26 Jul 2024
259
11 minutes
How to validate a business idea and start your own business: common mistakes of beginners
How to validate a business idea and start your own business: common mistakes of beginners
You know what’s interesting? Business ideas literally surround us, and we often don’t even notice them. It’s important to learn how to test them properly to avoid pitfalls that can hinder success.
Let’s look at some common mistakes that can occur when thinking about how to start a business. This will help you avoid them and increase your chances of success ☝️
Common mistakes when creating a business idea
Trying to Reinvent the Wheel. Often, designers create a beautiful bicycle that has nothing to do with reality. We try to do the same: sit, think, formulate… And we believe that until we come up with something completely new, it’s not worth doing anything. In reality, everything is much simpler and more down-to-earth, especially when it comes to micro and small businesses.
Innovation is Difficult. A statement that contradicts the first: it is believed that the bicycle has already been invented, and nothing new can be created.
Ignoring Market Research. We often underestimate the importance of analyzing the market and customer needs. Without a deep understanding of the target audience and competitors, a business idea may prove unviable.
Underestimating Financial Costs. Many entrepreneurs do not consider all the costs associated with implementing an idea, which can lead to a lack of funding and, ultimately, to the failure of the business.
Perfectionism. Excessive striving for perfection can delay the launch of a business. It is important to find a balance between quality and speed of implementation.
Lack of Adaptability. Unwillingness or inability to adapt the idea according to market changes and customer feedback can be a serious obstacle to success.
Ignoring Legal Aspects. Violating legal requirements, not adhering to norms and regulations can lead to legal problems and fines, which can seriously harm the business.
So, if there are good ideas that bring good money in your area, this is the start from which you should begin.
Case study: Panera Bread
There are no bakeries in your area, and residents have to travel to neighboring districts to buy fresh bread and pastries. Opening a bakery will satisfy this need, creating convenience for residents and a steady flow of customers for you. This is a classic example of meeting a real need and making a profit.
Panera Bread is an American bakery-cafe chain known for its fresh baked goods and food prepared on-site. They provide convenient access to fresh bread and pastries, meeting the needs of city residents.
Case study: Better Me health app
Idea: create an app that helps people monitor their health. Business Idea: Analyze the market and identify a demand for mobile apps that help monitor blood glucose levels for diabetics. The app integrates with popular glucometers, offers dietary and activity recommendations. People are willing to pay for a subscription because it significantly simplifies their lives.
Better Me is a Ukrainian app that quickly gained popularity in the global market thanks to its bio-individual approach and ecosystem of products aimed at achieving users’ inner happiness.
Case study: coffee shop with coworking space: coworking coffee shop "Nest"
Idea: open a coffee shop.
Business idea: open a coffee shop in an area with a large number of freelancers and students, providing them with a place to work with fast internet, comfortable seating, and separate zones for calls. You can also organize themed events and workshops. This will attract regular customers and ensure a steady income.
Coworking coffee shop “Nest,” located near Boryspilska metro station, combines a coffee shop and a comfortable coworking space with 19 workstations, large tables, and outlets at each station.
Case study: office food delivery service: GastroChef
Idea: open a food delivery service.
Business idea: focus on delivering healthy lunches to offices of large companies, offering a variety of menus that consider dietary needs and preferences of clients. By establishing partnerships with several office centers, you ensure regular orders and steady income.
GastroChef offers healthy five-meal deliveries in Kyiv with free delivery to home and office.
The difference between a simple idea and a business idea lies in focusing on real customer needs and monetization opportunities. A business idea is a concept that not only meets needs but also generates profit.
How to validate a business idea: criteria
- Existence of consumer need or value, or solving a problem: to confirm the existence of such a need, it is necessary to conduct research, but clearly defining it is important from the initial stage.
- Legitimacy: paying taxes is an important aspect of legitimate business. My first partners from the auditing firm “Azimut” once said: “If we don’t run a transparent business with all salary and vacation payments, we won’t do business at all.” Iryna and Katya, with whom I still cooperate, taught me: when I hear a knock at the door, I shouldn’t be afraid. That’s why I always support legitimacy.
- Plausibility: ideas such as creating an IT company in a city with 30,000 inhabitants and no educational institutions with the aim of making a billion dollars belong to the realm of fantasy. A realistic business plan should be based on actual data and possibilities.
