Steps 5-9: (Part 2 of 2)     

Written by Terry Ouimet

The problem is, how do you come up with a  good business idea so that you can bust out of prison and leave your job?

I think you will find these 9 crucial steps to how I came up with my business idea and my thought processes throughout each step of the idea development phase extremely helpful for your own idea generation.

Steps 5-9 are in this article, and steps 1-4 are in a separate article (part one, found in the archives of simplifierblog.com).  

SUMMARY OF THE 9 STEPS

  • Self assessment inventory

  • Risk tolerance

  • Neutrality thinking

  • Market Research

  • Competitor research

  • Customer research

  • Analyze the data

  • Winning position

  • Idea selection

SIMPLE TAKEAWAY:  Remember that the smart way to come up with your business idea is to challenge your assumptions with a methodical step-by-step game plan and stay as objective or unbiased in your thinking as possible.

SIMPLE ACTION STEP:  Grab your entrepreneur notebook or laptop and start answering steps five through nine to help you  come up with your business idea.

RELEVANT BOOK: Will it Fly ? How to Test Your Next Business Idea So You Don’t Waste Your Time and Money, by Pat Flynn.  Full disclosure, I am affiliated with Amazon and receive a small referral reimbursement if you buy the book through this website. Your price is not any higher, but you help easuccess to stay up and running.

 

Essentially what we are doing here is providing ourselves with a game plan or framework that allows us to prove if we are right about our assumptions and  new business ideas.

The famous book The Art of War by Sun Tzu has been used as a business “how-to playbook “ for strategy; and in it he advises three approaches to overcoming your enemy: know yourself, know your enemy and know the terrain. Steps five through nine essentially tap into this strategy.

5. Competitor Research

This information gathering goes hand in hand with the market research. As you learn more about your potential market and customers, you will also start seeing who the market leaders are, your potential competitors. These companies already have a strong recognizable trusted brand. Go on social media sites like Facebook and Instagram and study their marketing campaigns. What is their brand?  Who are they marketing to? What age, demographic and psychographic data (aspirations, opinions, activities and lifestyle) are they targeting, and at what price range? What is their unique value proposition, secret sauce, or winning position?

My market research efforts led me to the  realization that the mega market leaders were avoiding a specific niche in the market. A niche that I had personal experience with.  Furthermore I was looking for a solution to this problem in a mass market. My research showed that the large retailers were not providing a good product for or catering to in any way, people with chronic back pain. These customers needed a comfortable sitting option while enjoying their favorite outdoor activities for prolonged periods of time.  So with the market research intel I had gained which supported this idea, I decided to make this my niche or my target market.

“You can’t look at the competition and say you’re going to do it better. You have to look at the competition and say you’re going to do it differently.”  Steve Jobs, Apple

Some other effective research tools I used were:

  • Amazon, specifically reading the three star reviews. They offer both good and bad feedback that seems a little more authentic (More authentic than whom?) ,  and are not so biased in either direction.

  • Forums related to your niche. I used Quara.com, Reddit.com, Facebook and other industry specific forums all of which yield extremely valuable ground-level information.

  • Industry watchdog sites or review sites were very helpful to me. Kind of like Consumer Reviews but specific to your industry. They will take 10 brands of winter jackets for example and test the heck out of them and write very detailed helpful reviews. These reviews are almost certainly on your competitor’s products.

  • Census Data

  • Ipwatchdog.com for information on patents and patent law.

Patent and Trademark Search- This topic is a whole separate post but suffice it to say this is something that you MUST DO VERY EARLY ON as you research competitors. Somebody else may already have an existing patent on a product that you are designing and creating and you don’t want to infringe. You don’t always need to file a patent or get a trademark when you start a new business. However  if you do, new patent regulations make it such that you want to be the first to stake your claim and get your patent party started. It’s now called the First Inventor to File system.

I hired a lawyer to do an extensive patent search for me for the camping stool since the market was pretty saturated. I wanted to be sure that my idea was unique before I invested time and money into the product.  The fee also included advice about my chances of obtaining a patent and which areas of the product were more patentable; I found it very helpful. Potential Venture Capitalist and Investors will want to know about your patents as well. You can use Google of course to search for patents, just type in the words “patent search” and then your idea or your product. You can also go to the US Government patent search database,

http://patft.uspto.gov/  or  https://terryouimet.com/UStrademark

 Trademark law protects a brand’s design, symbols, or words. In similar fashion, you will want to research and establish your own trademarks. Examples of trademarks are “I’m loving it”, NBC,  the Nike swoosh and brand names like Apple and Burger King.

I also used these patent-search resources as a way to gather intel on how my competitors made their products; many times you will run into diagrams and or the original  blueprints and hand drawings of their products,…. just saying.

