Will Your Business Idea Work?
What to know before spending a penny
For a long time, I let my designs to be intuitive, full of art, expression, because that’s what I learned.
And with that in mind, I started a fashion label for children, and I focused on being an artist with a motive: to give the children a chance to understand their Mexican culture through clothes. And to design clothes that needed research, personal experience, identity, and everything an artist adores to transform into something incredible.
My textiles were beautiful, and the techniques were fantastic. Who wouldn’t dress their children in my clothes?
After two unsuccessful collections, I decided to study marketing because I thought my main problem was the lack of sales experiences. After finishing the master’s degree, I changed the business direction and did this next process to ensure the reinvesting was worth it.
First, I had to identify what I wanted to know: why it didn’t work?
- Was it the design?
- Was it my sell strategy?
- Was it the right target?
- Wasn’t the quality good enough?
- The motive wasn’t right.
I realized it wasn’t necessary to comprehend the past but to know what to do from now on.
Do I want my business to work? Yes.
Do I trust in my business? Yes.
So, how many people would buy my products? Because I could romanticize as much as I wanted my entrepreneurship path and find encouragement, but money is real. 💸💸
Money can be romanticized or not and it will worth the same.
The real question is: will it work?
We all have a millionaire idea at least once in our lifetime, but they never tell us about probability.
When you are an entrepreneur, people around you pitch ideas or tell you things they need and how useful it would be for them, being that the only reason to do business out of it, and you should be the one to make it.
Steps to know if your idea is profitable:
- How much is your capital? It doesn’t matter the amount, later we’ll know specifically. If the amount is zero, then skip this step. Again, this exercise is to know if the business will work.
- Make a list of the benefits your product or service contributes, the necessities that satisfy. This list will take you closer to identify your target.
- Once your target is identified, I recommend you to find someone of that niche and talk to them. We all have a friend or a friend of a friend that’s close to a target. Talk to them about your idea and listen to what they have to say to know how accurate or not is your vision and possible changes. And search for products that are alike (all necessities are satisfied one way or another. If your product doesn’t exist, then search for the products used at the moment).
Note: Most of the ideas end here. When talking to someone about our idea and hearing a second or/and a third opinion, it will give a panoramic view of what we can achieve or not.
If you decide to continue, you have an idea discussed and endorsed by a closer friend until now.
4. Research how your client spends their money: census is a great resource to know the right statistic of a population, and it’s available to everyone. You can obtain percentiles of your target and know the percentiles of their expenses (it’s not a data easy to get; commonly, census are found in government websites and are confusing). With this resource, you can also find your target earns' average salary, so all you need to find out is your products' costs.
Intuitively, you can know if this would work or not due to a low or high percentage, but, as I mentioned at the beginning, this article is to know, with numbers, if your idea is profitable: the subjectivity of probability.
Basic Probability Theory and Statistics
I want to discuss some very fundamental terms/concepts related to probability and statistics that often come across any…
5. Conditional probability: The probability that happened event A, event B, could happen. Meaning, knowing the target behaves a certain way (event A) and buying your product being event B.
Don’t leave me. You’ll see, it is only a division:
A= the number of your target’s average earnings.
B= average cost of your product (retail).
The result will be the percentage your product will cost to your client out of their salary. If that number fits their expenses like your research shows, you will continue to a business plan. On the contrary, to desist would be the smart thing to do.
To do a full exercise, you would need data that can only be collected through polls or/and focus groups, and all of this has a cost that, as I’ve said, at this point, it’s better not to invest until the next move is safe.