One of the hardest parts of building a new line of business is convincing yourself (and other stakeholders) that you're ready to make a significant investment in something new.
We've been working through these issues recently in regards to creating a new business line, and have chronicled the process we've gone through in a series of articles addressing questions such as:
- What does a "duck" look like?
- How do we build a robust pipeline of customers?
- How do we prioritize among potential customers?
- Who in the business is accountable for driving profitable growth in the new business?
- What partners do we need to build the business?
Once you work through those questions, you'll be in good shape to pursue a new business line. But you'll still have to address one all-encompassing question: Why do we believe we will earn a return on our investment?
This is every business owner's "gut check" question. We have to believe that (a) we are entering an attractive market; and/or (b) we are bringing unique capabilities to the market. If we are not confident in either of those, the odds are stacked against us. We may as well head to our local casino and bet on black. In fact, the casino test may be a good way to frame the question: Why do we believe we can get substantially better payouts from this business than we can get from a spinning roulette wheel?
The best way to validate your "reasons to believe" may be to share them with experienced industry insiders. We've had success talking with current or retired executives in the new business to verify our view that a market is attractive, and that our offer and capabilities are going to be distinctive. We also talk to potential customers. If they give us a positive view, then we know we are onto something.
Here are a few questions you should ask yourself in the "gut check" phase:
- Do we have a compelling story for why we will win in the marketplace, and how that will translate into attractive financial results?
- Are we balancing risk and return appropriately? Have we done everything we can do to minimize downside risk and maximize our upside?
- Every new business venture entails learning. Do we have a plan for gathering and reacting to our learnings? Are we getting to learnings quickly enough?
- Ultimately, will you be able to sleep at night, secure in the belief that you can manage the risk and learn how to win?
If you feel good about the answers to these questions and have done your homework, you should feel ready to take the big plunge into your new business venture!
What has been your experience in building a business? What have been your "reasons to believe"? Please let us know in the comments below or email us at firstname.lastname@example.org.