Is it a pop up or mobile shop?
Who will you affiliate with?
What events can you participate in?
How will you design and merchandise the space?
Price: How much will you charge for your product(s)? The key to this one is charging enough per product sold to cover the cost of acquiring your product + all operational expenses + your need for profit while still remaining competitive. Too many people with great products go out of business because they are either guessing at a price or allowing the market to dictate what they charge. If we do not do the hard work of calculating our actual product costs + operational expenses + profit needs and include an adequate portion of each in our customer markup, we will not sustain our business. To quote Jesca from one of Neema Development's global business trainings:
“In my business, I have been selling so many things; I have learned that maybe only 1 has actually brought profit.”
Promotion: Now that we have a plan to market a great product from a great location at a great price, we need the world to know about it! How are we going to get the word out? Without a solid and intentional marketing plan coupled with enough runway, you can invest in the hard work of building a business that no one knows is there. If they don’t know you’re there, they can’t have their lives transformed by your revolutionary product. Some basics you’ll need to have in place before you go too far down the promotion pathway (particularly if you are a U.S. citizen):
Tradename - unique to you and registered with your state
Legal Entity - you’ll need an official business address and should research whether a sole proprietorship, llc, or other legal form is right for you and apply for an EIN with the IRS depending on requirements
Basic Branding - mission statement, logo, pantone, tagline, online presence
Bank Account - so you can get paid!
COMPETITIVE ADVANTAGE
Creating a strategy for how you are going to gain and maintain an advantage over your competition is another key element of initial business strategy. If you are passionate about skincare, yet there is already another skincare line sweeping your community, what is going to set your brand apart? Hint: Being the least expensive option, while competitive, is not always the best strategy. There are four main qualities a company can adopt to differentiate themselves from their competition:
Provide excellent value
A convenient, safe, and attractive location
Quality, innovative products with unique design
Excellent and expedient customer care
BUDGET(S)
Lastly, essential to your conclusion of whether a business concept is a good idea or not is your business budget. We recommend forming 3 different types for the purpose of evaluation and planning:
Start-Up capital budget - what you need to launch + 3-6 months operations
Operational budget - all monthly revenues and expenses
Annual budget - an operations budget representing the ups and downs of the business (read cash flow) over the course of an entire year, bonus if you project this out 3-5 years
In order to mitigate risk and determine whether your business idea has a strong chance of success, it is critical that you consider ALL the costs when building each budget and that you be quite conservative in estimating your revenues. If possible, survey a similar business in the area to find out what their daily/weekly/monthly revenues look like over the course of the year. Ask them when their 3 slowest and busiest months of business are. Then create your annual budget accordingly. If your anticipated expenses regularly outweigh your anticipated revenues, it may be time to head back to the drawing board.
There you have it friends! A few thoughts to help you move from the idea stage to the planning stage. We hope it has been helpful to your process! As always, if you’d like to brainstorm, whiteboard, or simply have another set of eyes on your plan please don’t hesitate to reach out for a free consultation! We love seeing individuals pursue their dreams and become better able to provide for their families and future.
Photo credits in order of appearance:
Cafe Leo, best outdoor office in Woodland Park, CO
Yobel, best ethical trade boutique in Colorado Springs, CO