Checking a business idea for survivability.
Hello, my name is Artem Vorontsov. In this article, I want to tell you how I tried to fulfill my youthful dream and open my own business! I want to talk about how you can check the profitability of any business idea, as they say, without leaving your home.
I’ll start with the fact that I never opened a business - a car service and I don’t regret it in the slightest, since I started my own entrepreneurial activity from a car wash that this moment passed down to my brother.
And my business began, like many others, with a dream. As a student, I always dreamed of a car, as you know, in addition to the car, young man we also need money for its maintenance, for girls and a lot of other interesting things. I did not want to work for my uncle and aunt, but I wanted to do business. And for some reason, in my dreams of business, I always imagined my own car service, in which customers line up. And so, as they say, when the time came I began to think about the implementation of my idea, at that time I had finished my studies a long time ago, I worked at a brewery, as an ordinary loader, they paid well at that time, so initial capital was. There was enough money to buy used equipment from the Baltics, and for three months of rent and salary.
And when I was already close to realizing my dream, I thought, what if my business does not pay off? What will i do? - go to work reluctance! But how can I check the viability of my case?
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I started collecting information on the Internet, even bought a business plan, collected decent information - probably 230 pages. Well, everything looked decent, but something slowed me down, although I had already found a room, in a passable place! But what should I do now? Then it dawned on me that I need to check my competitors, who have been in this business for more than a year, how do they feel? And is there a place for me?
I identified the 3 strongest competitors who have the bulk of customers, started driving and measuring how many cars are serviced per day, tried to calculate the approximate profit for the month, quarter, year, but it seemed somehow hard, and the profits varied so much that there is very little data!
Every evening I continued to collect any information from the Internet, corresponded on forums, etc. and It was there that they advised me to order a check of my competitors, from a third-party organization, I thought such a check costs a lot of money, but in fact it turned out that everything is real and I broke through three companies for only 1600 rubles, now I don’t know the price, but the site was called www.zakaz.biz-proverka.ru
What did I manage to learn about my competitors and prospects this business? I will answer: “I learned a lot so that I would never open my own car service and not regret it !!” Because in the same way I found the most promising business in my city, as I said above, I opened a car wash.
And so I did a business check of three of my competitors, and to put it mildly, I was surprised, because I thought both according to my calculations and according to the calculations of the business plan I bought, I expected a bright future, with an income of 300,000 rubles a month - from only one car service !
When I looked at the reports of my competitors, I saw a completely different picture there, namely, two competitors did not understand how they existed at all, one worked in a big minus, had several more “one-day” firms - through which I withdrew at least some money, the other ate up taken back in normal times credit. The third one was also in debt.
I will tell you right away that all calculations were carried out on the condition that, according to statistics, firms hide up to 30% of their income!
But even taking into account 30% without tears you will not look at the profitability of competitors!
Let's not talk about the first two at all, I will give an example only on the last one, since he had a much better picture.
I will show you only what can be shown, since such information is confidential and not subject to disclosure, I am a decent person. But I think that the future businessman will understand everything anyway!
See for yourself:
The main indicators of financial statements.
Sales revenue is shown net of value added tax, excises and similar obligatory payments. Balance sheet for 2013 Form No. 1
Bankruptcy check |
The company has signs of bankruptcy. Liquidity is below the norm - the company's position is unstable. The company is experiencing a shortage of its own funds. At the same time, the company cannot restore its solvency within six months.
I think what you saw impressed you! I haven't shown you the other two competitors yet, and financial analyzes of their firms, as well as in the business check, there is also the IAS balance sheet, profit and loss statements and other financial indicators.
So it turns out that even if my third competitor hides 30% of the profit, and shows losses over such a long-term period, then at any moment an audit from the tax office can come and then there will be a complete ales, first they will ask how he pays the workers a salary, then they will go through the economic parts and everything, this founder will go to rest from business for 4 years.
Also from this business audit, I learned that the second company, or rather its head, is the founder of several other companies, which, as I am sure, were one-day firms at that time, which may also be of great interest to the tax! The same director, at a car service, had a store in which they traded auto parts, in the same store they sold tea, pies, and although it was not registered in the activities allowed by him, catering and retail auto parts, which is also illegal!
