You've just experienced one of those light-bulb moments when you think you've got a dazzlingly brilliant idea for a business. Possessing the spirit of a true entrepreneur, you've decided to bring your idea to fruition in the form of a new business.
But wait. Before you invest a big chunk of savings into your new business enterprise, you'd be well advised not to jump to any preconceived conclusions about the merits of your prospective business. Remember the Edsel? If seasoned corporate executives can make a spectacular failure like that, then mere everyday entrepreneurs are certainly not immune to errors in judgment.
Will it sell and will you earn enough to make a profit?
Sure, there have been brash entrepreneurs who have been successful without giving a thought to researching their potential market or determining ahead of time what the potential for profit may be. But like any other investment, it is prudent for prospective business owners to perform the necessary research prior to putting their hard-earned monies into a new enterprise.
According to the U.S. Small Business Administration, two of the core questions prospective businesses owners need to ask themselves are:
- What service or product does my business provide and what needs does it fill?
- Who are the potential customers for my product or service and why will they purchase it from me?
If you feel your product or service truly fills a real need in the marketplace, get feedback from individuals, business associates and industry experts. What do they think about your idea? If your idea is a new product, make a prototype if possible, and present that as well. Utilize questionnaires and hold discussion forums.
As unusual as your idea may be, you will always be competing with someone else. Find out who your competitors are and determine if your idea will make the product or service better, different or more valuable. Understanding what you competitors are doing will assist you in doing it better yourself.
And just who is your target market? Determine factors such as potential size, income levels, age and geographic location. Is your target market shrinking or growing? How much are they willing to pay?
The next thing you need to determine is whether or not your new business endeavor will generate enough revenues for you to enjoy sufficient profits. One way to do this is to calculate your business costs and to determine your breakeven point, the point where sales cover costs. Anything above your breakeven point equals profits. Business Know-How offers calculators to assess business costs and your business breakeven point.
Prices charged to customers need to cover business costs, enable desired level of profits, and be competitive and in line with what customers are willing to pay.
Another important tool to assess the likelihood of new business success is the Business Plan, a summary of your business and the objectives and activities needed for it to succeed. Components may include the following:
- Executive Summary
- Company Summary
- Products and/or Services
- Market Analysis
- Strategy and Implementation
- Management Summary
- Financial Plan
Do You Need to Protect your Idea?
You've determined there's a real need and market for your product or service, and potential profitability looks great. Now is the time for you and your attorney to decide if your unique idea will require protection under intellectual property laws -- intellectual property being U.S. patents, trademarks, copyrights and trade secrets.
If legally appropriate, filing for trademark or copyright protection is easier and less costly than filing for a patent. Patent protection typically costs in the thousands of dollars. In the real world, most start-up entrepreneurs have limited resources and the pros and cons of patent protection must be carefully considered.
Benefits of a patent include having legal protection for your business idea or product, having a head start over competitors who may want to copy your product, and being able to enforce your legal protection if someone does infringe upon your rights. On the other hand, it's typically not very difficult for another company to legally design a very similar but different "copycat" product since patent specifications are so precise.
Be aware that whatever intellectual property protection you obtain, you may need to spend even more monies on legal fees in order to defend and rectify any infringements.
If you promote your business, will they come?
It's not enough to have a great product at a great price that meets a true marketplace need. In order for your new business to be an unequivocal success, you need to get the word out. Here are some basic guidelines to do just that:
- Business Cards
A good quality business card is a new business's best friend. Hand them out wherever you go. Be sure to include a logo, what your business does, and contact information.
- Website
Every business today needs a professional-looking and well-designed website. You want customers and others to be able to learn about your business and just what products and services you have to offer.
- Postcard Marketing
Nothing beats postcard marketing for cost and readability. Use as an effective way to generate sales leads, promote special offers or coupons, drive traffic to your website or introduce new products or services.
- Hold a Grand Opening
A well thought out and successfully executed grand opening can greatly assist with your ultimate goal: matching your business's products and services to the people in your community who would most need and benefit from them … and increasing your profits along the way.
- Become a part of your local business and civic community
Join your local Chamber of Commerce and a service organization like the Kiwanis or Lions Club. Attend meetings and become involved in your community. Networking of this sort helps new businesses and their owners become readily known to people in the community … prospective customers.
