Before You Start: 10 Ways To Evaluate Your Potential Business’ Success
Perhaps surprisingly, I became obsessed with systems and process and careful planning when I used to tour as a DJ, run record labels and manage artists.
As a performer, you needed to take risks, but they were always calculated and based on research. Ahead of a performance, loads of preparation went into sets. When performing, you looked for patterns in dance floor behaviour – like the crowd going wild, or being mesmerised by expertly produced, fresh-sounding hypnotic sounds.
You made a note of the music that caused these moments, and repeated them on demand, when the time was right.
It was the same with the record label. To keep ‘in’ with our record distributors, (to appear professional and remain one of their clients), we needed to deliver excellent music product, that people wanted to buy, to a timeline.
Little happened by chance. It was all meticulously worked out, and releases were planned often more than 6 months in advance.
In essence what seemed like a rock’n’roll operation in the entertainment industry, was in fact based on theory, research, process and planning. Put in the work, and you could play anywhere in the world and deliver a great DJ set. Deliver quality product to a timeline, with great artwork, artist bios and press releases and you could sell records across the globe.
The New Business Stress Test:
When I chat with entrepreneurs and startups, especially in the digital space, I am often struck by how much “gut instinct” seems to rule the roost in key decision making. Despite the fact that there is an abundance of easy to find material, in books and online to help and support early stage business.
In my more recent work, the more I learn about business strategy and marketing, the more I recognise that there are robust tried-and-tested processes to help inform your decision making, and thus minimise the risk of failure.
If you are considering a new business venture, then you should have access to this business validation scoring system. It might reassure you and you’ll validate your new adventure. Or if you score poorly, it might save you investing your time and effort in the wrong business.
With your new business idea, run through this 10 point stress-test and rate each of the the following out of 10. Once completed add up your score and use this guide to evaluate:
50 points or below: sorry, move on to another idea, this one is dead in the water.
50-75: there will be some really hard graft here and you may survive, but it will not be easy.
75 or more: this could be a winning concept and is probably worth more of your time working out how you would bring it to life.
Note: answers to these questions should be validated where possible with qualitative and quantitative market research: real statistics and science – as opposed to your own guesswork or the suggestions of colleagues – especially those that you are working with.
Guessing the answers, based on observations from within your own organisation, is not an objective view and, when it comes to your new business, is akin to spinning a roulette wheel with your money or time.
- URGENCY
How badly do people want or need the thing you want to sell – right now? Paying to stream an old movie is low priority. Watching the cinema premier of the latest Star Wars film is high priority.
- MARKET SIZE
How many people are purchasing things like this? What is the demand: basket-weaving courses = low, cure for cancer = high.
- PRICING POTENTIAL
What is the highest price a typical purchaser would be willing to pay for this service.
- COST OF CUSTOMER ACQUISITION
How easy is it to acquire a new customer, and what is the associated cost? For a restaurant – not so much. For a government contract worth billions… a lot of money.
- COST OF VALUE DELIVERY
How much will it cost to create and deliver the value offered – in both money and effort? Delivering files via the internet (almost free) vs inventing a product and building a large factory (costs millions).
- UNIQUENESS OF OFFER
How unique is your offer vs competing offers in the market – and how easy is it for someone to copy you? Hair salons are ten-a-penny. Private space travel on the other hand…
- SPEED TO MARKET
How soon can you create something to sell? You can mow your neighbour’s lawn in minutes, but to set up your own bank could take years.
- UP-FRONT INVESTMENT
How much money upfront will you need before you are able to sell? A cleaner may only need cleaning products. A gold mining operation in contrast needs expensive excavation equipment, teams of workers and to purchase land or mining rights.
- UPSELL POTENTIAL
Are there secondary products that you can sell to customers. A Razor needs more blades, shaving cream etc.
- EVERGREEN POTENTIAL
How much additional work will need to be done to continue selling. Software (little), consulting service (lots).
For more strategic business and marketing advice, I am always happy to learn about new or existing business ideas, and chat through how I may be able to help. Simply book in a meeting using my link on the Calendly app.