It is one thing to start up a business project, and it’s another thing to survive through the required processes and come out successfully at the end. The choice of business, whether small or large scale, can be a brand new idea, opening a franchise of an established company, or something one is really knowledgeable and passionate about.
The path to entrepreneurship requires a lot of hard work. And even as hundreds of thousands of people across the globe take a leap of faith and start their own business, statistics shows that majority of them end up failing after a given period of time.
In this post, I have presented the necessary stages that a business project should follow, to successfully track its path to the intended profit region.
Coming up with a Business Idea
If you choose to open a franchise of an established company, then a lot has already been done for you including most of the required legal works; as the brand concept and business model are already in place. All you will need is just a good location and the means to fund your day-to-day operations.
But if you’re starting from the scratch, like majority of people, then it is important to come up with a good idea of what you intend to do.
- Firstly, start by making lists of problems that need solving. By starting with lists of problems that need solving, rather than a list of potential business ideas; you avoid coming up with a business idea that solves a problem no one probably has.
- Secondly, come up with lists of solutions to the problems you’re trying to solve. If your ideas seem to require more research, then go ahead and do more. And you can even use the opinions of a few persons in a brainstorming session, to identify which sets of problems and solutions are potential business opportunities.
After you have narrowed your options down to one, the next thing is to try to put down your projections on paper. Business plans are documents used for planning out specific details about your business. A comprehensive business plan should include the overview and summary of the plan, a description of the business, market strategies, competition analysis, design and development, operations and management, and financial information. The primary purpose of a business plan is to define what the business is or what it intends to do over time.
Building/Creation of the Asset
Having a well written business plan before you even start building the business is definitely the right thing to do. My mentor would always describe it as a step in the right direction. And with such document, one’s chances of successfully getting funding could be certain if you’re looking to meet some investors or pitch your idea to a VC (Venture Capitalist). Any person that will believe in you first needs to figure out where your business will be going, how it will tackle any potential difficulties, and what you need to sustain it.
Depending on the idea, assets could mean different things to different people. While some assets can be bought straight from the marketplace, in other instance they are created or built from scratch. But generally, assets work for business owners by producing passive income.
From an entrepreneurial perspective, the creation of an asset involves the integration of the various units that make up the entire means of the production. The effective functioning of the means of production gives rise to a finished product that offers real value in the marketplace, in exchange for cash in return.
He also went ahead to say that…
‘’In the Information Age, information leveraged by technology is wealth, and very inexpensive and abundant resources, such as silicon (used in the production of the computer), produced the wealth. In other words the price of getting rich has gone down.’’
Below are few examples of ideas that were created into an online asset models in the last decades:
(1) Aweber, an autoresponder used for effective marketing on the internet.
(2) DropBox, enabling people to save/transfer files on the cloud.
(3) Fiverr, an online marketplace where buyers & sellers meet to conduct businesses, starting from $5.
(4) GumRoad, where authors and artists can upload their work and sell directly to a large audience.
(5) Hostpapa, offering affordable web hosting services and reseller accounts for individuals/businesses.
(6) Instagram, an online photo album.
(7) LinkedIn, enabling professionals to connect easily with other professionals across the internet.
(8) Smashword, world's largest distributor of indie ebooks that can enable any author or publisher, anywhere in the world, to publish and distribute ebooks to the major retailers.
(9) Twitter, a powerful easy-to-use microblogging platform.
(10) Udemy, a platform that helps instructors to create courses online and earn money from it.
Marketing/Sales
It is important to understand the difference between sales and marketing. Sales is what you do in person at the point of exchange, while marketing is sales done through a system. Marketing is simply finding ways to draw customers to your business. You need to let others out there know that you are there and ready and willing to provide a service to them.
At this stage, once the first customers start coming in, cash starts flowing into the business. This is the point where business owners find out if they have built a products/service that people are willing to pay for. The first significant milestone is achieving product/market fit. And if you build something that nobody wants, you fail.
For startups offering digital products, Eric Ries in his book (The Lean Startup) talked about a systematic approach to building new and innovative products. In order to improve the odds of startup success, the first step is to launch your minimum viable product (MVP). Following this method, business owners are able to verify the fact ahead of time, if there’s a good market out there for their new product. It’s all about finding your early adopters and seeing exactly if your business will bring in paying customers.
The amount of cashflow that will be coming into your business is directly proportional to the marketing/communication flowing out. The major target in the course of doing any business is how to get to the break-even point. Because at the break-even point, the amount of cash generated so far should be just enough to pay back the major cost of the initial investment in starting up the business. Failing to build and sustain a significant path to customers (in terms of marketing) is among the top reasons why most businesses fail.
Positive Cashflow
Being able to sell more of your product/service to more and more people should take your business right into a positive cashflow region. And of course, making good profit is the main reason all business owners go into a business project in the first place. That is why it becomes important to devise and follow effective marketing methods that will take you past the break-even point, into the region of increasing profit.
To achieve large scale, is to have a large number of customers willing to buy from you. So if really you want to break the barricade of scale, then you have to get your product out for thousands of people, if not even millions, to see it.
Related Post: How to Move Easily from where You are Today to where You want to be Tomorrow
Online technology has provided people with more ways to be informed, and to also communicate with other people. Therefore the long tail of communication opportunities has grown, consisting of the many new and different channels that can now be used to reach an audience.
The end of the Project Life
At this stage of the project it could become normal for sales to start slowing down, as your product has already gotten into the hands of a large number of people. Except if you are offering a consumable product, then this is the time to start to consider to pivot. This is when most manufacturing firms start to launch innovative new products in order to maintain and sustain their market shares. Upgrading already existing products can also help to bring in more new customers. And even thinking of more creative ways of marketing could have a positive outcome in your sales.
Here's what we have looked at in this post:
(1) Coming up with a business idea of what to do[A--B]
(2) Building/Creation of the asset [B--C]
(3) Marketing/Sales of products or services[C--D]
(4) The region of positive cashflow [D--E]
(5) The end of the project life when sales may likely start to slow down [E--F]
It was in my final year as a chemical engineering student that I first learned about the Project Cash-flow diagram. Managements in big engineering companies such as the breweries, cement, steel makers, raw materials/mining, car plants, oil & gas, textile, electronics, pharmaceuticals, and even food and beverages; have been using the Project Cash-flow diagrams for many years, to successfully track their business path from the start to the point when the project start earning returns on investment.
In conclusion, the good news is that the knowledge found in the Project Cash-flow diagram can be used by product creators or service providers, to confidently start any business project and successfully find a path to increasing profit.