I also found out that a claim was filed against this company to collect a debt, as it turned out later. former employee, the car service manager filed a lawsuit to recover wage arrears and illegal dismissal! Fun!
About the founder who had a loan, the same thing to say. It turned out that there was such an interesting point in the business check as checking the presence of business ties. It was at this point that I found the name of my old acquaintance, classmate. In general, I met with him, it turns out that he and the third founder tried to deal with auto parts for trucks, but the business did not go well and they fled. My friend also told me that this founder also called him with a request to lend money under his " successful business».
In principle, these were the main points, because of which I was destined to refuse to open my own car service, and switch to the car wash business, which I do not regret at all. By the way, car washes in my city, even on paper (business check) looked much better! And those competitors that I checked, all had a profit! So my choice was justified!
I think it has become much clearer to you, just like me, how to start your own business. That you should not blindly look at other people (founders), who may even seem to live successful life and drive a good car! In fact, many of them have collected money in loans for their "sick" business and every day they puzzle over how to give it back?
When there is an idea for a business, it is better to probe the market right away than to hesitate and postpone. Otherwise, you can burn out or competitors will be more decisive. In this article, we will tell you how to test a niche and check the idea for performance.
Why Conduct Niche Testing
Niche testing helps you understand if a business has a chance. Internet entrepreneurs have great advantages compared to offline ones: they do not need to invest in renting premises and purchasing goods. You can check the demand in social networks, on free classifieds sites, as well as using a landing page and contextual advertising with a small budget.
The trial run will show whether buyers behave as we expected; what is the demand for the product and what is really important to customers.
Another advantage of testing is that you learn the basics of business on the Internet step by step: come up with a product description, create a website or landing page, profiles in social networks and on bulletin boards. This means that you acquire useful skills and knowledge that will be useful in the future.
How to test a niche for a business
Testing a niche on the go will not work. It is necessary to prepare, prescribe an action plan and strategy as if you were already really starting a business. This will show the true numbers. So you will have no doubt that it was only a “draft” version, and when you really start a business, everything will be different.
Niche testing takes place in six stages.
Stage number 1. Niche selection
If you have an idea for a business, you can immediately proceed to market analysis. If you don't know where to start - then look at what is already in demand. Perhaps among these areas there is something that is close to you:
- Services. This includes learning languages, maintaining Instagram profiles, copywriting, custom cakes - choose what you can do best.
- Training courses. Teach yourself - teach others.
- Handmade. For example, knitted items, toys, decoupage, jewelry, business boards.
- Selling goods from China. These can be video recorders, cases for phones and tablets, clothes, toys, inexpensive electronic devices.
Search the Internet for research on what products are most often bought. For example, Ain.ua magazine published the results of the survey “What products Ukrainians searched for in 2018: top 10 requests for OLX from Android and iOS” .
Think about what you can do best and what your soul lies in. In parallel, study the practical side of the matter:
- make a list of suppliers;
- find out how suppliers organize their work: minimum order quantity, terms of payment, return of goods, possible discounts.
It is best to write yourself a basic business plan. Even if you are not going to look for an investor, a business plan will help you put things in order in your head and not miss out on important things. Let it be 1-2 pages of text to begin with, then you can add details to it.
What to write in a business plan
- Problem What problem does your product or service solve for a potential customer?
- Product (solution)- a brief description of the product, how it solves the problem of the buyer. We formulate USP - a unique selling proposition.
- The target audience- who will buy your product, such as students, families with children, entrepreneurs or all together. for each segment. For example, families from a certain area with an income of $800 per month. Try to estimate the size of the market - how many potential buyers are in your segment.
- Competitors- Who else sells the same products. How can a customer solve their problem without your product.
- Your team- you will work on your own or you will need assistants, for example, to send goods by mail or receive incoming calls.
- The main stages of starting a business- what has already been done: there are suppliers or a website. Write down what needs to be done in the future: arrange delivery, find an assistant.
