If you are like most people, you have certainly heard the expression: "Build it and they will come." This phrase is referring to a business that releases a product or service that just magically sells itself.
While this sounds great in theory, products and services don't just sell themselves automatically.
The reality is that nearly every business owner I know, including myself, has made the mistake of building a great product or service without first confirming that there is actually a market for it. Maybe you have even been guilty of this too?
In those scenarios, I rushed out and formed a corporation, spent a lot of time and money producing a product, and waited eagerly for the orders to come in....and then I kept waiting, and waiting, and waiting...and very few orders came in.
How is that possible? After all, I had just created the most amazing product that anyone could ever ask for (so I thought). My product was worth thousands of dollars and I was only charging pennies in comparison. So why weren't the orders flying in?
As I searched for the answer to that question, I studied the successes and failures of many successful entrepreneurs. I discovered a little secret - that there is a step-by-step process that successful entrepreneurs use when launching new companies and projects.
I started testing and tweaking that process within my own company. And guess what? It really works! And here's the great news for you. That process can be broken down into five simple steps that you can follow to identify and launch your own winning ideas:
Step 1 - Do Market Research
The first thing you should do before rushing out and creating the product or service is to do some research to see whether there is a market for it.
One part of market research involves looking for other companies that already sell a similar product or service. It doesn't have to be an identical product or service - but a similar one.
You can use a search engine (such as google.com) to look for companies that sell a similar product or service. You can also use tools such as quantcast.com to find competitive data on various industries and/or web sites.
Another part of market research involves getting a feel for the type of demand there is for that particular product or service. For example, are there a lot of competitors? How much are your competitors selling of it? How many people are searching for such a product or service online?
You can find answers to such questions using numerous tools that are readily available, such as the Google Keyword Tool. This tool allows you to type in various key words and see how many people are searching on Google's search engine for those key words during a particular time frame.
While all of us would like to think that we can create a new market with our great ideas, the reality is that it is usually extremely difficult to create a market that does not already exist.
For this step in the overall process, the key point is to identify if you have any competition, and if anyone is searching for and buying the product or service. And in this case, competition is actually a good thing because it means there is a market for your type of idea (or the competitors would not be able to stay in business).
Assuming that you determine there seems to be a market for your idea based upon your research, you should then continue on to step 2.
Step 2 - Test The Market Potential Of Your Idea
In this step in the process, you actually perform some tests to see if there is a demand for your actual idea (and not just the overall market).
There are various ways that you can do some tests that are both legal and ethical. Before you rush out and start advertising, you need to step back and think about the channels where you would like to sell your product or service.
Where are your ideal customers shopping, visiting, etc? What are their likes and dislikes? Do they use a computer? The answer to these questions will help you determine what type of tests to set up.
For example, if your ideal customers are young mothers who all use a computer, then you might start with running some tests "online." You could run some Pay Per Click advertisements on search engines such as Google, Bing, or Yahoo, and take them to an order page. You may also want to place an advertisement in a newspaper in a certain section that young mothers frequently read.
The topic of testing could warrant an entire book itself, but the point here is to do various tests to see if anyone seems interested in your actual product or service that you would like to offer.
But to make sure your test gives you reliable data, there are a few tips to keep in mind. First, you should make the prospective customer feel like they're placing a real order, but without taking their credit card or payment information.
In other words, you don't want to just say, I'm thinking about offering this product, are you interested? No one will take the time to respond. You should instead have an actual phone number or web site where it appears that they can place a real order.
And then, on the place where you would normally ask for their credit card or other payment information, you simply state something like, "This product is currently out of stock."
Here you are just trying to get a feel for whether anyone would buy your actual product or service if you offered it "for real."
Step 3 - Evaluate The Results Of the Test
In this step, you evaluate the results of your testing to determine whether or not you appear to have a winning product or service.
There are a lot of factors that go into sales and marketing, so if you didn't get any orders during this testing process, it either means that your offer is not structured well (which can be fixed), or it means that no one wants it regardless of how it is structured (which can't be fixed).
If your testing did not go well and you did not receive sufficient "test" orders to give you a glimmer of hope, you should look back at your research from step 1.
If there are tons of people searching for it and if there are tons of competitors, it probably means there is just a problem with your offer that you can fix to get the sales where you would want them to be.
You can refine and repeat the testing process as desired based upon the results of your analysis. Everything doesn't have to be perfect at this point in the process.
You are simply trying to validate whether you will be able to sell the product or service. And you can perform this testing for well under $1,000 and get a really good idea of the market potential before you go invest thousands or tens of thousands of dollars into actually creating and offering it.
Step 4 - If Your Idea Passes The Test, Form The Proper Legal Entity
If your idea passed the testing step, then you can actually move forward with forming a legal entity, if you don't already have one. Examples of legal entities include Limited Liability Companies (LLC's), corporations, partnerships, etc.
A detailed discussion of these types of entities is beyond the scope of this article, but the point is that you want to make sure you sell your new product or service from an entity that has a limited liability shield that can help protect your personal assets.
Step 5 -Build and Launch The New Product/Service
Once you have a company in place that offers you some limited liability protection, you can now proceed with creating the actual product or service.
Once the product or service is ready, you can start selling it through multiple channels (i.e. such as those you identified in Step 1 as being the channels where people are looking for it most frequently).
So there you have it. That's the secret formula that successful entrepreneurs use to launch new ideas and new companies.
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