Question: I”™m hesitating to jump on a new business opportunity ”“ will it be a distraction or a serious opportunity? Will it lead to profits and more customers in the future, or will it be a bust?
Thoughts of the day: Every business needs new opportunity to keep it from getting stale. The trick is figuring out the risks you”™ll be taking and comparing them to the likely payoff. Put aside a budget to experiment. Don”™t be afraid to walk away if it”™s not likely to pan out. Have a number of experiments going every year. Try thinking in three- to 10-year horizons.
A steady flow of new business ideas is essential to keep any business fresh. Some will work, some won”™t, some will turn into other ideas and some will get tossed. Set aside part of every week to work on the future of your business.
In order to better evaluate risk and payoff on each idea, consider the following:
Ӣ How much will I need to put in to find out if the idea has merit?
Ӣ Can I repurpose the opportunity if it doesnӪt go as expected?
Ӣ Is the idea far out, or very similar to other ideas that have worked?
Ӣ How long will it take to pay off?
Ӣ Are there investment funds available to try out the concept?
Ӣ How much of the outcome depends on variables I can or canӪt control?
Ӣ Is there an established marketplace need?
Ӣ Is someone available who can be freed up to take charge of this project?
Ӣ What barriers to entry exist, to keep me out and to keep out the next player?
Ӣ Do we know anything about this?
Ӣ How strong is the competition?
Ӣ If IӪm buying an up-and-running product or service, is the company IӪm buying from making a profit? Why or why not?
Write out an answer to each question, and then score each answer from 1 to 4 (1 = high risk, 4 = low risk). Add up your scores and divide by the number of questions to come up with an average. The lower your average score, the riskier the proposition. Below 2.5, the risks increase significantly. Be careful.
Once you”™ve decided to pursue an idea, figure out the cost to explore and turn it into a revenue and profit generator. Think in phases: investigation, building the concept, launching, promoting, getting into regular production, breaking even and making a profit.
Start with a small project in order to get some experience. Line up outside resources who can help when you need it. Build a team of marketers who can take you from initial concept to online testing and then full-blown promotion. You”™ll need help with planning and analysis, market research, marketing concept, social media, copy writing and the marketing campaign.
Understand what sunk cost is. If you put money in and all evidence says that it”™s not going to work, call it a failure and walk away. The money you put in isn”™t going to turn into a return. It”™s gone. That”™s sunk cost. Know when to stop pouring more money in and move on to try something else.
While not every idea is going to work, all you need are one or two good ones to shape the future of your business. Part of your job as owner is to keep your eyes and ears open for new things to try, to keep your business fresh. It”™s generally easier and less risky to buy a proven concept than it is to start from scratch. Keep a list of possibilities and periodically pick one to try. Based on budget and available resources, you can probably take a preliminary look at two to four new things every year.
Some years may be more fruitful than others when it comes to experimenting with new ideas. Try to have a roster of several ideas you could pursue if the time is right. Set a goal to launch one or more new business ideas every couple of years.
How fresh or aged is your business? Use that evaluation to determine how many ideas you need to pursue and how fast you need to move to keep things up to date and forward-looking.
Looking for a good book? Try “Make Facebook Work for your Business: The complete guide to marketing your business, generating new leads, finding new customers and building your brand on Facebook” by Alex Stearn.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Send it via email to AskAndi@strategyleaders. Visit AskAndi.com for an entire library of Ask Andi articles.
