does not need another ‘me too’ product or service. On the other hand a completely new idea that is revolutionary in a product category (i.e., Facebook, Evian, iPad) requires a major emotional and financial commitment in order to be successful, something most small business entrepreneurs do not have.
What then are the criteria for an idea that would suggest that it is one that is worth pursuing as a prospective new business? It is important to recognize that the criteria for a good business idea are the same whether the business is in the service sector (i.e., home care, interior design), retail business (shoe store, clothing store, e-commerce website), product category (soap, cosmetics, hair dryer) or business to business (computer consulting, marketing services, architecture). Let's look at the criteria for a good idea:
It is Unique to the Business Category - For example, it represents something that none of the other entries in the category offer at the current time. This is often referred to as the UNIQUE SELLING PROPOSITION (USP). In the ideal situation it is something that only you can say about your product or service and will be the basis for your positioning (to be covered in a later chapter). A USP can be product oriented (i.e., a longer life battery), service oriented (i.e., home care providers available within 1 hour), or emotional (you will look or feel better). The key is that it is sufficiently different from others with whom you will compete so that you will have a platform that sets you apart from the competition.
Is Meaningful to your Target Audience - A great idea is only good IF it is something that is unique as just discussed, but also represents something to which your target audience (to be covered in a later chapter) can relate as being important. For example, most people love the taste of cola drinks. Recently Coke came out with a product that had a citrus additive in the cola. This probably evolved from their research that indicated a large percentage of their users order Coke with lemon or lime. Therefore they developed a Coke with this flavor recognizing that it was something that was of interest to the target customer.
Had Coke come out with an apple flavored cola beverage it probably would not be successful. While the idea clearly is unique to the brand and the category, it most likely is not something to which the users of Coke or Pepsi could relate as being a desirable flavor.
Is Easy to Understand - A vital element in the evaluation of an idea is whether the target consumer quickly and easily understands it. For example, the addition of a citrus flavor to traditional Coke is a simple concept that any customer would understand immediately. On the other hand, if a smart phone manufacturer added a feature that would dramatically reduce the number of dropped calls or would expand the coverage of the phone, this would have to be explained in very simple terms to the consumer. Most consumers do not care how the company achieved this capability; they only want to know that it is a benefit they will get from the enhancement.
Represents a benefit, not a feature - Customers are seeking benefits and not features when evaluating ideas as prospective reasons to buy. For example, if a tool company developed a new type of drill that could withstand the heat of constant use, the customer (i.e., professional contractor, DIY home user) would be more interested in what that means for them in terms of the use of the drill. It still makes the same hole, but the benefit is probably that the drill will save time as you can work continuously without having to wait for it to cool off. Therefore the benefit of the new technology is saving of time or perhaps to a professional contractor saving money!
Another example of promoting features versus benefits would be a new plumbing service business. They could advertise their feature of having more plumbers in the town than any other company (a feature) or offer to provide 1-hour service for all emergencies (a benefit).
Advertisable / Marketable - The last criteria is that the point of difference be advertisable and marketable so that it can easily be communicated to the target customer. To accomplish this, it must be able to be communicated within only 3-5 words. If it requires more than that it probably has little valuable in terms of the communications capabilities to the target customer.
SUMMARY - Nothing is more important than the idea you have for your business. Take the time to ensure that you have fully developed your idea and then plan to do the appropriate testing to be sure it is worth your time and effort. Extra time planning and researching your idea will pay significant dividends to you as the venture unfolds, and will dramatically increase the probability that your venture succeeds.
CHAPTER THREE - The Business Plan
One of the first questions that clients raise when coming to SCORE for counseling is whether they have to write a business plan. The correct answer to this question is whether the individual is willing to use the business plan as a working document in the venture, or only as a one time exercise to start the business or to help raise money. In the ideal world, the business plan is a living document that is developed when a business is started, and then maintained and updated at regular intervals as the venture matures
Why Develop a Formal Business Plan? - There are several very important reasons why a business would benefit from doing a business plan. Specifically:
It provides a discipline that forces the writer to think-through all the aspects of a business that will be important to the success of the venture. This includes both the strategic approach (i.e., overall business strategy; marketing strategy, pricing strategy etc) and the tactical elements (promotion programs, advertising, networking, etc.) of a program to launch the business.
It increases the likelihood that the writer of the plan has carefully evaluated the competitive marketplace, is familiar with the category/business where they will compete and, importantly, knows the profile of the major competition to whom they will face as they begin the venture.
It provides a very important communications vehicle for explaining the business to other parties. For example, anyone who would consider investing in the business will want to see a business plan to be able to understand the market in which they are operating and what their plan is to enter the category in light of the competition. It also provides the very important financial details such as P&L projections, cash flow analyses and balance sheet estimates for the first three years of the venture.
It forces you to set financial goals for the business that will become the benchmark for success as the venture matures. These goals should be updated at least semi-annually based on the experiences in the actual marketplace.
It gives you the discipline to set specific goals for the business for the coming year. For example, what are the 3-5 things that you would like your business to accomplish in the plan year? Do you want to generate ‘x’ number of new accounts, ‘y’ levels of awareness, ‘ z’ levels of retail distribution, etc. These are very important benchmarks against which you would be able to judge the progress of the business as time goes on. Importantly, this is an exercise that should be on going, and not just something that is implemented only in the first year of preplanning the business.
A business plan should be a dynamic, rather than a static document. Some organizations write a plan when they start their business and never look at it again. The smarter organizations will continuously review their plan and revise it based on new learning and actual in-the-market experience.
How to Write a Business Plan - An effective business plan is generally written over an extended period of time (weeks or months) as each section will require some research and analysis. Some SCORE clients come to us with the goal of seeking to develop an effective plan, and our goal is often to try and write one section every week or two based on the learning at that point in time. There
