Let’s say you have a great idea for a new product or service—something no one’s thought of before, and which you believe has great potential. Do you jump right in and get going, assuming you’ll take care of any obstacles as they arise? Or do you make sure you’ve got all your bases covered, thus hopefully tipping the odds of success in your favor?
Bob Diener, president and co-founder of a travel site Getaroom.com, believes that while confidence and enthusiasm are necessary for any new venture, no fledgling enterprise will get very far by ignoring the fundamentals.
In this article for The Harvard Business Review blog, Diener offers valuable advice for incorporating those fundamentals into your business plan.
Five Fundamentals to Remember When Starting a New Business
Keep Your Expectations Realistic
It’s important to be optimistic, Diener says, just not wildly optimistic. Think carefully about the market you plan to enter. “Are you selling a lower margin product that will take time to gain traction? Or are you taking a shot with an app that might be a dud or might attract 100,000 downloads a month?”
In order to manage your finances, tailor your plans to accommodate a reasonable amount of buyer interest and sales. If you’re counting on advertising to draw in customers, Diener says, “Remember that most advertising simply does not work.” Instead, plan to bring in customers via other channels, including word-of-mouth referrals.
Have a Distinctive Value Proposition
Your product or service has to offer genuine value, or it’s not worth your time and resources to pursue. But, Diener suggests, it’s foolish to rely upon your own judgment in this area. “You’re invested in the business, so of course you’ll feel it has value for your customers,” he says. “Gather some outside counsel to be sure the value is clear and easily explained to your target audience.”
Without a clear value proposition, “you’re likely setting up the business for failure.”
Offer Product/Service Attributes Consumers Don’t Already Have
If your great idea is something customers already possess, can get for free or is otherwise available from competing businesses, what’s so compelling about buying it from you? Customers must be able to “easily identify and discuss your competitive advantage,” Diener says.
Create a Viable Business Model
The best business plans answer the “hows” of any new enterprise:
- How will you proceed with your product or service while keeping costs down?
- How can you make certain demand is sustained over a long time frame?
- How do you intend to market the product or service on a practical budget?
To be successful, Diener says, “You need to be a hawk on the bottom line and ruthlessly manage top line expenses.” A solid business plan can’t guarantee success, but it can “turn failure into a learning experience instead of a catalyst for personal financial ruin.”
Attract Customers with Cost-Effective Marketing
Great idea, strong business plan—now you have to get customers to make the all-important purchase. Diener advocates using “inexpensive promotions or contests” to draw consumer interest.
A clever social media strategy is another cost-effective approach to marketing. “Encourage conversations about your brand by asking for reviews or finding a way for consumer-created content that shows off your product’s unique features.”
Attend to these fundamentals—or what Diener calls “non-negotiables”—before you start your new business. It might make the difference between success and failure.
What’s your advice for starting a new business?
