Seven Stages Of A Business Idea
I’ve been putting together a business plan over the past couple of days. During this time, I’ve been making notes and trying to understand and optimise the entire process.
Anyone who is into business stuff will know that there’s a ton of inefficiency when it comes to starting a business. They’ll also know that most of it can be avoided. One minute you think, “Hey… let’s build a product just to see if anyone will buy it” and three hours later you realise you’re hitting the search engines in an attempt to find out about which legal structure provides the most privacy or whatever.
Business ideas are the biggest liars you deal with as an entrepreneur: They jump into your head with promises of untold riches, yet if you don’t jump on them and strangle them into submission, they waste your time and money.
Here then, is a step-by-step. You should not concentrate on anything else until you’ve finished the stage you’re on. No going backwards, no going forwards.
Stage One: Mindset, Assumptions and Goals
Here’s the “business idea” and the first thing you need to be aware of is that this is a stage.
Ideally, it’s a stage that you’ll spend as little time on as possible.
You have a great idea – a book teaching nerds how to talk to people or a washing machine that doesn’t use any electricity. Of course, in your head it’s the best thing that’s ever been conceived, you’re the best person to do it and you can deal with anything that stands in the way.
Realistically, most ideas never get past this stage for a number of reasons. People prefer the dream. People are afraid to confront reality or failure. They don’t have the skills or knowledge to put the plan into action.
At this stage, really assess your idea for viability. Is anyone going to buy it? Can you produce it? If you do produce it, are you the sort of person that wants the lifestyle it’ll bring? What lifestyle will it bring?
These seem like stupid questions, but people are stupid.
“Yeah, I want a business where I can travel the world!”
Do you? Sitting on a plane and never having a permanent home isn’t what most people want.
“I want to make nine figures!”
That’s possible if you’re willing to work god-awful hours and be a ruthless corporate cut-throat.
“My idea is bound to take off it’s like Facebook for gamers!”
… really think about your idea. If all of your evidence is, “I think it would be a big hit” you don’t have an idea. At the very least you should be able to find a small core of people who are practically begging for something.
Stage Two: Research
By this stage, I’ll assume you have an idea, have some notion that it’ll sell and understand that you’re a person that can provide it. (Don’t start a public speaking business if you’re an introvert with a stutter.)
That’s nowhere near the end of the game. In fact, we’re just beginning now. We’re leaving the land of the dreamers.
What we need to do now is research, research and then research some more.
You’ve got an idea, which is great. But how great is it?
By the end of this stage, you need to know what the competition are offering. You need to know how your product is different and hopefully better.
Then you need to find out about your customers: Who are they? Why are they suffering? How are you fixing their suffering?
You need to know this to a greater extent than they know themselves. That’s the secret to selling.
Stage Three: Plans and Pricing
We’ve got an idea and notebooks full of research at this stage.
We’re not even close to starting up though. We don’t have a product and we wouldn’t know what to do with it if we did.
In stage three, that’s what we’re working out. This is the last section that’s difficult for your brain. After this stage, it’s all hands on deck.
What are you going to do to create your product? Where are you going to sell it? How are you going to market it? What does your product cost and how much profit do you make? What issues are going to keep you awake at night and is your accountant going to hate you?
This section really counts, because if you get it wrong, everything gets much more difficult later on.
At this point, you should probably do a test run, prototype project or minimum viable product.
Stage Four: Creating Your Business and Products
Alright. We’ve got a plan. A plan is nothing without action, and we’ve done a lot of brainwork thus far.
Now it’s time to do something: namely, get your business set up – should you need to – and get your inventory sourced or created.
Again, the more thorough you are with this the better you’ll do in the long run. Quality control is important. Manufacturing is important – and this isn’t just for physical products. If you’re selling digital products, what formats are they in? How are you delivering them and where are they being stored?
All of these issues need to be addressed before you go live. If you don’t sort this out, then expect a ton of customer support issues and refunds to generate.
Stage Five: Selling Your Products
Let’s assume at this stage you’ve got a warehouse full of products. (Not really.)
You should already know where you’re going to sell, but knowing isn’t doing. It’s time to set up your distribution chain (or chains.)
In order for your business to be a business, you have to have your products out there on sale. If you’re selling to businesses, then you need to be available on all the various business directories in your market. If you’re selling to consumers, you need to sell on your website and all other appropriate vendors.
At this stage, you should master your copywriting, advertising and whatnot. Not only is it going to make you money and give you cash flow, but it’s going to be crucial for the next stage too.
Stage Six: Marketing Your Products
This is the goose that lays the golden egg.
Annoyingly, it’s where people want to start when they first have their business idea. They don’t have a product yet and don’t know how to get one, but by-golly do they need an Instagram and a Facebook fan page.
Those things are good – but not at the start.
If you don’t go through the preceding steps, there’s no point in worrying about marketing. You don’t have a product, thus you can’t make any money and you can’t get a positive return on time or money invested.
But once you have a product line, you can and should look at every possible avenue for marketing available. At this point, you’ll have your profit margins and so you’ll be able to invest in marketing – be it social media, SEO or otherwise – and work out where you get a positive return on investment.
At this point, the whole process is repeated over and over. There’ll be new avenues for marketing and selling, new needs to be met and more products to create.
Thus finishes the six steps. The last one is optional but integral.
Stage Seven: Expanding
There’s a shelf life to every business.
Even the biggest businesses of yesteryear meet their shelf life eventually. During my lifetime, we’re probably going to witness the handing over of power from oil companies as the major capitalist powers to something else.
We’ve already witnessed telecoms industries change, and there are bigger changes on the horizon. Autonomous vehicles, manufacturing automation, green energy. The future is unfathomable.
However, there’s no place for that in this guide except to say; Your business, no matter how good, is going to change and adapt or die.
If you have a product line and you’re marketing and selling it, that’s fantastic. Expand, improve and enjoy.
But keep one eye on the future because it’s got its eye on you.
Final Thoughts
Alright, that concludes this article. Those are the seven stages of planning and starting a business. Well, six and a weird tangent at the end.
If you run through your business idea in that order, you’ll probably go from having a great idea to a great business. However, if you run through this process – especially the early stages – and you realise the idea is not feasible, then you need to stop.
There’s no point in wasting tie on bad ideas. No matter how good they are in your head, if the world doesn’t bear them out, you’re only kidding yourself. There are plenty of ideas to try. Keep going through them and searching them out until you find one that sticks.