9 Tips to Turn an Idea into a Business
Ideas: Everyone has them. Few act on them. Even fewer make money from them.
Want to turn an idea into a real business? Here's an overview of the process from Stephen Key, the author of One Simple Idea for Startups and Entrepreneurs. He holds 13 patents and his products have been sold in retail outlets like Walmart and 7-Eleven.
1. Test quick, test often.
Early on Key realized that in order to eat he had to find out really fast if an idea would work--if not, he needed to move on and find a new one. "But don't test with your friends," he says. "The real test is whether people will reach in their pockets and pull out dollar bills. That is the ultimate test."
2. Understand the market.
First, really understand the marketplace: Where your product fits, how it's different from other products, and whether you can sell at the right price point in that category.
The ideal situation is to find a niche where everyone else has left crumbs on the table, Key says.
3. Determine the manufacturing cost.
Now determine if your product can be manufactured at a price point where you can make money. That's easy: Contact contract manufacturers, send over specs, find out if it can be made and the cost of making it.
To protect your idea, have manufacturers sign an NDA. Or file a provisional patent. Either works.
4. Determine your margin.
If your price is too high you obviously won't be competitive. On the flip side, competing on price alone is a losing battle you probably won't win. Your profit margin must allow you to compete day in and day out; if it won't, move on to another idea.
5. Get real feedback.
Stop at local retailers. Go to regional trade shows. Show your product to people in a position to make decisions. That pulls your idea forward instead of you pushing it.
Smart people will tell you right away if you have something or not.
6. Test before you go into full production.
Set up a webpage showing your product. Share it on social media. Create a video. Show the benefits of your product and find ways to learn what people think.
The goal is to get a few genuine green lights that show you have something--or enough red lights to show you don't.
And don't worry about people stealing your idea, Key says. Never operate based on fear. Eventual success will be based on shelf space and customer service: getting customers and retailers to love you.
7. Then do the math again.
The magic is in the ideas. The means is in the numbers. Once you understand your manufacturing costs you can put all the pieces together and decide if you really want to take your shot.
8. Start small.
Sell one. Then sell two. Start small, learn about your product, see how it looks at retail, determine changes you should make to packaging and marketing. When you start small and stay close to your customers it's a lot easier to make smart changes along the way.
With a small idea it doesn't take a lot of capital to start your business. Finding dollars to launch is not easy, so by starting small you won't end up with a garage full of product you can't sell.
Win local first. Then you can focus on winning regional, national, and global.
8. Most of all, keep trying.
Don't think you have to reinvent the wheel. Keep it simple, keep it small, and find a variation on an idea that already exists.
Here's an example: guitar picks. (Key created HotPicks, a company he later sold.)
"We didn't try to compete with the largest guitar pick manufacturers in the world," he says. "We knew people--musicians and non-musicians--collected guitar picks, so we made them a lifestyle product. That way we could sell them outside music retail environments where there was no competition."
When he tested the first skull-shaped picks, Key put booklets in music stores and had the salespeople take surveys. After the person filled out the survey, they received a gift. "That way our audience could tell us what was cool," he says.
9. Remember nothing is forever.
Innovate, design new products, extend your line, and stay current. There is a life cycle to everything.
One product will not build a business. One product is a start. Keep building your network of retailers, keep giving them products that are new and current. Never, ever stop.