Turning an idea into a viable business is one of the most difficult endeavors a person can undertake. Giving life to an idea is like giving birth to a child and raising it to be a full-grown adult capable of standing on their own feet, it requires a lot of investment be it physically, mentally, financially, and intellectually.
Furthermore, a brand new idea does not necessarily mean that it would become a sustainable business in a blink of an eye. . While it seems that having a brilliant idea is all that it takes to be a successful entrepreneur, the reality of the situation is quite different. Statistics are quite shocking when it comes to the success rates of new businesses; According to Forbes, 90 percent of startups fail, while 75 percent of venture-backed startups fail and nearly half of businesses do not make it to their fifth year according to the Review42 platform.
These statistics are not meant to discourage entrepreneurs; indeed they could act as a motivation for them to work harder and smarter. While every successful business has its unique path to success, duplication is a reality and competition is always present. All one can do is execute ruthlessly. That being said, there are fundamental steps that entrepreneurs can take to turn their ideas into viable businesses in the real world.
1. Research the market and find out which problem your idea solves
Every business whether it’s a start-up or a large company must address a certain problem for customers or satisfy a certain gap in the market. You might come up with the brightest idea to find out later that someone has preceded you in the market and has already addressed the same problem you are solving without much success. Generally speaking, competition is normal, in fact having a lot of competition means a lot of opportunities. However, if others have tried and failed, it’s important to learn why. That being said, it’s important to do your market research that will enable you to estimate the size of your market and ultimately define the size of the problem that you are solving.
“The first step of starting a business is to identify a problem to solve and then you need to figure out how many people have the same problem. That’s your market size and that determines if a problem is real and real people are suffering from it,” said Tamer Azer, Partner at Shorooq Partners, the regional venture capital fund and adjunct executive education faculty at AUC. “Questions like, what’s the demand for your idea and who will use and buy your product or service need to be answered,” he added.
2. Know your competition
“Once you’ve clearly identified the size of your market, the next step is to understand who has tried to solve this problem and how, not to mention if they have succeeded or failed. Learning from others is a critical part of building a successful business and not replicating the mistakes of others,” added Azer.
Running a comparative SWOT analysis with others in the market is a powerful tool to evaluate your startup’s competitive position, especially during the early stages of the company’s life. It’s an analysis framework that evaluates the strengths, weaknesses, opportunities, and threats of a company, project, or an idea. Strengths and weaknesses indicate internal factors related to your project that put you at an advantage or disadvantage compared to competitors. Opportunities and threats are usually external to your project or business and are more related to your business environment.
Start your analysis with your project’s strengths and weaknesses. Your points of strength could be your location or the price of your product or service. Your weaknesses could be your financial resources, staff limitations or the small size of your business.
3. Identify your target audience
Knowing your target consumer’s personality and behavior is one of the most critical points in executing your idea. The first step towards this is to identify your market segment with respect to age, gender, location, and profession, among many other things. More importantly, you need to analyze your customer’s preferences and choices over time. This kind of analysis will give you valuable insights into how to engage your target audience and solve their problems. It will also enable you to have a personalized view of your customer’s interests and even their challenges.
One way to do this is to gather as much data as you can on your prospective clients. Be very specific and dig deep into it. You can also make focus groups to help you understand more about what motivates your clients’ decisions. You can also use social media to gather such data and get the help of a business expert or a consultant to help you generate a profile for your customers.
Azer explains that understanding your target market helps you work towards a critical milestone of product-market fit. This means that the product you built matches the needs of the market you are trying to serve and this is a critical landmark in the growth and success of any business.
4. Create your business and financial plan
Most investors will require some sort of a business plan in order to decide if your idea is worthwhile. So it is imperative you have one at hand before going out there searching for funding opportunities. Creating a business plan will be a sort of manifesto for you that will guide you at least for a period of three to five years. Moreover, it will help you focus by getting your ideas down on paper instead of having them scattered in your mind. A business plan does not have a specific format but usually, it contains some kind of an executive summary of the whole project’s idea, a market analysis, detailed steps of execution, team information, expected outcome (product or service), indicators to measure success and progress and a financial estimate/plan.
This is also important so you can show potential investors that you understand how to build the business you are trying to build.
5. Execute, execute, execute
Start building, build fast, release to the market, learn from your customers and iterate. “Nothing and I mean nothing is more important than execution when it comes to turning your idea into a reality.You can build all the business plans in the world but nothing beats real execution and traction,” Azer tells Business Forward. “Go to market quickly and so that if you fail you can fail fast and if you grow you can grow fast and raise capital. Nothing beats flawless execution; nothing is more impressive than someone who ruthlessly executes and executes well,” added Azer.
6. Determine your source of capital and find your investors
Once you’ve demonstrated execution, it’s time to identify the right investors for your business. “Find investors who have experience in your line of work, who are passionate about your business and who are the right fit in terms of size and stage,” explains Azer.
“If you are an early-stage company, don’t go to a venture capital who invests at the Series A or B stage with a minimum ticket size of $5 million, you need a seed-stage investor who can put a bank check of 250K to 1million – finding the right investor for your business is critical to extract the most amount of value and give your business the best chance it has to grow and succeed,” Azer added.
Summing it up
If your startup succeeds then you have done something right that 90 percent of new businesses fail to do. Setting luck aside, there are more humble reasons that help startups to succeed like having a clear vision, doing thorough market research and understanding why others failed, understanding the personality of your target audience, their motivations and their choices, finding the right investors, having a clear detailed business plan and above all the execution of your plan. If you follow these steps while being fast in execution, a quick learner, persistent and resilient then you are setting yourself up for great potential for success.