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.