are two very important rules relative to entrepreneurial success. The first is to have a great idea, and the second is that if you don’t have a great idea, keep working until you can identify one.
A significant number of clients come into SCORE seeking to start a business, but they have no concept of what the idea will be that can make their business a success. Some have decided to start a consulting business; others have a customer service concept and a third group wants to begin an e-commerce web- site. Typically, the problem with each of these ideas is that they have not figured out why a customer would want to buy from them. The world does not need another “me too” product or service.
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 essentially 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 (i.e., you will look or feel better). The key is that it is sufficiently different from others with whom you will compete and has a strong appeal to your target audience so that you will have a platform that sets your business 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 which is important your target audience (to be covered in a later chapter). Generally, a successful product or service must fill a need which currently exists or can be created by an effective communications program. For example, most people love the taste of cola drinks. Recently, Coke introduced a new 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 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 under- stands 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.
* Can provide adequate profits to support the business. – A large percentage of clients come to SCORE with a “wonderful” new business idea but have never done the homework necessary to determine if there is sufficient demand for it, and it has a cost structure that will enable it to be sold at a price that will appeal to the target market.
* Represents a BENEFIT versus a FEATURE – Customers make purchase decisions based on the benefit the new product or service provides them, rather than the features that a new product offers. 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) but benefit to the consumer is that they provide 1-hour service for all emergencies.
* Advertiseable / Marketable - The last criterion is that the point of difference of this new product or service be advertise-able and marketable to the target audience so that it can easily be communicated in advertising, promotion or packaging. To accomplish this, it must be able to be communicated within only 5-7 words. If it requires more than that it probably has little value in terms of the communications capabilities to the target customer.
SUMMARY - Nothing is more important than the idea you have for your business. Before beginning to plan the tactics of a new product introduction, it is essential that effort is made to ensure that you have carefully evaluated the idea based on the items outlined in this chapter. This evaluation will be extremely important to your venture as you begin to do the appropriate business planning necessary to move it to the marketplace.
CHAPTER THREE
The Business Plan
One of the first questions that clients raise when coming to SCORE for counseling is whether they should write a business plan. The correct answer to this question is almost always YES, whether the individual is planning to use the business plan as a working document in the venture, or only as a one-time exercise to help raise money needed to start the business. The business plan should be 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 the exercise of writing a business plan. Specifically:
* It provides a discipline that forces the writer to think through all the aspects of a business which 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, a potential investor or loan provider would not consider giving money to the venture without a thorough business plan. This is because they need to be able to understand the market in which the business is 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