- Finance- how you will make a profit, sources of expenses and income.
Stage number 2. Market analysis
When you have a basic idea of the future business, it's time to test your niche. Several methods will help with this.
Find out the number of queries in search engines
If the product is not unique, there is already a demand for it. Special services help to check the demand on the Internet. One of them - .
Register with the service and enter a list of queries that can search for your product. Put yourself in the place of the buyer - what requests would you write yourself.
Check for queries that indicate a willingness to buy. They are called transactional.
Transactional requests indicate that the user is ready to take an action. They contain the words "buy", "wholesale", "order", "download" and others.
Avoid general queries, such as "evening dress" - it is difficult to understand intentions from them. Perhaps they do not want to buy a dress, but to find a pattern or look at the style.
Study competitor websites and ads
Make a list of competitors, write down their offers and think about how to formulate your offer better, what additional benefits to offer. Do not be too lazy to make a test order or call - it happens that the site is beautiful, but the support service does not answer calls. In the future, excellent service can become your competitive advantage.
When you have studied the demand and competitors, go back to the business plan and supplement the relevant items with new information.
Stage number 3. We create an offer
You already have a product, its description and competitive advantages. Time to introduce yourself to the Internet audience, assess the demand and reaction.
Groups in social networks
Goods and services are sold on Instagram, Facebook, Vkontakte, Telegram. See where there are more of your competitors and what is the activity of subscribers in each of the networks.
pros
- Large audience coverage.
- Direct communication with clients.
- Promotion features - user ratings, menu (for restaurants), call to action button, events and so on.
- Viral effect - creating contests, drawings you without big investments get reposts, likes and new subscribers.
Minuses
- A lot of time to create content - photos, text, videos.
How to create a business profile
Social networks themselves help users to present themselves by offering step by step guides. By following the prompts, you can easily create an Instagram business profile. Facebook business page or business profile on Vkontakte.
What content to use
The interest of subscribers is supported with the help of text posts, photos, videos, infographics. Each social network has its own characteristics.
For example, both text and visual content work on Facebook and Vkontakte.
On Instagram, the basis of content is photos. It will be necessary to prepare high-quality product photos, organize photography so that there is a stock of photos for future posts.
The basis of promotion in Telegram is text notes. Here you need an interesting publication plan and the ability to write engaging content.
What to include in your profile
Design your business page in such a way that it "catches" - this is a showcase of your business for social media users. Fill in all the proposed fields using information about the benefits of the product. Please provide valid contacts. Make sure that letters reach the mail, and you can get through on the phone.
What to post
- Announce new items.
- Show examples of using the product.
- Customer reviews.
- Product reviews.
- Collections of articles.
- Humor - anecdotes, jokes; beat last news in the Internet.
- The inner kitchen of business - how they wrapped gifts for the New Year, how they tested an armchair or a telephone.
- Ask for advice.
- Give free advice.
Ad on free sites - bulletin boards
Bulletin boards are probably the easiest and least expensive way to test a niche. There is no need to prepare a lot of content and deal with the settings. Just register a profile and advertise.
There are more than 40 bulletin boards in Ukraine and Russia. The most popular Ukrainian sites:
- Olx, Ria (general);
- Klubok, Kloomba (clothes);
- Shafa (brand clothing);
- Kidstaff (children's goods).
Popular bulletin boards in Russia:
- Avito, Yula, FarPost, Hand to Hand, Flagma, Buy and Sell (general topics);
- "Masters Fair", LoveMade, Spinbo (handmade);
- Littleone, Kidtobaby, ForLovedKids (children's products).
pros
- They come here to buy.
- For buyers there are filters, search, reviews.
- You don't need to create a lot of new content compared to social media.
- Ads are indexed by search engines. This means that even those users who simply search in Google or Yandex will find a product or service.
Minuses
- Ads are moderated. It may be long. Plus, the ad can be rejected.
- There are limits on free ads. For example, OLX has limits for each product category.
- There are many scammers who disguise themselves as buyers and deceive.
How to advertise a product or service
You need to register a profile by entering an email, phone number, name or login. Then confirm the registration in the mail and fill out your profile.
