About 50 percent of small businesses fail -- that is, cease operations entirely -- within five years, according to the Small Business Association. What can you do to ensure that your company won’t be one of the ones that fails? The key lies in making sure you have a viable business idea that’s positioned well to help your company succeed.
Here are eight steps you’ll need to take to develop and nurture a winning business idea:
1. Start for the right reasons.
It might sound strange, but there are actually plenty of bad reasons for wanting to start a business -- maybe you dislike responsibility, have problems with authority or just want an excuse to take naps in the middle of the day. But running a successful business takes hard work, determination and sticking out bad breaks, and you won’t be able to overcome these hurdles if you’re in it for the wrong reasons.
If, on the other hand, you want to start a business because you have a true passion for what you do and you want to share a solution to your customers’ real needs, you’re much more likely to start out on the right path.
2. Brainstorm like crazy.
The next step, once you’ve determined you have the right foundation, is to brainstorm like crazy. Take multiple 30-minute sessions to think about, and write down, every idea you have for a possible business. No holds barred -- nothing is too outlandish at this stage. What do you know? What do you enjoy? What have you done before? What have you always dreamed of doing?
Once you’ve conducted your individual sessions, seek out people you know well and trust. Ask them what they see in you. What special talents have they noticed? Write it all down and keep an open mind.
3. Pick one idea.
This step may be the hardest part of this process, but you can make it easier by remembering that it’s not the only business idea you can pursue in your lifetime. This is simply the one you’re choosing right now. Weigh each of your options carefully according to what knowledge you have, where you have connections, where your passions are and where you see an opportunity.
4. Test the market (then test it some more).
It’s no secret that I’m a major proponent of testing. I test everything, and it’s changed my life. Many businesses skimp on market testing because they’re afraid it will be expensive and time-consuming (or worse, that it’ll reveal there’s actually no market for your idea). Let me tell you, though, there’s nothing more expensive or time-consuming than a failed business.
There are plenty of different ways to test a market without spending a ton of money, but one of my favorites is to simply talk to real people who are in your target market to hear their actual needs in their own words. Roughly 20 percent of failed entrepreneurs attribute their failure to a lack of product-market fit. Don’t wind up becoming one of them!
5. Make a plan.
Once you have an idea you’re confident there’s a market for, it’s time to make a plan. Many businesses fail because they don’t take the time to make a plan and stick to it. And I’m not talking about a huge business plan document that’ll sit in a drawer and gather dust. I’m talking about a living, tactical document that sets a framework for the company, identifies growth benchmarks and defines your overall goals.
As you make your plan, you may find yourself asking questions you hadn’t thought of before -- questions that potential investors will think of. By planning ahead, you won’t be caught off guard.
6. Secure funding or bootstrap.
The number-two reason that startups fail is that they run out of cash. If you aren’t able to fund the business on your own, it’s a good idea to try to secure the funding you need before launch. If you can’t secure funding from other business owners or investors, consider asking your friends or family for help. Alternatively, many founders choose to bootstrap their companies to keep operations under their control and maintain independence from investors’ profit motives.
The route you end up taking for your startup is entirely up to you.
7. Build a great team.
As a founder, you should have significant knowledge of your market and the product or service you want to offer. However, you can’t do it all alone, and the team members you choose to bring on can make all the difference.
When building your team, be sure to follow some key guidelines. Hire to supplement your deficiencies, not to copycat yourself or boost your ego. Evaluate your team regularly and know how each member contributes to your success. Let anyone go who doesn’t move the needle for your business, even though firing team members is never fun.
8. Don’t be afraid to try again.
One of the things that statistics can’t capture is what happens after a business closes its doors. If you do end up shutting down, take the lessons you learned and don’t be afraid to try again.
Being successful in business requires many things, from a viable idea to a team to support its execution. By putting these eight steps into practice, you’ll significantly increase your odds of finding a winning business idea that puts your business in the 50 percent of successful, growing companies.