Will my business idea work?
8 min read
17 October 2013
John Mullins shares some advice for those thinking about launching a new business.
With entrepreneurship growing as an acceptable – even desirable – career path, it is important for first-time entrepreneurs to heed others’ experience. Experienced entrepreneurs understand the odds.
They know most business plans never raise money. They know most new ventures fail. Most of all, they don’t want to start what long-time venture capitalist Bill Egan calls a “lousy business,” which consumes years of energy and effort, going nowhere in the end.
And so, every day, they consider: “Why will or won’t this work?” So committed are they to showing a reluctant world that their vision is feasible that they want to know why they might be wrong before bad things can happen.
If they can find flaws before they launch, they can often work around them. They can modify their idea to better fit their target market. If the flaw they find proves to be fatal, they can abandon the idea before launch, or soon enough thereafter, to avoid wasting months or years and piles of savings.
Better yet, if after asking their daily question the signs remain positive, they pursue their opportunity with renewed passion and conviction. This evidence translates to newfound confidence that the facts – not just intuition – confirm their hypotheses.
So resist the urge to launch right away and learn as you go. While appealing in today’s lean start-up world, this approach is all too likely to result in a waste of your entrepreneurial energy and talent. Instead, road test your idea before starting. And in the meantime, learn from those who have come before you.
Understanding attractive opportunities
It’s crucial to evaluate a potential business idea by answering the entrepreneur’s question: “Why will or won’t this work?” Opportunities are best understood in terms of three elements: markets, industries, and key team members. Consider the experience of Paul and Alison Lindley, founders of Ella’s Kitchen.
Back in 2006, the young parents were facing a bit of a challenge in getting their six-year-old daughter Ella to eat. In his Caversham kitchen, 40 miles west of London, Paul Lindley started concocting blends of natural and organic fruits and vegetables that were fun, colourful, and fit the family’s on-the-go lifestyle.
Quickly realising that there might be a market for his tasty creations – he confirmed the micro market for his products by watching how Ella loved them! – Paul did more formal macro market analysis of other parents like himself. Indeed, he found great interest in healthy, ready-made goodies for young children. And yet, the food industry hadn’t provided any such product to meet this demand.
Based on these market and industry insights, as well as his confidence in himself and his wife as target users of their products, Lindley moved his lean start-up out of his kitchen into a couple of beautiful barns nearby to expand production. Ella’s Kitchen baby and toddler food pouches – filled with all-natural purees of organically grown fruits and vegetables – began finding their way into the homes of most British families with young children.
Organic smoothies in four kid-friendly colourful flavours – red, green, purple and yellow – followed, as did a range of toddler-sized fruit snack bars and a host of other products.
Lindley then expanded internationally – after all, eating should be fun, tasty, and cool for kids, no matter where they live. And in 2013, Hain Celestial, a leading American marketer of natural foods and beverages bought Ella’s Kitchen.
Why won’t my idea work?
Of course, not every startup will proceed as smoothly as Ella’s Kitchen. If you’re honestly considering the question, “Why will OR won’t my idea work?” concerns will inevitably crop up. If fatal flaws are found, the best thing to do is to abandon the opportunity quickly. Persisting with a fundamentally flawed opportunity is likely to have one of two exceedingly unpleasant outcomes:
Best case: The best and most likely outcome is that experienced investors or other resource providers will see the flaws that you have ignored and refuse to give you the resources you need. Fortunately, their refusal will save months or years of your life spent on a “lousy business”. The harsh reality is that this is the case for the majority of business plans.
Worst case: The second possible outcome of pursuing a fundamentally flawed opportunity is that, in spite of the flaws, you are able to secure the resources you need and start the business. As some point, the flaws will emerge, and you’ll scramble to recast the business before it goes under. Or not.
Why will my idea work? Can my opportunity be shaped?
The good news is that potentially fatal flaws are often fixable. You can choose a different target market; the offering can be adapted to market needs; or the opportunity can be pursued at a different level in the value chain – as a distributor, rather than retailer or manufacturer, for example. Adding individuals who can deliver on critical success factors can strengthen the entrepreneurial team.
So, take heart. Road test your entrepreneurial vision before you even think about launching a lean start-up. Consider the market you’re targeting, both in the form of individual consumers and larger, segment-wide trends. Examine the industry in which you’ll be competing to consider whether others are or could provide the product or service you aspire to sell.
And finally, assess the team with which you’re working: do you have the critical success factors required to make it a go? And what if you’ve found fatal flaws in one or some of these factors? Reshape your business model, or direct your entrepreneurial time and talents to a different opportunity with greater potential. Most importantly, enjoy the drive toward a road test that works!
John Mullins is an associate professor of management practice at London Business School and author of ‘The New Business Road Test: What Entrepreneurs and Executives Should Do Before Launching a Lean Start-Up.’