Five Steps to starting your own business: Step 2 - Understanding your Opportunity

In my previous blog I looked at Step 1 of the 5 Steps to starting your own business – Developing your core concept and proposition.

In this blog I want to provide you with some thoughts on how you really get to understand your business opportunity, the hard questions to ask, and common mistakes to avoid.

Step 2: Understand your opportunity Having the initial idea is one thing, but translating that into a business opportunity that is scaleable is quite different. Understanding where and why you will sit in a particular market is an essential part of deciding to go it alone.

Putting it simply, knowing that lots of people who like chocolate also drink tea might lead you to develop a chocolate teapot! So you need to be careful about not only gathering the relevant facts but understanding the implications for your concept. No one should know more about your customer or business idea than you when you launch so it is vital that you do the deep and wide research that would normally be expected of you by your current employer. Don’t rush this part. Keep digging and be alert to data that might point away from your idea.

All forms of research are valid, but getting up close and personal with people that you would want to buy your product/services is important, so find ways to identify them and talk to them about what they would be looking for. Survey Monkey is an easy way to gather some data, but unless you personally send a link to potential respondents you might be disappointed with the number of completed surveys, so think about other ways that can work alongside that to gain the information you need.

Building one or two (but no more than four) customer personas can be a useful exercise, drawing upon the information that you have gathered from your research, and will really help you to focus on who you are targeting. You also need to think about your competitors and why your target would currently go to them. Who are they? What do they offer that you can’t or won’t? Does the gap exist for your idea? Are you creating a new market sector? Is the problem that you are solving important enough for customers to pay for at a profitable rate? Is this a long term need?

Desk research can give you an idea of the size of the market, but don’t fall into the common ‘Dragon’s Den’ mistake of doing a simplistic mathematical calculation to get to the size of your ‘opportunity’. Be specific. Halve your estimates and halve them again to avoid being over-optimistic. Would you still be interested in pursuing the idea if it was a £100k opportunity rather than £1m? At what point is this not big enough to be realistic and motivating?

Having the opportunity to pull apart your findings, and test the assumptions and conclusions with an objective advisor at this stage is one of the most important parts of deciding whether to continue on the journey. A lot of time and money has been lost by individuals thinking they had a great idea that consumers would flock to, only to find that they hadn’t asked all of the right questions. If you'd like to chat through your ideas and assumptions before heading too far down the road of 'Going it Alone' feel free to send me an email and we can arrange for a free of charge face to face meeting to suit you. Next in this series is Step 3: ‘Developing your Business Plan’.