Have you ever had a flash of cash that you thought might be a good idea for a startup business, but didn’t know where to start?
Don’t worry, you are not the only would-be entrepreneur to face this problem.
Every day entrepreneurs worldwide have an idea to startup a business, but aren’t sure whether they should act on their flash of cash or even where to begin.
If you’ve had a flash of cash, but aren’t sure what to do next, here are 7 steps to help guide you through the process.
Step #1 – Research your startup idea
Once you’ve had a flash of cash, or startup idea, your first step is to conduct some market research. Your research should tell you whether someone else has already thought of your business idea and if it’s currently in the market and being sold by someone else.
A Google search is the fastest way to begin your search and will help you quickly figure out whether someone else has had a similar flash of cash and is already selling your product or service. If you discover that there are already many companies selling something similar to your idea, then it’s probably smart to wait for your next flash of cash that doesn’t have so much competition. Otherwise your only real hope of success is to differentiate your product or service enough that it will appeal to a whole new set of customers.
If you can’t find any other products like your flash of cash after a thorough search, that doesn’t necessarily mean it’s a good idea. It only means that there isn’t already a lot of competition for your product. Unfortunately it might also mean that there isn’t a lot of demand for it either.
Step #2 – Do you really want to be an entrepreneur?
Once you’ve had a flash of cash and done some searching to figure out whether you might have a viable product, you need to ask yourself whether you really want to be an entrepreneur. People that have ideas for new businesses often see piles of money as the outcome – in other words a “flash of cash.” Unfortunately that is not always the case and in many instances turns out to be a “waste of cash.”
Starting a business demands a lot of work, is stressful and will complicate your family and personal life. This is not a deterrent for most entrepreneurs. In fact they live for the challenge — much the way an athlete craves the competition. If you on the other hand are living a comfortable existence and satisfied with your place in life, then think seriously whether you want to jeopardize your work life balance in order to become an entrepreneur.
Step #3 – Protect your flash of cash
Once you’ve decided you really want to become an entrepreneur and turn your flash of cash into a reality, do yourself a favor at the outset and protect your idea. Taking precautions early on can save you money in the future, especially when it comes to legal fees for intellectual property disputes. Here are three ways you can go about protecting your idea:
- The most basic form of protection is to get a special notebook (with numbered pages that must be torn out) to keep track of your plans and sketches. These notebooks, often referred to as “logbooks,” can be found online or at your local office supply store. Make sure you record everything about your flash of cash in the logbook.
- The next thing you can do to protect your idea is to have people sign a Non-Disclosure Agreement (NDA) before you share your idea with them. This binds them to secrecy and can be used against them if they try to steal your idea. Templates for Non-Disclosure Agreements can be found online, but it’s always wise to consult an attorney first as this is a legal document.
- Lastly you can protect your flash of cash by filing a patent application. There are many “how-to” articles online and you should also visit the United States Patent and Trademark Office website for more information on this process. Although it’s not as complicated as it may seem, you should consult an attorney before taking this step.
As you consider protecting your flash of cash, one thing to be mindful of is time. While you can use all of the above to protect your intellectual property, or flash of cash, they will all take time away from you actually getting your product to market. If you spend all of your time filling out patent applications, you may miss the window of opportunity to launch your product. So you will need to find a balance that offers you some protection and also allows you to start a business as quickly as possible.
Step #4 – Make a prototype and get some feedback
Once you’ve decided to become an entrepreneur and bring your flash of cash to life, your next step is to build a model or prototype. This important step serves two purposes. Firstly it will help you understand whether you can actually build your flash of cash. Secondly it will allow you to share it with suppliers and potential customers to get their input.
Your prototype doesn’t necessarily need to be a fully working model with all of the bells and whistles, but it should help others understand what you are trying to accomplish. Once you’ve put the prototype together, show it to prospective clients and get their feedback. Also take it to suppliers and ask them how much they will charge you to make it in various quantities.
After you’ve gotten some initial feedback, then you need to decide on next steps. If the feedback involves some relatively simple changes that you can incorporate into the prototype, then go ahead and make the changes and get some additional feedback. On the other hand, if most of the feedback you received was negative or significantly raises the cost, then you should consider whether your flash of cash is really worth pursuing.
Keep in mind that customer feedback rarely gives you a perfect answer. Everyone is different, and everyone has different needs and desires. Your goal is to develop a product that meets the needs of a target set of customers – don’t try to create something that works for everyone. If you do, you will wind up with a product that is either too expensive or one that nobody wants.
Step #5 – Put together a business plan
After collecting some positive feedback about your business startup idea, then you need to put together a business plan that covers the key elements of your new product launch. Although a business plan doesn’t need to be a long document, it should at least describe what you are planning to do and how you are planning to pay for it. Perhaps the biggest benefit of a business plan is that it helps you to think through the key steps of launching your product by addressing four elements: product or service, sales and marketing, funding and organization structure.
Assuming you are not going to seek funding from a bank, angel investor or venture capitalist, then your plan can be relatively simple and should answer questions like the following:
- How you are going market and sell your product?
- Retail sales
- Online channels
- Direct selling
- How many units are you going to sell over time?
- First month
- 3 months
- 6 months
- Full first year
- How much are you going charge and what is your pricing strategy?
- One time sale
- Recurring monthly sales
- Low introductory price
- Cream skimming pricing
- How much is it going to cost you to manufacture the product?
- One time charges
- On-going unit charges
- For small quantities
- For large quantities
- How are you going to fund your startup costs?
- Personal savings
- Credit cards
- Friends and family
Depending on the nature of your startup, there may be other questions that are more appropriate. For instance, if you are starting a retail store, then things like rent and foot traffic should be captured in your business plan. A good starting place to find business plan material is the Small Business Administration (sba.gov). At minimum you should wind up with a financial plan that covers the first 12 months of operation.
The purpose of your business plan is not only to show how you are going to get from the beginning startup to company profitability, but also to provide you with a way to measure your results. For example, if your business plan called for making 10 sales in the first 3 months and you haven’t made any, then you need to figure out what is wrong with your business plan and recalibrate.
Step #6 – Final check-in before you launch
Steps 1 through 5 are just the beginning of turning your flash of cash into a reality. Step #6 provides you with one last opportunity to ask yourself whether you still think it’s a good idea. Beyond this point, you will have to start making personal and financial sacrifices to turn your idea into reality. So before you take the plunge, go through the following list to make sure you are ready.
- You understand that being an entrepreneur requires creativity to solve all sorts of problems and will significantly disrupt your current way of life.
- You have shared a prototype or model of your flash of cash with prospective customers and received enough positive feedback that leads you to believe that they will pay for your product or service.
- You have a good idea how much it will cost you to produce your product or service in small and large quantities.
- You have created a business plan that describes what you are going to sell, who you are going to sell it to, how much they will pay for it and how you are going to fund your startup costs.
- You know how you are going to market your product or service (retail, online, direct) and have a list of prospective customers.
By skipping any of the details above, you risk losing a lot of money and wasting time that you might have enjoyed doing something else.
Step #7 – Your first sale
For an entrepreneur, there really isn’t anything more satisfying than making that first sale and depositing the money in the bank. The first sale validates your idea and shows that someone is willing to pay for your product or service. However a startup is only successful if it makes many profitable sales over time.
Your first sale doesn’t need to be profitable. In fact many startups begin by losing money for a variety of reasons – the main one being the inability to cover fixed costs, like your salary or rent for an office. So part of your business plan should explain when you expect to reach profitability. Over time, if it becomes apparent that your startup is not going to be profitable, then you need to shut it down. Don’t take on a lot of debt with only a hope of becoming profitable.