6. Customer Research/ Proof of Concept

If you don’t do this part of the idea generation stage, you may as well sign up to fail. If you are a social media online star with 1.8 million viewers per month and direct access to customer opinions, you can simply ask your tribe what product or service they would like to see you create. Otherwise, you will have to make it a creative grass roots effort. I couldn’t play hockey with a broken stick, you cannot build a house on a bad foundation and you can’t start a business without validating your idea or getting “proof of concept”. 

The best way to get proof of concept or validate your idea is to get your product or service in front of potential paying customers, a sample segment of the market that you will be selling in.  If you have a prototype of your product, grab it and take it around town to that market segment. Ask them to try it and more importantly ask them what they honestly think about the product, what they like or dislike, what they would keep or change. Ask them how it compares to what they are using and how much they would pay for it if they like it. With my portable camping stool I had some people say they would pay toward the higher end of the market price for it due to the value it brought with chronic back pain.  

If you have CAD files (computer animated design) or images of your pre-production model product or prototype, this is one idea that worked very well for me. I got on the phone and contacted key decision makers such as purchasing agents, managers in stores, licensing companies and others who would be able to compare my product to market leaders and give me valuable feedback. You can email CAD files to key decision makers as well as potential investors, these files are very professional and helpful in demonstrating to others your seriousness about what you are doing.  These decision makers should also be able to give you an honest opinion about whether or not their customers might be interested in it or not.

Don’t Forget to Create an “NDA”

Just be sure to have them sign a Non Disclosure Agreement or what is known in the industry as an “NDA” prior to you showing them your CAD files or talking too much about your invention. The NDA is a legally binding document that basically says don’t steal my trade secrets and proprietary information or I will sue you. Don’t be shy about asking people to sign it, they expect it and many people will ask you for it before you bring it up. I didn’t come across anybody who objected to signing it.

You may even get some interest along the way like I did surprisingly from a market leader and competitor who wanted to partner with me and help me manufacture it. My specific design was not in line with his current product mix and distribution connections. However,  instead of working out a licensing agreement, he saw it as an opportunity to assist in manufacturing and sales of my product.  I also went in to a large chronic back-pain-product store and spoke with the manager who said his customers would have an interest in the product.

Learning some basic sales skills as a new business owner will be one of the most important investments that you can make in your business. Additionally, it will help give you the courage to do the things we just discussed. Whether you realize it or not, selling is going on all around you and you will need to “sell everybody” whom you come into contact with about your dream and your idea.  It can be the difference between a big opportunity or not, so I highly recommend adding “sales 101” to your startup business tool kit. For an excellent resource on sales tips for the new entrepreneur, please download my free ebook called Money Making Sales Tips For New Entrepreneurs.

If your new business offers a service, and not a product, follow the same formula. You simply want to get your offering in front of people who are using competitor services in the market and get their honest feedback. This isn’t a time to try and defend your idea and shoot down their objections. Let them talk freely about it and be humble and wise enough to consider any negative feedback as a tool that will only make your product better. You will almost certainly have to make several revisions if not more to your initial idea. So look at it as a work in progress.

I created some surveys or questionnaires to obtain market research information and sent them out to my contacts with the incentive of being entered into a drawing for a Visa card. It worked pretty well and I received very valuable information that guided my decision making. There are countless other ways of obtaining customer information online that I tried and worked very well but I will go into those in separate post.

The importance of understanding your customers is underscored by the Jeff Bezos interview, ” our number one conviction and idea and philosophy and principle is customer obsession, as opposed to competitor obsession. And so we are always focused on the customer, working backwards from the customer’s needs, developing new skills internally so that we can satisfy what we perceive to be future customer needs,”

7. Analyze the data

After gathering all this research and having a better understanding of the market and my competitors, as well as an in-depth knowledge of my potential customers, I then attempted to answer these questions to help me pinpoint my business idea.

  • WHO ARE MY CUSTOMERS?

  • WHAT DO THEY BUY NOW?

  • WHY DO THEY BUY THIS PRODUCT OR SERVICE NOW?

  • WHAT ARE THE CUSTOMER PAIN POINTS OR PROBLEMS?

  • WHAT WILL MAKE THEM BUY FROM ME? HOW AM I DIFFERENT?

  • WHAT WILL I SPEND ALL MY MONEY ON?….kidding, unless it helps motivate you, then go ahead.

Answering these questions above will undoubtedly give you a thorough understanding about the market that you will be selling in, who you are up against and how your product or service compares to theirs. At that point you can start to formulate ideas on how you will differentiate yourself in the market.  

8. Identify Your Winning Position

Your winning position is the one thing you are hanging your hat on to accomplish your objectives and business goals. All of your tactics will be built around supporting your winning position. Your winning position is preferably a unique value proposition that strategically positions your products and services on a different level than you competitors.

Its what will make your competitor’s customers want to cross the street so to speak and do business with you instead of them. It’s your secret sauce. According to Harvard strategist Michael Porter, “Strategic positioning means performing different activities than your rivals, or performing similar activities in different ways.”  