- Press releases
You've got a new business with a great innovative concept. Get the word out, and your customers will come. Send out a well-written press release detailing your new business and what makes it special. The media is always looking for stories on hot new businesses and trends -- Why not let it be about yours?
- Judicious advertising
Budget an affordable amount for advertising. This may include advertising in the Yellow Pages, local newspapers and business directories.
Case Study: Cereality Cereal Bar & Café
Not only has co-founder David Roth's great idea been turned into a hot new business called the Cereality Cereal Bar & Café, it has also become an unequivocal phenomenon. So popular, they have received over 5,000 inquiries from around the world from individuals seeking opportunities to partner with their company. As a result, they have decided to expand their development strategy to include outside operators-licensed partners and franchisees.
Open for business since 2003, Cereality offers its customers more than 30 different cereal varieties to choose from, 30 different toppings, a variety of milks and choices of hot and cold beverages. The menu also features proprietary cereal bars and other homemade bakery items, snack mixes, granolas, parfaits and smoothies. Customers can also get their own personalized cereal boxes made to order with their favorite combinations. Pajama-clad Cereologists prepare orders to customers' specifications.
The "light bulb" moment
David Roth, Cereality co-founder, was at a high-powered business meeting and one of the executives was covertly eating Cocoa Puffs. Roth noticed this. At one point, he asked the executive if he would ever go out to eat cereal, to which the executive answered, "Of course!" Roth subsequently observed other people's cereal habits while they were out and about; i.e., the Mom with her baby in the stroller, and the container of Cheerios she had at the ready. These observations created the spark for the Cereality idea.
Roth says, "It's about paying attention … even to the simplest thing."
Market research and profitability assessment
"The initial idea development began in the late 1990s," recalled Roth. "While no formal protocol of research was done, we spoke to best of breed in retail and in QSR [Quick Service Restaurant] -- very anecdotal -- but also to understand the potential of the cereal industry. 95 percent of Americans eat cereal; almost all eat every day. Third largest selling item at grocery stores (behind soft drinks and milk). Created a realistic business plan -- looked at it NOT as a restaurant idea but as a brand.
"We opened a pilot store at Arizona State University in the Memorial Union building -- small kiosk on a hall -- to see if the idea would 'work' and how to fulfill a huge demand (for cereal at all hours of the day and night) already in the marketplace."
Intellectual property protection
Roth says they knew they had such a powerful idea that they invested in intellectual property protection -- trademarks for their marks, slogans, catch phrases … plus patents pending on business method.
Today Cereality has already warned a number of new cereal restaurants -- some may call them copycats -- to stop using similar product names and slogans; restaurants that are cashing in on the same business idea. Cerealicious, another cereal restaurant knockoff, was sued by Cereality for trademark infringement in March of 2006. The Cereality concept has created so much buzz, Roth and Baker have had their hands full trying to protect their company from those seeking to steal their intellectual property.
Promotion of Cereality
"There was a very small ad campaign at Arizona State University with the funny slogans and product blend names you see on our website," says Roth. "We did invest in making the website really fun and appealing which helped drive buzz among bloggers and online communities.
"A press release went out in April 2004; sent to establish Cereality as the originators of the concept and to make the brand name synonymous with the idea of "cereal café." The release went on PR Newswire 'everywhere' including to the public (e.g., via Yahoo Finance), but we pursued USA Today and Business Week for initial stories -- and that's where they appeared -- based on the breakthrough nature of the idea.
"The copy in everything, including the press release, was speaking with a particular voice and attitude, and was the beginning of our idea of 'Always Saturday Morning' as our ethos/brand essence."
Taking a look at the April 2004 press release, the title alone is evidence enough of why the release was such a success: "95% of Americans like Cereal. 57% like Sex. We've Got Cereal."
Advice for budding entrepreneurs
Roth has these tips for individuals who want to turn their idea into a thriving business:
- "Pay attention to the simplest idea -- this is not rocket science; just tune in."
- "Think about meeting a need rather than trying to create demand."
- "Think about something people ALREADY have as habit and how you can make it better."
- "Stay authentic -- be true to yourself and trust your initial instincts."
- "ACT AS IF -- When you really believe, all others will have to."
- "Know your strengths and weaknesses -- and hire people who can make up for where you fall short."
By Patricia Schaefer
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