How to write good ad copy
- Fill in all the filter fields - this way there are more chances that the ad will be shown to the user.
- Take a good photo of the item. There are recommendations on sites, for example, on OLX, photo requirements are described.
- Write about some detail or feature of the product that will make the ad more personal.
- Change the ad text periodically to make it look new.
Advice: Write the announcement in a file so that it can be easily copied to other bulletin boards.
What content to use
The main content, other than ads, on free sites is customer testimonials. Therefore, you need to ask for feedback after each closed transaction.
Landing
It is needed to test a niche using contextual advertising. This is a product or service description page with one specific call to action. If you have several calls to action, such as “buy” and “download presentation”, this is no longer a landing page, but a one-page site. It will be difficult to test the effectiveness of ads on a one-page site, as the actions of visitors will be blurred.
Today, there are many designers that allow you to create a landing page without programming skills and immediately publish it on the Internet.
Free websites will be created on third level domains. That is, the address is long and contains the name of the platform. This is enough to test a niche, in the future you can buy a domain for yourself and indicate the name of the site in it. You can buy a domain from the same service that made the landing page. For example, on the borstch.com website, a domain is given free of charge when purchasing a paid plan.
pros
- Just create a website without programming skills.
- There is documentation, tips, videos. For example, Tilda's website has a free course on how to create an effective landing page.
Minuses
- Although the landing page is assembled according to the constructor principle, you still have to study the documentation and video. And also delve into the settings and understand the interface.
- Free landing pages are hosted on third-level domains.
How to choose landing page content
Earlier in the business plan, we formulated the product description, benefits, and unique selling proposition. This information will form the basis of the content for the landing page.
A selling landing page includes a set of standard blocks and elements:
Stage number 4. We launch paid advertising
For paid advertising use special services - Yandex Direct, Google Adwords, and social networks - Facebook, Instagram, Vkontakte.
How to test a business niche in social networks
Some people come certain idea to solve a common problem that remains unrealized, and the person never again seriously touches on this topic. Other people generate an idea for a business and concentrate on it, trying to immediately take measures to implement it, but something does not work out.
Ideas come to various forms and have different scales. Most bad ideas can be recognized as bad right away. Good ideas can be good ideas to varying degrees. In theory, a good business idea is one that solves a problem skillfully and does not have any significant flaws. But not every a good idea can make your business viable.
For example, although the idea is good, it may not be cost-effective, which is an obstacle to significant profits. If you have a good idea, but you are not sure if it is sustainable and suitable as a basis for real business ask yourself the following questions:
Does my business idea solve common problems?
The first question you should ask yourself is a simple one. Think about your idea. Does it solve any common problems that the average person faces?
The first key is to solve the problem, not to introduce some innovation that no one ever needed. The second key is a common problem that your enterprise can solve. For example, if you invented a device that allows someone to play the accordion and fix a car at the same time, you probably won't be able to reach a wide audience.
You can do some market research to support your idea, but if your product or service is not in demand, think twice before taking action.
Are people willing to pay for your solution?
You can spend some marketing research to get the right answer, but even just thinking about it, you can come to some conclusions.
Imagine that the idea didn't come to you, and that instead someone else comes to you with it.
- Are you willing to pay for this person's product or service?
- How much are you willing to pay for this?
These two questions should immediately tell you if this business idea has the potential to generate tangible income.
Is your business idea scalable?
Making money, believe it or not, is only the first step in the process. To thrive in business, your idea must have room for growth, ie. it must be scalable.
- Can your idea gradually expand and enter new markets?
- Can you come up with new, improved business models?
- Can you expand your business to other areas to make more money?
If your idea is not scalable, and it can only exist in its current form, it will not give you the opportunity to create a full-fledged business.
Is anyone else using this business idea?
This important point needs to be checked and one quick google search should give you an idea about it. See if there are any other companies that are already using your idea. If it's a great business idea, there's a good chance someone has already thought about it.
If you see at least one competitor with a version of your idea that is better than yours, then your idea probably has little chance of being viable.
Can anyone else do this?
