It happens to every entrepreneur. You are hanging out with friends and someone has a “can’t miss, billion dollar idea” that is just ludicrous. I hear so many business ideas that while, yes, it would be great if they existed, if there is no feasible way to launch the service or product, it is just not going to happen. These are the same people who probably think that every idea needs to be completely original.
How many surf brands were out when Volcom launched in 1991? Tons, and look at the following Volcom has today. Business is all about creating a need for something or offering what people want. Every entrepreneur has a book full of possible business ideas. Some are world changing, some are money machines and some are just way to utopian to ever be made. Deciding how to move a potential business from idea to reality is key to creating something that is sustainable and can be accurately scaled.
First, you must identify the potential market. Are there really enough people that will buy your products or use your services? Many entrepreneurs are overly optimistic. First look at the industry. If your idea is, for example, creating an easy way for older people to use modern technology, you first need to calculate if there really are enough older people that are interested and if it will even be sustainable.
If you are targeting people who are 80 years old, there is a good chance that your market will be small to begin with. Knowing approximately how many people are in your target market is key to being able to target and secure a group of that market to be customers. Knowing the market size will also allow you to determine if that market is even worth entering. If there is just no market to scale your business or the market is just too small in general, then you may want to rethink starting you business depending on your objectives.
The second issue that you must address is funding. I have heard ideas that would cost over $5 million to even get off the ground. To keep a business that requires that much cash infusion to start usually will require large amounts of cash to keep them growing. While an idea may sound great and life changing, one of the major aspects that holds back rapid technological advancement is funding.
You need money for everything when you start a business whether it is building your product, advertising, overhead, etc. There is just no way for a first time entrepreneur to be able to raise funds for a business that costs so much money to get off the ground. A large idea you can put on the back burner until you are in a position to start the venture. Look at Elon Musk and the Hyperloop for example. Musk built his way up from venture to venture in order to open the door to new opportunities.
In addition, what also must be considered is what is backing the money spent. If you need to spend over $1 million in your first year on staffing and overhead, there is a small chance for that business to get going. The most successful of these ventures are tech based startups. If you are spending $5 million on land for a farm to produce corn for ethanol, now you have collateral that your backers can liquidate if your startup fails.
Another issue that arises when it comes to funding for entrepreneurs is that a venture will likely take more to get off the ground and support as it grows than is initially accounted for. Any budget can easily be overspent and many problems will arise as you iron out the kinks and set successful protocols.
Making sure that your account for funding to take care of problems as well as take advantage of unforeseen opportunity is key to allotting when starting up your company. Most startups fail because they run out of money, and allowing for a safety net may prove key later in the life of the business.
Remember when starting a business, there is no way to reach $1 billion if you can’t even reach $1 million. Set goals for yourself and reassess along the way. You can’t just jump to the end. Most entrepreneurs and companies alike start small and grow from bottom. Assessing the feasibility of a venture before launch is a key to making sure you will reach all of your goals and scale your company how you envision. There is no reason to waste your valuable time, so learning to assess feasibility is a key component of entrepreneurship.
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