Let’s get straight to the point. I think that a lot of future business owners think they have an amazing idea for a business. But don’t! I know... there are many many reasons why a new business can fail, but I feel there is one overarching reason they fail. Bad ideas.
I’ve been helping businesses brand themselves, tap into existing and build new markets and advertise for over 25 years, so I’ve seen almost every personality type and business idea. To this day, I cringe, when I am pitched a business concept by a potential client that, deep down, I’m pretty confident will end up closing its doors, forcing bankruptcy and/or cause significant stress and anxiety.
The real culprit here is that we all like to think our own ideas are ground-breaking… trend-setting and have a massive market or otherwise put, will be a huge success. In fact, I’m in the process right now of vetting a business concept that I think will perform well. But there in lies the difference between successful business ideas and unsuccessful ones. Critical analysis. Critical analysis will help kick a bad business idea to the curb before you’ve even spent one dollar.
Current survival rates for small and medium-sized businesses in Canada decline over time. About 85 per cent of businesses that enter the marketplace survive one full year, 70 per cent survive for two years and 51 per cent survive for five years. (Source: Industry Canada).
So if we know that critical analysis of your business concept will help improve your success odds, why don’t more people invest the time and effort in trying to de-bunk their business idea? Good question. My gut feeling tells me it’s either one or a combination of these things: delusion, laziness, inexperience and/or too focused on the fun and easy aspects of the business.
Delusion. You’ve convinced yourself your idea is great despite doing virtually no work to prove it. Your friends and family may be compounding said delusion by being good friends and supporting you no matter what you do.
Lazy. Speaks for itself. Let’s face it, vetting your business idea takes A LOT of work! But at this VERY early stage, it's just time you are investing and the more time you can invest, the better your chances of ensuring your idea is a great idea worthy of taking to the next stage.
Inexperience. Although a very real and valid point, it’s becoming less and less of a good excuse. There are so many high-quality on-line resources available to potential business owners that it’s staggering. Not to mention the endless local business support groups.
Mis-directed focus. I can speak to this first hand. Focusing on the fun bits of the business is easy. It feels good. Working on your logo, finding a location, interior design… all really fun (and important) aspects to starting a business. But what is FAR more important is to crunch numbers, define markets, define competition, forecast revenue/expense/profit and loss and most importantly being critical of your idea itself.
So with all that being said, I’m going to let you in on a little insider info. I’m currently vetting a family small business idea that is a themed pizza concept. The first reaction I get from people is, “Dude… pizza? Are you sure?”. When I take the time to explain the idea, I see their eyes slowly widen and head nods of approval culminating in “OMG, that is an amazing idea!”. But that’s not enough. So I am currently in the process of performing the next steps:
I’m determining an estimated cost of producing one pizza. A VERY important number.
I’m calculating my “Start-up” costs and my “Operations” costs. Two very different numbers, both equally important.
I’m doing a competitive analysis to ensure our pricing structure stays competitive and is positioned well within the market as well as seeing what our competitors are doing to grab market share.
I’m building a library of ideas. The crazier the better. When I am ready, I will be able to draw on these ideas for a good start.
I’m building a market research file to do my best to determine if, in fact, there is a market for my product, how big it is and what it looks like.
Considering the short and long-term strategy so I have goals to aim for and put plans in place to ensure I have the stamina and energy to go all the way.
The important thing to take away from this is simple. I’m doing all this work BEFORE I have spent a single dollar. If my concept fails on any of these key components, I will literally shelf the idea. No harm done. And know that, just because you did extensive research doesn't guarantee success. There are many other factors to consider. The idea quality is simply the FIRST to consider.
So, in conclusion, being your toughest critic can be VERY difficult, when you're convinced you have a rock-solid idea. But do everything you can to try and poke holes in that idea. Be brutal! If you’ve done your homework, thoroughly, it will become very apparent whether your idea is worthy of a full life-long commitment.
Would you like my help starting your business or taking your current business to the next level? Email me directly, text me at 905.442.3323 or call me at the same number. It's always free to chat!
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