How can you test your business ideas? [2006]
- Date : (2006-07-27)
- Author : SAIE
How can you test your business ideas?
Profile When Craig McKenzie and Andrew Harvey started Debonairs Pizza in 1991, they knew that they faced stiff competition from other fast-food outlets. If their business was to succeed, it needed to be different. To do this, they built Debonairs on a home-delivery system. At the time, home-delivery wasn’t very common in South Africa. Then, they dressed their delivery staff in starched shirts and bow ties and adopted the slogan “We deliver smartly”. Like most entrepreneurs, the partners had a great business idea, but had no way of knowing if their idea would work. So they tested their idea in the market by starting small. Craig and Andrew operated their first outlet from a small room rented from Craig’s family bakery and sold their pizzas by telephone order. By delivering their pizzas instead of selling directly to customers, the partners avoided spending a fortune on rent, expensive shop fittings and furniture. In no time at all, they had more orders than they could handle and Debonairs Pizza was on the map. Craig and Andrew began to expand Debonairs through franchising and soon there were outlets throughout South Africa. Five years later, their business was sold to the Steers Group for R25 million. Not bad for a small business built on a start-up capital of just R3 000!
Test your business ideas with the Idea Evaluation Test In the previous issue of Jet Club magazine, you may have used the Idea Generator to come up with business ideas of your own. The next step is to test these ideas for their viability and for their appeal. After all, running a business takes total commitment, so it’s important that you like what you do. If you missed the previous issue, don’t worry. Any business ideas can be tested in this way. In the table below, write a brief description of five business ideas, for example, “A: A pizza delivery business.”
Business Ideas A B C D E
Then, read through the nine statements in the table below. Next to each one, rate each of your five business ideas using the following scale: 0 = definitely “No” 1 = probably “No” 2 = probably “Yes” 3 = definitely “Yes”
Idea Evaluation A B C D E
- I’m really excited about this idea.
- I can see myself happily running this business.
- I can easily commit to this business for 5 years.
- I have all the skills I need to run this business.
- I have sufficient experience in this type of business.
- I can acquire the extra skills I’ll need.
- I have sufficient capital to start up this business.
- I could raise the extra capital I would need.
For each business idea (A to E), fill in your score (0 to 3) for each statement. Once you have completed rating each idea, add up each column of scores and fill in the total for each business idea. Those ideas which score highly are probably the most promising, as you are most passionate about them and they are already a close match to your skills, your experience, and your access to capital and contacts.
How to test your business ideas in the market 1) Start your business part time. By starting your business part time, while still employed, you will soon find out if your idea will work or not without risking too much. 2) Start small. If you are ready to launch your business, you can test the market by starting small. This reduces the risk while giving you a chance to fine-tune your business operations. 3) Observe similar businesses already in existence. By studying similar businesses, you can observe how successful they are and determine if the market can support your business too. Things to look out for include how long they have been in existence, how many branches they have, how many staff they employ, where their premises are located, and how many customers they attract each day. 4) Questionnaires. By carefully compiling questionnaires you can find out from potential customers if they need and want the products or services that you are offering. However, it’s important to remember that people often say and do things differently.
No matter what type of business you wish to start, you will always face some kind of risk. By testing the market and testing your commitment to your business venture, you will be better prepared to manage that risk. In the next issue, we explore what you will need to start your own business.
