You’ve had a eureka moment and dreamt up a business idea that you know will work. But now what?
You’ve had a fantastic idea and you’re convinced that it’ll be a real winner but you don’t know what to do next. Three months later, you see ‘your’ idea being marketed.
Unlike you, someone else has done something about it. If you think you have a workable idea, there are ways to turn your dream into reality. Here are some key points to get you started…
Research your market
First, you must establish whether anyone would be willing to part with their cash in order to invest in your idea. If you think they would, then it’s likely that someone else is already doing something similar. So you need to research your market and ask yourself, ‘What competition do I face?’
If you want to set up a tea shop, for example, make a list of all the other tea shops in the area, check what they offer, what they charge and what additional features they offer – homemade cakes, for instance, or on-site parking. Then think about the clientele. Are they pensioners or mums and their children? Do they visit regularly or for a treat? Use the people around you to test your concept. Ask family and friends; survey people in the target market on whether they’d buy your product or service.
Question them on what improvements they’d like to see in competing products or services. You can always test the market using prototypes, questionnaires and focus groups, to ensure that your idea has a realistic chance of success.From all this research you should be able to determine whether there’s a gap in the market that your idea could fill, how you are going to pitch your pricing and whether there are any special features or unique selling points that could set it apart from the competition.
Construct a realistic business plan
If you’ve ever watched Dragons’ Den then you’ll know that the next part is crucial if you want any hope of securing funding. What you need is a realistic idea of the first year’s costs and projected revenues. Sit down and work out the costs you will incur while turning your dream into reality. Then add on a hefty margin-of- error percentage. You’re bound to spend more than you think, so overestimating is a more realistic approach. If your idea is something that you’ll need to manufacture, then you need to look at these costs. If your idea is a new shop or service, then how much will the property cost to rent or lease? How much will fixtures and fittings cost? Don’t just work out the set-up costs but also the ongoing costs for at least the first year.
You’ll also need to work out what the ‘marginal cost’ is likely to be. This is the cost to you to make or serve one more unit of whatever it is you’re going to do. If it’s a restaurant, it’s the extra cost of serving one more customer. If you’re going to make something, it’s the added cost to make, store and sell the item. Also, you will need a realistic idea of how fast your idea will take off. You’re unlikely to be overwhelmed with customers on day one because only a few people will have heard of you. Consider how your market is going to grow and then see what this means for the potential income you’ll be bringing in. Once you’ve figured out your likely costs and likely revenues, put the two together and you’ll have the start of your business plan.
Securing the funding
Your business plan will reveal how much money you’ll need to start your business and how much of a gap there will be between your costs and revenue once your business has started. This gap is likely to be negative for at least the first year so you will need to make provision for this. Cash flow issues in the first year often strike the death knell for new businesses, especially if you are making a product or providing a service to other businesses whom you then have to invoice. If this is the case, then it’s worth considering an ‘invoice finance’ option that helps you to free the money tied up in invoices. In the current economic climate, asking for funding is obviously even more tricky.
However, if your idea is viable and you will realistically be able to repay any loans or investments you receive, it may not be as difficult as you imagine. There are many sources of start-up cash for new businesses, including government grants, overdrafts and bank loans. You could cash in shares and investments, consider a family loan or a joint venture, or remortgage a property. The UK grants database for government and European funding for small and medium sized businesses has its own website, www.j4b.co.uk, with lots of useful information.
Marketing your new business idea
Now that your planning is in place, how should you promote yourself? Advertising, online and direct marketing, as well as exhibiting at trade fairs are all options. But how you tell people about your business will be determined by the type of customer you are aiming to attract and, of course, by your advertising budget. What is the best way of distributing and selling your products? You could sell directly to a few key customers or go through retailers. Setting up a shop online can keep overheads down. If you are selling a product, you could approach other firms to sell it, or license it to them – but don’t talk to them unless they have first signed a confidentiality agreement (usually drawn up by a specialist solicitor), so they can’t steal or reveal your idea. If your idea is an object rather than a service, making a prototype and staging a presentation will improve your chances of success. Finally, don’t be put off by fear. You’ll almost certainly make mistakes but they are rarely as drastic as they first seem. And, if you’re doing something to move your business forward every day, then sooner or later you’ll arrive at your destination – a successful business.
A word from James
A good idea starts with a plan. So, create a good business plan and work hard to make sure you have the right people around you. Businesses don’t just succeed on ideas alone. Determination and knowledge are equally important to achieve success. Intellectual property stimulates and stabilises markets and, without it, many start-up companies would not become successful businesses.
Protect your idea
- Intellectual property laws enable people to own the work they create. There are four main types of rights which can be used to protect an invention or creation. Patents protect the features and processes that make things work. For instance, the chemical formula of your favourite fizzy drink or the bolt that makes a wheel turn. This enables inventors to profit from their invention.
- Trade marks are symbols that distinguish goods and services in the marketplace, for instance logos and brand names.
- Designs are the look and appearance of an object – from the shape of a take-away cup to the design of a car boot or a folding chair.
- Copyright is an automatic right which applies when the work is fixed, that is written or recorded in some way.
Pictures: getty images