Imagine for a moment that no one before you has implemented this business idea.
- If you introduce it to the world and start selling something special or providing some useful and unique service, how easy would it be for someone else to replicate your idea?
- How easy would it be for them to make a subtle improvement in this area?
If your idea is not unique, or if it can be easily copied, the chances of copycats and idea thieves (working well within the law) taking advantage of it are very high.
Can your product or service be in demand for more than a year?
This is an important issue for the sustainability of your business. Think and think critically about your idea. Is your idea something that comes and goes, or does it have a solid foundation and a long-term foundation?
If this is something unstable and coming, do not forget that your business will not work for a long time. Business ideas that will enjoy fleeting interest will not be successful in the long term. If you're aiming for something big and solid, you need something that solves common problems on a long-term basis.
If you can confidently answer all of these questions and have done enough research, you have a good chance of turning your idea into a successful venture. Just remember, the ideas phase is only the first step of the whole process. From this point on, you will need to do an exhaustive research, write a business plan and start looking for investors. It's a long and arduous process, but with confidence in your idea, you'll be getting closer to the big start of your business step by step.
- Slack
- Trello
If you have a brilliant business idea and are ready to immediately launch a startup, slow down and analyze whether all the nuances have been taken into account and whether all the shortcomings have been corrected. It’s not enough just to come up with an idea, find start-up capital and recruit a team. Every new business needs a step-by-step "strength test". Dmitry Voloshin, CTO of Preply, spoke about how to test a business idea in order to avoid failure in his column.
Entrepreneur from Kyiv, co-founder and service station of an international marketplace for finding tutors preply.com. Education: Kyiv National University. Taras Shevchenko. Preply has three co-owners: Dmitry Voloshin, Kirill Bigay and Sergey Lukyanov; the project was launched in 2012. At the moment, over 25,000 tutors and about 80,000 students around the world are registered on the service.
"Mom-test": checking by relatives and friends
Beginning new business from scratch, every entrepreneur wants to succeed. However, without careful preparation, a successful result cannot be obtained. To remove at least some of the risks, do not be lazy and test your idea - from the concept and initial resources, and ending with the implementation and all sorts of details. There are many ways to test the creativity, novelty, uniqueness, and potential of your project.
You can start with a simple survey of relatives, friends and acquaintances. The so-called “mom test”, despite the fact that it is rarely 100% true (after all, people we know will deliberately and unconsciously try to “embellish” your project), it can still give food for thought and point out weaknesses.
When conducting such interviews, it is important to remember that in order to get the most truthful answers, you need to formulate and ask simple and understandable questions. Focus on the shortcomings and problem areas of the business idea, while specifying what solution to these nuances your environment sees. By carefully analyzing the results and choosing all the most important for your project, you will rise one step higher in understanding the project's prospects.
Client testing
When launching a new product, one should not forget about target audience, its needs and requirements. You can check whether people are really ready to buy a product or service by using the Lean Startup methodology (aka Lean Startup), developed by American entrepreneur and business theorist Eric Rice.
Lean startup is a concept of "lean" launch and development of companies, which is based on the most careful use of company resources. For this, a scientific approach to the introduction of any new product, service or idea is used: a hypothesis is formulated, it is tested locally on a small audience or a small market volume, and then processed feedback and evaluation of results. And only in case of success the idea is scaled.
Using this approach, companies can design products and services that meet customer expectations and needs without the need for large initial funding or costly product launches.
In the conditions of modern telecommunication technologies, you no longer have to go from house to house to achieve significant results. It is enough to create a landing web page (landing page) and take advantage of the opportunities social networks, online communities, message boards or marketplaces with your target audience.
Oxygen, aspirin or jewel
Another method for testing the viability of your business idea can be an express test, which was invented by a successful entrepreneur and Harvard Business School lecturer Janet Kraus. To do this, it is enough to answer the main question about your project - how irreplaceable it is, whether it is a product or service for the target audience, without which it is impossible or difficult to live.
