Considering a new business idea? Then obviously you’ve considered how many new businesses don’t make it. Let me start with a piece of good news. It isn’t eight in ten like you’ve been told. That’s a myth. And there is an easy reason to see why. The people who bring up that statistic never say ‘by when’. Is it after a year? After five? In the whole lifetime of businesses?
In fact, less businesses than that fail. About half of businesses make it to their fifth year and about a third make it to their tenth. So that’s a relief. Still, a one in two chance of not making it is still big enough – particularly if you’re investing as much into this idea as you’re going to have to do for it to have a chance.
For that reason, you want to boost your chances as much as possible. Here is how.
Do your market research
Just because you think it’s a cool idea doesn’t mean other people will. So, step one is to find out if there is an actual market for your idea. You can do this through traditional channels, like market research companies. The only problem with that approach is that it will cost you and at this point you might not yet be willing to invest big dough.
A strategy I particularly like is to simply run ads for the product you’re trying to run on social media. Pitch the idea and point to a page where people can sign up for a newsletter if they’re actually interested.
Get some help designing a few good static image ads from a friend who knows how to do that kind of stuff (they’re not too much work), experiment a little bit with who gets to see them, and then track numbers. On Facebook that’s pretty easy. On your newsletter page you can use Google Analytics and UTM parameters to see which ad is the most likely to draw in people who actually sign up for the newsletter.
Don’t really get any interest? Then you’ll need to go back to the drawing board. You do? Well, then you don’t just have a better idea of who is interested, but you’ve also got an initial mailing list to work from.
Find the money
You need to know how much money you actually have at your disposal. This means taking stock of your financial situation: what’s coming in and what is going out. Based on that, you can make an estimate about how much you can spend and how much you run for.
Also, make an estimate of when you’ll be seeing your first income. Now double that time to give yourself a more realistic number (we’re notoriously over-optimistic about these kinds of things).
Even better, see if other people would give you money. A lot of people might have good things to say about what you’re planning. But if they’re not willing to back that up with money, then those words don’t mean much.
This doesn’t mean you have to take the money. You can always say ‘I’ll think about it’ if there is interest. But it will serve as a good bellwether of whether your idea has potential. Even better, when the time comes that you do need financing, any people who have formerly agreed to finance you will be easier to convince a second time.
Get legal advice
You’ll want to get good legal advice today to avoid all sorts of problems down the line. So get an attorney who know this kind of stuff and get them to give you a rundown of the best structure you should use, what kind of contracts you should use and more of this kind of advice.
Don’t skimp on this, because if there are any areas that you overlooked, this can allow people do all sorts of nasty things to you down the line. And legal trouble can be the death knell of a budding business. Now you don’t need to keep them on retainer. Have them walk you through the initial stages.
If possible, do a trial run
Now, this might not be an option for every new business. Sometimes the product will be too expensive to produce. Sometimes there will just be too much time involved. But if the product is relatively simple, then see if you can actually sell it before you fully commit.
Find some customers locally, perhaps among your friends or business associates. Make them aware that this is a beta run and that there will be a long delivery time. Then try to see if you can get some initial orders.
If you find this relatively easy, then that means you might very well have a winner. If not, well then that will give you some very valuable information as well. It doesn’t mean the idea won’t work, but it might mean you have to reconsider your approach.
Get the proper permits and licenses
Once you start up for real, get all your paperwork in order. This might require speaking to lawyers again, as well as government officials and whoever else is involved. Yes, that can be a Kafkaesque nightmare.
But having them swoop in and take your business away because you don’t have some crucial piece of paper is much worse.
So get your paperwork in order! Just as importantly, check what the biggest legal problems are that businesses are likely to face and make sure you’re prepared for those. After all, the best thing about us is that we can learn from other people’s mistakes. But we can only do that if we pay attention to where other people have screwed up.
A final thought
And then go for it. Yes, it will be harder and more complicated than you can imagine. It will be a struggle that will have you stressed out and working nights. But it will be yours. And there is something to be said for that.
So hold on. And make sure your buffers are ample, so that when the inevitable headwinds come, you’ll be able to take them on for as long as they last.
