Having what you think is a brilliant business idea is only the first step on the start-up road.
If you want to make sure that your dream doesn’t falter before it gets much further down the line, you need to interrogate your idea carefully and ask yourself some very honest questions.
Successful entrepreneur and angel investor Andy Yates says there are five steps every budding founder needs to take to make sure they have the best possible chance of success. He reveals them below.
The big picture: take a step back and be objective about how you can achieve your goal
1. Play to your strengths
Take a long hard look at yourself in the mirror. What are you good at? Have you got great experience, a network or a real advantage in your industry? What do you really enjoy doing? Have you got a passion, skill or hobby that you really enjoy?
Every business takes a lot of hard graft – but loving what you do makes it a lot easier.
Then peel your eyes away from the mirror and go and ask your family and friends if they agree. Ask for a straight and honest answer. If you think you are a brilliant chef – but your partner would prefer a takeaway to tasting your cooking – then catering probably isn’t right for you. But if your hair styling is a cut above the rest – you might be in business.
2. Find your secret sauce
What makes you different and how will you sell your service to potential customers? You might be brilliant at what you do, but so may thousands of others.
Do you have a particular product or service angle or something that sets you apart from the competition?
Could you provide better quality, be more cost-effective or provide better customer service?
Are you the only, or one of a relatively small number of local businesses that do what you do?
Have you got a great way to reach your target market?
Once you’re clear about what sets you apart from the competition, make this explicit in your business plan and in your marketing.
3. Make a detailed plan
Here’s the golden rule to writing your business plan: get the basics right – or basically you are in trouble.
Take a conservative view on how much it costs to make or provide your product or service. Don’t forget to include all the costs – from production to people to packaging.
All in the planning: get the basics right – or basically you are in trouble, says Andy Yates
Then think about the profit you can make for each item or service you sell and realistically how many you can sell.
Then the important bit – come up with a cashflow forecast based on how much you need to invest upfront and when you realistically expect to get paid.
Most start-ups go bust because they concentrate too much on potential profits and forget about the cashflow.
You don’t need to be an accounting genius, and you can create your business plan in a simple spreadsheet – but if you fail to plan, you are planning to fail.
4. Identify your ideal customer
Your family and friends are good people to bounce initial ideas off – but the real test is finding potential customers.
What would they buy and what would they pay for your product and service? What are they really looking for? Which competitor products do they buy at the moment?
Set yourself the task of speaking to at least ten potential customers. Try different types of potential customers and ask as many questions about your chosen market as possible.
Hone in on your ideal customer then research, research and, oh yes, do more research. You need to quickly build confidence about how many potential customers you have got, where they are and just how you are going to reach them cost-effectively.
5. Be honest with yourself
Now back to looking in the mirror again. How committed are you? Be honest with yourself. Is this a 9 to 5 job or a 5 to 9 job in the evenings (or indeed both).
Is this a lifestyle business that will allow you to earn a nice living – but just that?
Or do you see this as a business you really want to push with the aim of growing both revenues and a team around you?
Business angel Andy Yates has shared his five vital tips for start-ups
Both are fine but both require very different levels of discipline, priorities and commitment.
Also think about what you are willing to spend and risk. The chances are any business will take a fair amount of time and effort to get off the ground. You will probably need some starting capital to cover set-up and as you grow.
What is your risk appetite? Have you any savings and are you prepared to use them? Are family and friends prepared to help you out – and, if so, for how long?
A lot of questions – but if you are serious about starting-up, if you have the passion and desire to be your own boss – then you will find the answers.
So here’s an idea – if you are still interested, you could well be ready to join the start-up revolution.
This is Money and I are inviting start-ups, early stage firms and those with a great business idea to enter the Great British Entrepreneur Challenge and win expert advice, mentoring and support from me and my network – and the chance to bid for up to £50,000 of seed funding. Hurry up and enter now before the 3 November deadline. Full details below.
How to enter our Great British Entrepreneur Challenge
We are inviting start-ups, early stage firms and those with a great business idea to enter the Great British Entrepreneur Challenge and win expert advice, mentoring and support from Andy and his network – and the chance to bid for up to £50,000 of seed funding.
To enter your business idea, start-up or early stage company in the Great British Entrepreneur Challenge, email firstname.lastname@example.org.
Your application should include
1. Your name and contact details (including email, mobile phone, relevant social media links)
2. A summary of your business idea and why it’s different from competitors (in no more than 150 words)
3. A summary of what stage your business idea is at and what you have achieved so far (up to 150 words)
4. Tell us why you are the right person to benefit from the Great Entrepreneur Challenge (up to 150 words).
5. A link to any websites, videos or other useful information to help with your application.
The deadline for the first round of the Great British Entrepreneur Challenge is Friday 3 November 2017.
Between 3 November and Friday 17 November 2017, applicants may be contacted for information and feedback.
Selected applications will be invited for interviews to be held at This is Money’s offices in London from 20 November.
We can only reply to selected applicants and the judges’ decision will be final.