Conventionally, this method can be called "oxygen, aspirin or jewelry." Here you must clearly realize the importance of your future product. If it is irreplaceable, it is oxygen; if it makes life easier or helps to solve any problems, it is aspirin; if it is more a matter of prestige or pleasure, it is a treasure.
According to Kraus, ideally for successful business idea all three components are necessary, since it is these three aspects that will provide your startup with progressive development, market stability and growing profits.
The Disney Method
To take a close look at your business idea from all sides, it will not be superfluous to use the so-called "Disney method". It is based on considering his idea from three different positions - a dreamer, a realist and a skeptic.
Disney teams, developing new projects, gradually moved from room to room, each of which had its own functions. In the first it was possible to fantasize in the most insane way, in the second - to create detailed sketches of the implementation of these fantasies, and in the third - to subject everything to harsh and merciless criticism. To finalize the project, the teams could return to the previous rooms, since the project was considered finally successful only when there were no complaints against it in the “critics room”.
In the conditions of the modern market, to implement such a method, you can simply abstract away, and instead of rooms, use a piece of paper, a text editor, and, of course, all the power of your intellect.
Edison Method
Having tried all the methods described above and having all the pros and cons of your business idea in your hands, try to finalize the project, change the idea so that there are simply no cons left.
This is where the Edison method comes into play. Since each failed test provides valuable information for reflection, your main task at the final stage of testing a business idea is to refine and strengthen it until it is 100% satisfying.
When Edison was once asked what his secret was, he replied that he did not stop working on a product until it "worked on its own." This is the essence of the method.
P.
S.
Summing up: when working on a startup, it is important to remember that any business idea is a “green” product that “ripens” only under the condition of a correct, logical, carefully thought out and executed testing and verification plan.
Water does not flow under a lying stone, which means that for the successful implementation of any modern startup, the stone must be removed and the flow directed in the direction that will lead you to the best result.
You can start your own business in several ways: come up with a business idea yourself, join another business or use someone else's idea, and buy ready business. In all of these cases, before you start investing, it will be useful to conduct a “crash test” - checking a business idea for vulnerability. How to do it?
Draw up the most rough business plan
- Write a plan for implementing the idea: what are you selling, to whom are you selling, where are you selling, how are you selling - all the points that describe the development of the business.
- Make calculations: indicate the availability and amount of start-up capital and how much you are willing to spend on promotion - in general, all costs should be foreseen as much as possible.
- Calculate the cost at which you will sell your product or service. This is important for understanding whether you will enter the market with your offer or not.
Conduct a competitive analysis
The less money you have at the start with high competition, the less likely you are to launch a successful business. The most common reason for failure is that the costs significantly overlap the first income, and it is not possible to reach the profit. So let's start with simple steps:
- We analyze the number of requests for your product or service in Yandex.
- We look at the search results for a similar query - this is enough for a rough estimate of the ratio of demand to supply.
- We study the prices of a competitor - do they correspond to the prices from your business plan. If a price offer key competitors are difficult to beat, and the product is not unique, it’s better not to get involved.
Find your niche
This means taking a small share of the market. In order to be in your niche #1, most often you need to succeed in selling a unique product or service. When looking for a niche, it is important to identify demand. Let's say you decide to sell raccoon toothbrushes, but will someone be looking for your product? But the opposite also happens. Nobody knew anything about the new product, but it is so attractive that the rumor about it starts to help sell it without much advertising.
Study the market and consumer
The most successful are those business ideas that a person undertakes to implement, a dog, as they say, who has eaten in some given specialization. An experienced pastry chef who decides to open his own bakery, for example, already has the knowledge of where to buy raw materials, what equipment is best and what kind of cakes visitors prefer. If you are a recognized specialist in your field, then it will be easier for you to promote it - for sure, some of your customers will come to you, trusting directly your professionalism. But be prepared for intense competition with your former employer.
If your business idea needs to be realized in a market unknown to you, study it thoroughly, take a partner with a proven successful experience from this particular market.
Test Hypotheses Through Internet Marketing
A very popular method for testing startups. But it will require a certain budget. The method is to create
Internet page that provides detailed information about a specific product or service in order to persuade users to buy ">landing pages