Examples of Winning Positions

When Tiger Woods was in his hay day his winning position was his mental toughnes. LeBron James his Self Confidence and Serena Williams her physical intimidation. Remember Peyton Manning’s his work ethic?  What is going to make you different and better?

With the portable camping stool, my winning position was more comfortable seating for people with chronic back pain. With SimplifierBlog, the winning position is that it simplifies and saves you time starting your business. When I was conducting my research for the camping stool, I noticed that I had 40 internet tabs open on my internet browser at any given moment. I was spending countless hours trying to qualify, vet and analyze online information. It was the only way to get the very latest and greatest information in the entrepreneur space to help me succeed.

I noticed that there was a never-ending spew of information from every direction. And it was up to me to piece it all together, make sense of it and somehow apply it to my business hoping that I did it correctly. Talk about time consuming and confusing. My winning position is that I help entrepreneurs learn and get their business up and running more quickly.  I do this by centralizing and simplifying the best online entrepreneur content.

So, there is a lot that goes into your winning position, but to help you arrive at yours, answer the questions below and it will help get you thinking.

  • What is the one thing I am going to “hang my hat on”  to meet my objectives for this product or service?

  • Is there anything that I am going to do that my competitors are not?

  •  My competitor’s customers  will buy from me instead for what reason?

  • How is my product or service unique?

 Another helpful way to look at it, your customer is an expert in the problem, you have to be the expert in the solution. You have to think in terms of customer focused solutions to a mass market problem.

SWOT Analysis- Yes, I do believe that conducting a SWOT Analysis is still in style. My research shows that most leading brand name companies are conducting them. Others include professional and college sports teams, military leaders, government agencies and more. It has stood the test of time and is a necessary component to your strategic business planning process. The purpose is to deepen your understanding of the market, your product as well as your competitors. This analysis will get your new business off to a successful start and minimize risk. See the chart below that you can replicate or download online and the examples of how to fill in your strengths, weaknesses, opportunities, and threats.

Strengths

1

2

3

…etc

Weaknesses

1

2

3

…etc

Opportunities

1

2

3

…etc

Threats

1

2

3

…etc

Strengths: For example, Starbucks would be brand recognition, Amazon would be strong product mix and brand recognition, other examples could be forty years of combined sales experience, or low overhead, or a strong patent.  Strengths are usually referred to as “inside” (your company) competencies or skills.

Weaknesses: For example, Apple and Starbucks are both high cost products, other examples could be low marketing budget and no internal skills or resources for social media marketing, SEO, website design etc. or no patent /trademark which leaves you open to attack from lower priced copycats. Weaknesses are usually referred to as “inside” (your company) competencies or skills.  

Opportunities : For example Facebook has started to innovate products that are complementary to its social networking website and mobile apps. Another example is a company that looks at expanding products into foreign markets. Similarly, new government or industry specific regulations could favor your product. Opportunities are usually referred to as “outside” (your company) factors.  

Threats: For example a threat to Pepsi would be the trend toward a healthy lifestyle, or for Microsoft it would largely be cyber attacks. These are usually referred to as “outside” (your company) factors.  

I won’t go into too much depth  at this time,  but if you would like a longer read on SWOT Analysis I found a good article on mindtools.com

https://terryouimet.com/mindtools

and another good website is http://www.panmore.com

By creating a SWOT Analysis, you will have a visible tool to use as a strategic roadmap or game plan to help you differentiate yourself from the competition; this will allow you to minimize pitfalls and set yourself up for success!

9. Idea Selection

During this step you are identifying, refining and going with your best idea based on what market research, competitor research and customer research are all telling you.  It was helpful for me to learn in my journey that many famous and successful entrepreneurs never really hit it big on their first idea. I think it takes not giving up and trying new ideas and persevering until you get it right. In the process it doesn’t make you a failure or mean that you are a bad person. Rather, it means you are one step closer to getting it right.

At this point, hopefully you have done the research and have kept an open mind by challenging your assumptions and treating your idea generation like a scientific hypothesis. If so, it should be fairly obvious if you have a good business idea or not.

No Risk, No Reward

My experience has led me to believe that you still have to make a leap of faith. You can’t get a guarantee from anybody that your business idea will work. Likewise, there is no guarantee that you will make a lot of money. Remember, the very definition of an entrepreneur is a risk taker. No risk, no reward. However, I personally believe in minimizing risk, taking calculated risk, taking a wise risk. Take these steps seriously and work them over vigorously. Then you will be setting yourself up for success and minimizing areas of danger that unnecessarily trip up other businesses.

I encourage you to leave the job that you hate, and begin the process of finding your dream business.  It all begins with your idea.

 If you completed the 9 steps, did your original idea make it through the hypothesis testing? If so, share your idea with us! Also, feel free to give us feedback on this post below. 

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