Fools rush in….
So you’ve got this ‘fantastic’ business idea and can’t wait to get it up and going. Hang on, let’s just have a sanity check. How much risk are you taking and what’s the likelihood of success?
We know that the failure rate among new businesses is high – the exact figures depend on the source of the statistics but roughly 25% fail in the first year, and less than 50% survive more than four years. And those figures hide the many many more that simply trudge along, never achieving anywhere near the dizzy heights that were dreamed about when they were created.
In business terms it is so appropriate that the title line of this blog ends with the words … ‘where angels fear to tread’ because ‘business angels’ – amongst other investors – require substantial evidence that a business idea or model is going to work before they part with their money. Sadly though the reality is that checking out the idea – doing some market research – is all too often the first casualty of a new enterprises’ kick off strategy.
Instead, the fledgling entrepreneur, so convinced in their own mind that their idea is going to be the next best thing since sliced bread, quits their job, remortgages their house, and pumps their life savings and those of family and friends into their new business. Wow, that’s some risk taking. It’s almost akin to bulk buying lottery tickets.
So listen up any budding entrepreneurs reading this – YOU MUST TEST BEFORE YOU INVEST! I use caps advisedly as I’m sure that there are many who still won’t listen and who will probably end up blaming someone or something else for their ‘bad luck’. For ‘bad luck’ read ‘lack of preparation, forethought and plain and simple testing’.
Testing an idea doesn’t necessarily have to be complicated or expensive. Present the idea or concept to people you know, whose business acumen you trust. They’re very unlikely to nick the idea – generally people don’t – and in any case it takes an awful lot more than the idea to make a successful business. Try it out on a few customers. Or take a leaf out of James Averdieck (founder of Gu)’s book who, in order to test the appeal of his product went into his local supermarket and put a few empty packets on the shelf, stood back and watched to see how many people picked them up.
How hard is that…? It’s not! So why do so many just jump this vital stage? What’s particularly frustrating is that it’s often exceedingly easy to do a test. Better still it can usually be done way before you leave that secure job. In my own case, my first company was well underway with a proven model before I jumped ship. I admit that this is not always possible but it’s no good to blindly jump in with that ‘eyes wide closed’ lunacy that seems to affect so many budding entrepreneurs.
If you want to get your offering right for potential customers or for you or others to invest in, go and check things out first. If you don’t fancy this, then I suggest you place a large pile of cash in the garden and put a match to it – it will probably have exactly the same effect, only won’t require as much effort.
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