Don’t miss the Businesslink Networking Breakfast with Mrs. Divine Ndhlukula on Friday 26th October, 2012.
By Phillip Chichoni
Many people have brilliant business ideas in their heads. But very few of those ideas actually turn into commercially viable businesses. In a country with such a high rate of unemployed people this is a sad scenario. But what really stops these ideas from germinating into real businesses?
In my discussions with potential entrepreneurs I have found one of the biggest reasons: lack of action. You may know what you want to achieve but you don’t know what steps to take, so you just wait. Nearly a century ago, Napoleon Hill was commissioned by billionaire business magnate David Carnegie to research the factors that made successful people so. The result was the best-selling book “Think and Grow Rich.” One of the factors that Napoleon Hill states as the major contributor to success is the ability to take action towards your goal.
This article will direct you on the path of action to take to turn your idea into a real business.
Step 1: Define your business model. A business model is the process by which the business will work and make money. Every business supplies a product or service and generates revenue from doing so. How exactly this happens is the business model. The most common sources of revenue, which define the business model, are:
a) Sales income
b) Fee income
c) Commission income
f) Advertising income
Step 2: Identify customers. You need to ask yourself some important questions, such as: Who is going to buy your product or services? Where are these people located? How many are they? How will sales be made; directly by you, or indirectly through a channel? Will they be willing and able to pay for your products? How do you know that they will be prepared to pay that price?
To be really sure, you need to do some research in order to get real answers. Many entrepreneurs make the mistake of producing or procuring products without understanding customers’ needs, only to struggle to make sales.
Step 3: Develop a marketing plan. Just because you have a good product does not mean it will sell itself automatically. Customers need to know about the product and its benefits so they can decide to buy. How will potential customers get to know about your offering? Will you need to carry out a marketing campaign or will you approach potential customers one-on one? What marketing methods will you use to reach customers? Your marketing plan needs to have specific targets. How many units do you need to sell to break-even and to make a profit?
Step 3: Analyse the competition. If similar products already exist in the market, how can you be sure that you can lure customers from their existing suppliers to your new and unknown business? Some strategies to beat the competition include being better priced, offering better quality, or having superior technology. Other methods include making access to your products easier or offering more after sales value. If customers do not move from their existing suppliers there is no business, so the differentiation must be substantial. If it’s a new product then you must be able to show evidence that enough customers will adopt the idea, and pay the proposed price. This may necessitate some test marketing or market research.
Step 4: Define start-up requirements. You will need resources to get started. These include capital for premises, machinery and equipment, furniture and stocks. Even if you are starting a home-based business you still need basic things like business cards, stationery, a computer, a website etc. Some of these things you can get second-hand, to minimize your start-up costs. Once you know the capital required you then need to work out how to raise the funds.
Net week I will share some tips for starting up on a shoe-string budget and innovative ways of raising start-up capital. Don’t miss it.
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