Even during a recession, there are many opportunities to take your new ideas to market quickly and profitably. Most entrepreneurs are overflowing with great ideas for new products and services. So how do you screen these ideas so that they generate big profits in a relatively short time? …Get started by answering these 5 questions.
1) Who are my target customers, and what are their biggest needs?
As you consider your new offering, do a brain dump on your target market, including demographics (e.g., age, income) and psychographics (e.g., attitudes, behaviors). Also consider the size of your target market, its growth rate, and current trends. Fill in any big holes by conducting research online (e.g., FactFinder) at your local library’s business center, or by surveying current and potential customers. You can deliver a short, user-friendly survey in person, by phone, or by using an online survey tool such as Survey Monkey.
2) What benefits does my offering provide that meets these needs?
There’s a big difference between “features” and “benefits”. A benefit is what your customers value about your offering and how it meets their needs. In contrast, a feature is a fact-based aspect of your offering or what it does. For example, you might provide the feature of 24/7 technical support for your new product. However, the real benefit or WIIFM (What’s in it for me?) to your customers is comfort and convenience. Make a list of your offering’s possible benefits and get feedback on it from a formal or informal group of customers. (See Entrepreneur.com’s distinction between features and benefits: http://tinyurl.com/6k5w22 .)
3) Who are my competitors and how do their offerings compare?
Take the time to assess your key competitors and any viable substitutes/alternatives to your offering. Study their strengths, weaknesses, and how they meet the needs of your target market. Try mystery shopping at your competitors’ websites, stores, phone lines, and by purchasing some of their offerings. Obtaining customer feedback on your competition, via surveys or user groups, is essential. Check out Wikipedia’s simple, powerful competitor framework.
4) What are my initial and ongoing costs?
Take into account what your new offering will cost from development through launch (i.e., your start-up costs), including research, development, testing, supplies, marketing & advertising, inventory, office/warehouse space, and training. Then consider your annual costs for ongoing sales and servicing. Write these costs down, and discuss them with your business advisors, area experts, or colleagues to better understand your investment.
5) What are my expected annual sales?
Write down your estimated annual sales from your new offering, including best, worst, and most-likely scenarios. For example, if your estimated Year 1 sales are $25,000, you might add 50% for a best case scenario and subtract 50% for a worst case scenario. Then, for a rough break-even analysis, calculate the number of product units or service hours to cover your start-up costs. You can also calculate the annual sales required to cover ongoing distribution, marketing, servicing and other costs.
A few tips:
* Answering these questions may seem daunting, yet if you carve out focused time, you could do it in 1-2 weeks. You’ll avoid costly mistakes and greatly increase your chances of a successful, profitable launch.
* Write down the questions, answers, and your assumptions, as you work through them. Documentation makes them more tangible and holds you accountable for follow-through.
* Create a dialogue with others about these questions. Invite input and different perspectives, because the more open are your eyes, the less likely that you’ll be blindsided.
* Be trusting and smart with your new ideas. Carefully select with whom you’ll share them. When in doubt, use confidentiality agreements. Better safe than sorry!
* Try a mastermind group or other forum where you can share your new ideas and receive support, and accountability. Look for our monthly Putting Passions into Action groups in Seattle (second Mondays of the month).
Happy Passioneering!
