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So you have come up with a great idea that you just think is great. You are convinced that the problem exists and you have a solution that customers will love. Now you simply need to raise some money to make it a reality. Sound familiar?
Over the past 17 years, I have worked with a whole lot of aspiring entrepreneurs at Babson College and across the country, each as a professor and advisor at Butler Launch Pad and in private work. This is probably the most typical scenario I’ve encountered. Entrepreneurs often miss the most vital query. It’s not about how to start a business but should Are you starting a business?
Surprisingly, you are not alone. Such research according to CB Information, Tomek Eisenman AND Sports Kotashev found that one of the most typical reasons for the failure of latest ventures is the lack of a market. In other words, the entrepreneur created a product or service for which there have been not enough customers willing to pay for it.
Fortunately, this error will be largely avoided with a little preliminary market research. Here are three tips to assist you to understand whether your enterprise idea is worth pursuing.
Find out who your customer is (and is not)
The first step is to determine who constitutes the market for your particular company. Your customers are everyone who offers you money, and you wish to know who they are so you possibly can determine whether there are enough of them to make the enterprise worth your time, energy, and money. Why should they have an interest in your product or service?
An often neglected query is whether or not they feel they have a problem that the product or service solves. This could appear obvious, but you would be surprised how many entrepreneurs collect a lot of data from individuals who won’t ever be customers.
Then make sure they see the problem as a problem worth paying to solve. I remember trying to sell diesel engines to a Russian truck manufacturer in the Nineties. We explained that we could save them fuel and help reduce emissions. The answer was that diesel is low-cost and it’s nice that we care about the environment and they do not. They were never going to change into a customer – they didn’t see any of these issues as issues worth spending money on.
Figuring out who your potential customers are is not enough; you furthermore may need to know what sets them apart from non-customers to really know how big your market is. There will at all times be people or firms that have a problem but are not willing to pay to solve it.
In other words, what makes them interested in purchasing the solution? The answer is rarely demographics – almost no one says, “I would pay to solve this problem because I’m 28.” Imagine you define your market as people between the ages of 18 and 40. That is, someone might say, (*3*) Demographics almost never determine what truly makes someone a customer.
Know what they are willing to pay for
Then make sure you understand what they are willing to pay for. In other words, what does your solution need to provide to make them willing to part with their money? You don’t desire to waste time and money on features that are not needed or that will not persuade your customers to buy.
One thing to understand is how they solve today’s problem. If they have not found a way to solve the problem, there’s a good likelihood they do not care enough to pay for a solution, no matter what they could let you know.
Then, what do they like and dislike about their current solution? Why are these things necessary to them? This will assist you to understand what features and advantages are valued and desired, so you possibly can focus on creating a solution that really meets their needs.
Finally, you wish to understand what points of the solution are key to your purchasing decision. What would make them buy one solution over the other? Why do they use the current solution as a substitute of alternatives? Knowing this, you possibly can make sure that your efforts are focused on the points of the solution that are more likely to lead to a purchase. Additionally, it will even assist you to create a marketing message that resonates with your customers because you know what is necessary to them.
Always ask “why”
In each my work with entrepreneurs and my previous profession in market and product research, I have learned that the most vital query in understanding potential customers and their needs is “Why?”
If one person is willing to pay to solve a problem and the other is not, answering this query offers you insight into what sets these two people or firms apart and is key to defining your prospects.
You want to understand Why certain features or advantages are also necessary Why the solution is necessary for this particular customer. Customers often want all the pieces. By understanding why, you’ll understand what they actually need.
Finally, people often try to let you know what they think you would like to hear. But to resolve whether to pursue an idea, you wish the truth, not only something to make you are feeling good. It’s much harder to explain “why” if the initial response isn’t what they consider.
For some entrepreneurs, contacting strangers and gathering information could also be uncomfortable, but it is the best way to discover if your idea is worth pursuing. While many of the aspects that may impact the success of a recent enterprise could also be beyond your control, ensuring you do this work up front can assist you to avoid one of the most typical ones.