During our last Business Plan Workshop we had an interesting question asked – “when should someone accept that their idea for a business will not work?”
Normally I am adamant that you need persistence and belief in yourself, never give up your dream. But this made me stop and think.
Certainly in the past I’ve had entrepreneurs contact me to describe a business idea that I can see is never going to work and sadly they may have spent years of their time and thousands of pounds in developing it.
More importantly than my opinion, when I quiz them on the evidence to indicate there is a need and if anyone would actually pay for the product or service, the information is non-existent or poor at best.
By evidence I really mean market research and that’s not just asking your friends if they think it’s a good idea. Rather the idea must be one that will form the basis of a business, that will satisfy a real need and that the public will give you their hard earned cash for it.
Actually the market research doesn’t have to be rocket science, but it must be reality. There are a lot of papers already written on most market areas that can start you off (the British Library’s Business Centre is a good source).
There are always competitors, or alternatives to your idea that you can check out. You can talk to prospective buyers, either consumer or trade and don’t ask general questions leading them to say that it’s a nice idea, ask for advance orders – pin them down. Then you’ll see the reality.
Once you are up and running, the question becomes “how long should you give it, to show that it will work?”
Again my instinct is to not give up too easily. If the market demand seems to be there, but you have to overcome difficulties, that’s normal and the great entrepreneurs have all had to overcome initial hurdles. But if it’s not taking off, stop and think whether it’s anything that can be fixed, or a fundamental flaw.
Michael Birch, who sold his social web site Bebo for $850M a couple years ago had tried lots of different ideas. Some worked, but weren’t scalable. Some worked but weren’t able to make a profit. Others may have been a good idea but there were basic flaws. Such as the address book updater (I think there are still some of these around). He found that unless everyone on the contact list updated their address books, the user would simply stop using it. Of course not everyone did update, so it never took off.
Each time he learnt from the experience and moved on. How long did he give each one? Probably only a few months, but the Internet can give very quick feedback. For a traditional business it can take longer, however you should have set realistic goals that allow for the market you are in and be checking against them. If you’re not meeting them, what’s the reason?
You may find it is obstacles that can be overcome, or it might be that there is a basic issue with the business concept that no amount of tenacity could fix. Being tenacious and determined needs to be applied to the overall goal of being a success, not just one venture.
Knowing when to take the learning and move on, without giving up at the first sign of trouble is a difficult one. But I think it can be seen as the difference between operational problems and concept failure. If the homework is done first many of the concept issues should have already been spotted.