Tuesday, April 24, 2012

Small Business and Entrepreneurship - To Startup or Not to Startup Part XI - Testing and Conclusion

"The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible."
--- Yale professor on Fred Smith's paper proposing overnight delivery service. (Smith went on to found FedEx)

"A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make."
--- Response to Debbi Fields' idea of starting Mrs. Fields' Cookies.

"We don't like their sound, and guitar music is on the way out."
--- Decca Recording Co. rejecting the Beatles, 1962.*

In this final article on the decision of whether or not to start a business, we will discuss testing customers and then conclude the series.

We've spent the last few articles researching our potential company's environment beginning with broad industries and narrowing things down into markets and market segments. Going through the exercise of researching all these areas should give a good idea of what is going on in our chosen market segment and give us an idea of how we want to approach our target customers. The next step is figuring out if our strategy will work.

We want to remember too that one of our goals in conducting this research is that we want to aim to try to get to our first customer, and our first sale, as quickly as possible. In the testing phase we are attempting to really get to know our customer and perhaps in doing so we can even secure an order or even an up-front payment? Either would surely make the decision to start a business an easier one to make.

Based on the information we've already compiled in our research we want to spell out who we think the target customer is, what benefit our product provides for that customer, how the customer decides whether or not to purchase our product, and the means by which we can reach our customer with our product.

Once we have all this information we can begin testing. The purpose of testing is to validate our business concept, verify what we think we know, and try to figure out what we don't know in order to then make adjustments.

Our methods for testing are surveys and interviews but may vary wildly in action depending on the nature of the target customer. If our product is something we are targeting at a very broad consumer market like for example, a new beverage, we can possibly test with surveys and taste tests at popular shopping locations. However, if our product was something like a business consulting service, it may require researching who at a target business makes the "buy decision" and figuring out how to contact some of these specific people for interviews.

We want to design our surveys or construct our interviews to find out first hand from our potential customers whether or not they would buy our product, why they would buy it, what is it that causes them to decide whether or not they would buy it, and how we they could be reached with our product.

Knowledge gained through testing can then be utilized to make adjustments prior to launching, or if the necessary adjustments are significant, perhaps a re-haul of our entire plan, and a later re-testing of the concept.

Once we've tested we want to go back and review all aspects of our research - our  financial projections, our industry and market research, and our testing results - and consider all of these prior to deciding whether or not to move ahead and start the business.

Every idea or product will be unique, some may have more attractive financial potential while others may have more attractive market opportunities, and even after all this work it will likely still be a very difficult decision. But the more we know about what we may expect if we launch, the better prepared we may be, and hopefully the higher our chance of finding a quick success.

* Full credit to "Things People Said - Bad Predictions" for the quotes at the top of this article. 

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