Making a Case for Your New Business
Creating a business case prior to actually starting a business may help prevent a disastrous venture doomed to failure. All of us are prone to falling in love with an idea and thinking that the world will embrace it. It won’t. Too often businesses are built on wishful thinking. Instead, an idea for a business must be examined and tested for validity.
Here are the steps that need to be taken:
- Crunch the numbers of your idea
- Develop a forecast showing your best and worst scenarios.
- When will you break even?
- Develop a cash flow projection. Will there be adequate financing to pay for it all?
- Develop individual projections for various pricing environments.
- Develop individual projections for each competitive reaction.
- Examine user needs
Ask prospective customers whether they like, want and need your business. Will they receive value and benefits from your offerings? This step is often skipped because we think we know best. The goal is to hear from customers what they want, need and will be delighted by.
You need to answer the following questions:
- How are the prospects currently solving their problem?
- What problems are left unsolved?
- Where is the competition failing in providing solutions?
- What trade off will the customers make?
Your business should deliver a unique benefit not currently available.
- Competitive Analysis.
Analyzing the competition requires an understanding of the competition’s business model and its strengths and weaknesses. Consider the following:
- Who is the competition?
- How strong are their sales force, customer service and marketing?
- Are you targeting the same customers?
- Is price a major factor in customers’ choice?
You also need to understand how the competition competes and where their customers are coming from. Finally, assess the competition’s reaction to your business.
- Concept Testing
Before starting the business do a concept test. It’s a low cost and low risk step and it may save you a lot of money down the road, and. This will confirm or negate your hypothesis that you will satisfy customer needs better than others and that prospects will leave their current providers and switch to you. The idea here is to gauge market acceptance, what features are meeting with customer delight and what prices customers are willing to pay. This step can involve:
- Running test ads
- Developing a website with offers
- Collaborating with an existing business
Make sure that you’ve done your homework before investing your money. Anything else is a gamble.
Perception is the reality-people buy based on differences They Perceive. It’s the differences that potential customers perceive that make them choose one business over another. And those differences make the customer feel more confident about their final decision as well.
Unique Core Differentiators (UCDs) clearly articulate what makes your business different. They are the special things about your product or service or business that compels customers to buy from you rather than your competitors. Well-formed differentiators target your customer’s ‘hot buttons,’ real buying concerns, or key frustrations. In one statement it educates them about exactly why they should buy from you.
The best sales people are ‘canned’. They know better than to wing it through a prospect meeting. They have a systemized sales process to work with. And the most effective system is relationship selling – selling based on getting to know a customer’s real needs and fitting your product to them.
Relationship selling doesn’t involve high pressure or manipulative methods. The salesperson here is a problem solver, a helper, and an advisor to the customer. They learn to identify the customer’s needs and sell them a solution that fits the need – not just a product. It moves the emphasis from price to value as a differentiator and provides a powerful advantage over competitors.
Do you know…
How to use objections to further the sales process
How to prepare a sales pitch so that saying ‘yes’ is the next natural thing to do
How to build relationships so strong that your clients won’t think of going anywhere else
Your customers are generally only interested in product features that translate into benefits. So, whether you’re developing a new product or exploring a way to repackage an old one, it is important to think clearly about the benefits you provide. Product features are not important in themselves. Great as a product may be, customers won’t love it for its own sake. They’ll only love it for the benefits it provides.
Guarantees, and especially those that are in some way even better than ‘money back’, are a proven way to attract prospects. But how to develop such a guarantee?
The best thinking on the issue of developing guarantees now involves using the concept of ‘risk reversal’. There is no better way to change the perceived benefit of a product or service than to offer an ‘extraordinary guarantee’ that switches the risk of making a wrong choice from the buyer to the seller – risk reversal. In effect a risk reversal guarantee inspires the prospects trust by announcing: “I’m so confident in our products, services and business that I’m prepared to put my own money where my mouth is and make it impossible for you to lose out on this transaction.”
By knowing what the customer really wants, and then making it clear that they will get the result they’re after from this deal or else the seller shoulders the consequences, makes their buying decision so much easier. And that’s what offering an extraordinary guarantee can do.
Most small business owners never question the validity of their business model. Is it a successful model? Does it make sense? Will it make money? Yet your business model is your foundation. It does 2 things
- It explains to all who ask how your business provides value to its target market. How do you make their life easier, happier, richer and more successful? Why do your customers come to you because … you have a convenient location, there is easy parking, your after sales service is good, you recognize and greet all your customers, you have a unique understanding of their business, your product/service is the best value for money, no one else can supply it and so on
- It demonstrates why your business will be financially successful. Do you have lower costs than your competitors, and if so, why? Is it because you are skilled at producing your products more efficiently? Do you have a source of raw materials that others pay more for? Can you command a price premium, and if so, why? Is it because your service is so exceptional that people are willing to pay a little more, or is it because you provide 24/7 service?
Are you providing sufficient value that people will pay to obtain your product/service at a price that will make you a profit?