From the course: Small Business Secrets

Testing your business concept

From the course: Small Business Secrets

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Testing your business concept

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Starting a new business from scratch can be incredibly risky. You don't know at the beginning whether or not it's going to succeed but what we can do is we can minimize the risk by creating a test business. We don't want to leap all the way in at the beginning until we've given it a little bit of a trial. Here's a small process that you can use to create that test business. First of all, we can ask potential customers, if you identify who that most valuable customer is, go to those kinds of people and ask them, how interested are you in this thing? We also want to ask them, what price they'd be willing to pay for the product or service that you were thinking of offering and also, ask them how many they would be willing to buy. We want to get a general survey of the numbers. No, this isn't going to be a precise science but just asking the question will give you, as the potential business owner, an idea of how much interest there really is out there. You may find that there's no interest and you'll just abandon the idea from the beginning or you may have more confidence because you've talked to people who are really excited about your idea. Number two is to set a target. By this, I mean the number of sales or the sales dollar volume by a certain date. We want to make a commitment to a specific date on the calendar and then try as best as possible to make that sales number. This is the cutoff for us. We need to hit that number and if we don't, the business idea is not viable. Number three is to set your maximum budget. What that means is how much money are you wiling to invest into the business? Often, business owners who are very excited about this business idea or opportunity that they're pursuing keep dumping money into the project hoping that it's going to pay off. We want to create a dollar amount that we're not going to cross. As your calculating that, include inventory. Meaning, how much do we need to have on hand to be able to sell to people and what does that inventory going to cost us? Then, step four is go sell the idea. Go out to customers and do everything you possibly can to have them buy it. We try to hit as best as possible that target number by the date and it's your responsibility as the founder of this business to make it happen and then, step five is, at that target date, we evaluate our success or our failure. Failure is a valid option. That's the whole point of the test. We want to know whether or not this thing, this idea is actually an opportunity. If you do the test and find out that it is a valid opportunity, you'll have much more confidence going forward and turning this wonderful idea into an opportunity and ultimately, into a successful business

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