The most common challenge I see young businesses face is the lack of an understanding of where their product fits in the marketplace. We are such an instant gratification society that we have an idea for a company and we quickly build a web site, grab some social media handles and 1-2-3 LAUNCH!
That’s not how it works. That’s not how any of this works as a recent commercial reminds us.
There is definitely a growing constituency that says, follow your passion and the money will follow. I wish it were that easy. The problem is that passion alone can often lack direction. It can be flighty and it will easily lead you astray when you quickly find yourself trying to be all things all people.
I recently wrapped up a client who really understood this. He contacted me after purchasing a building in a mid-size southern city. He had a very clear vision (passion) for the business he wanted to put into the space and he asked me to conduct a detailed analysis that would help him determine if putting a gym in the building would be successful.
Here are the steps I followed — you will likely notice some inherent overlap.
- Assess the Market – The foundation of the feasibility study needed to demonstrate a knowledge and understanding of the demographics of the downtown. There were multiple buildings being converted into apartments and condominiums which likely would result in an influx of people looking to live-work downtown. Presumably the residents will be young, single and relatively affluent. I needed to confirm that.
- Gauge the Profitability — My client’s initial goal was to open a gym. As a consultant my start up costs were essentially an LLC license, an unlimited data plan for my phone and a new laptop. Pretty minimal to get started.The startup costs for a gym shocked me. (The number of them that failed was also quite suprising.) So much upfront investment becomes very hard to overcome in a quick amount of time. My client planned a full remodel regardless of the type of business that went in, but in order to have a good gym you needed newer, well-maintained equipment which was expensive. Multiple shifts must to be hired, trained and staffed because gyms need to be open very early in the morning, stay open until late in the evening and are open on weekends: far beyond a typical 8 hour day.I created a profitability model for the feasibility study — how many members did need to make a profit? It might be easy to get 30-40 members but what if I needed 75 to break even? What if it was 175?
- Scope the Competition — How many other solutions are already there? There are always options for your customers, including doing nothing. Do your research on who is competing for your customer’ attention. You should consider complimentary and competing products as well. Maybe a there is already a gym on the block so maybe the recommendation is to open a coffee or juice bar?
- Plan your Partnerships — I’m in a couple different social media groups where I often see small business owners ask the hive mind “how do I find customers.” When I see questions like that I tend to believe that this is a young solopreneur. She is likely a year or two into her business, has likely been running on adrenaline in development/launch mode. She has likely racked up at least a couple thousand dollars in debt and isn’t paying her self a dime because there isn’t enough money coming in yet. Maybe the launch a success, but then her site traffic dwindled and, even worse, social media player changes the rules making it harder for customers to find the product they once loved.Now our new small business has no long term solution for finding customer. They may not even know who their customers even are. (I wrote a blog in 2016 that talks about how to value your customer.
Along those lines BE REALISTIC — not everyone is going to get onto Shark Tank or get included in the Self Magazine annual beauty section. And if you do — it should be the icing on the cake not the bread and butter.
- Who You Are. Who You are Not. A well-rounded feasibility study sets the stage for you to create a branding plan. It’s easy to get distracted every time the phone rings with an opportunity. They all sound so good. Generally, there are going to be sales people trying to pitch marketing tools that are guaranteed to work (until you try to cash in on the guarantee). There are going to be other entrepreneurs who try to collaborate with you (or rather take advantage of you.) Having a clear document can remind you of your vision and give you a much needed “out” when you have to say no.
In the end my client did not launch a gym. Instead, we launched a co-working space called THE OFFICE HUB. It is in Shreveport, LA, and believe me when I say that it is beautiful. I’d love to tell you that it’s a raging success. Bottom line is that it’s been open a week, so we have yet to know how successful it will be. However, we are confident that because of our feasibility study we are on a solid foundation. Thanks to the study, we were able to learn about all the fabulous things happening in downtown Shreveport. And that a space like ours will ultimately be a valuable addition.
Some primary and secondary research helped us find and connect with the Downtown Development Authority, (@CoolDowntown). The DDA then helped us connect with every local television stations! They all came to our grand opening and did on camera interviews with our Executive Director. 100 or so of the Shreveport movers and shakers were also there for the Chamber of Commerce ribbon cutting! We created a business that Shreveport is hungry for — and we knew it thanks to the investment in the research.
So if you’re considering launching a small business (or have recently done so) take some time and find a partner, preferably one who is independent and objective, to put together a feasibility study.