Everyone has ideas. Very few people are able to execute them, make money from them and build a company around their idea. How do you turn your idea into a business? Stephen Key, author of One Simple Idea for Startups and Entrepreneurs, is clear about it. Key has 10 steps to follow, and they must work, since over his career as an entrepreneur he has patented 14 products, which are sold in stores the size of Wal-Mart.
What steps should we follow to turn an idea into a business?
1. Test your ideas quickly and constantly
Key realized that if he wanted to make a living from his ideas, he needed to find out quickly whether they would work. If they didn’t, he had to move on, look for new ideas and test them. “But you don’t test with your friends,” Key warns. “The real test, the acid test of your idea, is when people are willing to take money out of their pocket to get what you’re offering.”
2. Understand the market and know who your market will be
You need to understand the market: Where does your product fit? Who would buy it? What sets it apart from other products? Can you sell it at a fair price within that sector? Don’t try to be unique, or go after products that have no competition. The ideal situation for a business is a market where everyone has left crumbs on the table. (Read: 7 steps to define your market once you have a business idea.)
3. Work out the manufacturing cost
You need to know in advance whether your product can be made at a cost that lets you make money. That is easy to find out: you just need to talk to manufacturers to learn how much production would cost. Key advises protecting your idea by filing a provisional patent application. (Read: How to register a patent for your idea.)
4. Calculate your profit margin as precisely as possible
If your product’s price is too high, you won’t be competitive. On the other hand, if you get into a price war and squeeze your margin beyond what you can afford, you won’t make money either. In fact, nobody makes money in that kind of war in the end. If you think your profit margin won’t let you make a decent living, don’t be afraid to move on to another, more profitable business idea.
5. Get real feedback from users
Go to local stores, attend trade fairs and industry events. Show your product to people who are in a position to make decisions. People themselves will tell you whether you have a business with potential or a useless idea.
6. Test before you go into production
Key advises creating a website to show your product, sharing it on social media and making a video explaining the benefits of your product or service. What we are looking for are green or red lights. If too many negative comments appear (red lights), it’s time to ask whether the business idea is worth it. If, on the other hand, we find people willing to dig into their pockets, we have a business.
7. Run the numbers again
Although the magic is in the ideas, in the end the numbers rule. We sit down again and go back over the manufacturing costs and the small details we may have overlooked in the other steps. Once all the pieces fit, we decide whether to start.
8. Start small
Although Donald Trump advises thinking big, beginnings should be small while we learn about our product and our customers. We will probably need to make some changes. The worst thing that can happen to an entrepreneur is to spend the money on manufacturing and then find they can’t sell the products they have already made.
9. Remember that nothing lasts forever
You have to take advantage of the momentum, because we could be very successful, but that success could be due to having created a passing fad. You have to innovate constantly, create new products, keep moving and never stop.
10. Above all, keep trying
Don’t despair if your first idea doesn’t quite take off, or if the second one ends in failure. Never give up; keep trying.
11. Watch out for debt
Stephen Key doesn’t say this one, but I do. Be careful with debt at the start. We know that getting money to start a business is not easy at all, but many of the failures I have seen were not because the idea didn’t work. They happened because the business took longer to take off than expected, expenses were higher than planned, and so the financial squeeze arrived sooner than anticipated. Watch out for that.
Further reading
- 15 questions to evaluate a business idea
- How to start a business with no money
- The best business and entrepreneurship ideas from our blog, 2012–2013
Featured image: takomabibelot, CC0 1.0, via Flickr.
