I think it is time someone spelled out a few truths. There are many ideas floating about. Some are really good, others not so much. Not a every idea warrants a company and not everyone can run a good business.
Before deciding to turn an idea into a business, approaching investors or squandering the family fortunes, it is important ask yourself some very serious questions about what you are about to build and the company you intend to start.
Any journalism student will tell you that the first rule of new writing is understanding the five Ws and one H. It is the Bible of news writing and without it the story makes no sense. When applying the same rules to starting a company, there are six questions you should be able to answer before starting your business.
So for those ideas that are good, that can be a business and for those of you think you can run a business, it’s time we chatted about the Ws and H.
What, why, who, where, when and how:
What am I building?
A clear idea of your product is incredibly important. You have to be able tell people exactly what it is your company does, builds or provides. The big “what is it?” is a question buyers will ask, investors need to know and consumers need to be clear on. If you can’t give a straight simple answer to this question, then perhaps it is time rethink that great idea.
Why am I building this?
It’s all good and well to have an idea that you believe in and think will make billions and billions in revenue but why? Does this product or service fill a gap in the market? Have you identified a specific need for it and the most important of all, is it solving a real problem?
Innovation comes in many forms. It can be a new idea that targets a need that consumers didn’t know they had. Henry Ford said that if he had asked people what they wanted, they would have said faster horses so he built them a car instead. Other forms of innovation take something that already exists and improve on it dramatically. Think about what Mark Zuckerberg did with Facebook. He took Friendster, Hi5 and MySpace and created a social network that capitalised on individuals’ personal networks. Why are you building this? Are you innovating? So what?
Who am I building it for?
You know what you are building and why you doing it but who is it for? Who is your target audience? Are they willing to pay for your product or service? Can they afford to? Are you business to consumer (B2C) or business to business (B2B)? Understanding your audience helps you understand the type of business you’re building and how to sell it to your target market.
Where will I distribute this?
Global or local? Very important. Nobody wants a schizophrenic business that isn’t sure what its market is. Building for international markets means taking a lot of things into consideration, especially in the tech space, where it is becoming more and more important to protect your idea and technology. Also the way you present your product might need to change for different markets depending on what your competition is.
When am I going to market?
Do you have a plan of action for this business venture of yours? Too many people underestimate the power of a well set out Excel document with tasks and timelines. Giving yourself actionable deadlines tells investors you are ready and serious. It builds expectations with your target market and most importantly it gives you drive. It says this is a real business and there are plans in place to make it work.
How am I going to build and sell this?
All the Ws have been answered, and you are pretty certain your family fortune isn’t about to go waste. Great. How are you going to build the billion dollar revenue product? Are you building hardware, a web service, a software product? Have you made plans for marketing? Knowing how you are going to build your business is vital but more so is how you are going to market once it is out there. Also keep in mind how much this will sell for. How much are you going to ask people to pay? Is it free?