Example: the idea of delivering hot bread to the door. I don’t eat carbohydrates after lunch, so often the food prepared by my relatives goes to waste. But if there was a service that delivers hot bread with butter or pâté by 7-8 in the morning, it would become a high-margin business. If you live in a high-rise building, calculate the number of apartments and possible conversion – this is a really feasible business.
The “Love and Can” method: make a table with two columns: write what you love in one, and what you can do in the other. Then cut it into strips and combine different options. Perhaps this way you will find your business idea at the intersection of your “love and can.”
Example: the idea of creating a home appliance repair service.
I often face breakdowns of household appliances at home, and every time I have to look for a repairman, which takes a lot of time and nerves. But if there was a service that provides home appliance repair services at home, it would be a very convenient solution. A client can leave a request on the website or in the mobile app, and the repairman will come at a convenient time.
Advantages of such an idea:
- Convenience for clients: no need to transport heavy appliances to the service center.
- Time saving: quick response and problem-solving on-site.
- Wide market coverage: almost every family has household appliances that can break down.
- Additional services: you can offer maintenance and preventive services.
Conclusion:
Creating a home appliance repair service can become a profitable business, especially in cities with many high-rise buildings. You can provide convenience for clients and a stable income for yourself, as we did in Kiyservice.
Testing a business idea: Is it a tough nut to crack?
After formulating the idea, it needs to be tested for strength: Analyzing a business idea is a serious step that should never be skipped.
1️⃣ Testing the idea with criticism
Some people are afraid to share their ideas, fearing they will be stolen. The biggest mistake is staying in your own bubble, not listening to or hearing criticism. Constantly discussing ideas helps make them better.
2️⃣ Openness to criticism
I openly test my idea of starting an IT company, expecting criticism. I talk about it with friends, partners, even those who might troll me. Most often, I get responses like:
- “If it’s a good idea, why hasn’t anyone done it yet?”
- “It’s a good idea. It’s already been done!”
Most critics will say something similar, but among them, there will be someone who gives constructive criticism. My main critic is my wife, an entrepreneur with unique intuition. Look for such people!
3️⃣ Formalizing a business idea
Your project should have clearly defined:
- Goal
- Desired income
- Implementation timeline
- Tasks, problems, and risks
Important points for a business idea:
- Description of the product or service
- Project goal
- Tasks to achieve this goal
- Problems and risks
- How to overcome problems and minimize risks?
- Actions (measures/work) and timelines to achieve the project’s goal
- Arguments in favor of the project’s success
Even rough sketches are important. Without deadlines, written actions, tasks, and goals, it is not a business but a dream.
Clearly answer the question: “How much do I want to earn, when, and what do I need to do to achieve this?”
If you try to create a detailed business plan with numerous tables right away, you can quickly lose motivation.
The main thing is to overcome yourself and build a management system.
Example of testing the strength of an idea for a home appliance repair service:
Description of the product or service: Home appliance repair service at home.
Project goal: Provide a convenient and quick home appliance repair service for residents of high-rise buildings.
Tasks to achieve this goal:
- Creating a website and mobile app for ordering services.
- Hiring and training qualified technicians.
- Conducting an advertising campaign.
Problems and risks:
- Lack of qualified technicians.
- High competition.
- Low trust of clients in new services.
How to overcome problems and minimize risks:
- Collaboration with technical schools to find technicians.
- Excellent service and guarantees to attract clients.
- Positive reviews and recommendations.
Actions and timelines to achieve the project’s goal:
- Website and app development: 3 months.
- Hiring personnel: 2 months.
- Advertising campaign: 1 month.
- Service launch: 6 months.
Arguments in favor of the project’s success:
- High demand for home appliance repair.
- Convenience of the service for clients.
- Professional and qualified staff.
For the successful implementation of an idea, it is important to carefully plan, consider all possible problems and risks, and be ready to overcome them. Continuous improvement and openness to criticism will help make the business idea stronger and more successful.
Testing the idea for strength (selling goods on a marketplace)
We have prepared a template file for you.?
Explanation of the example:
- Employee salary, UAH per month (Net): established salary for the employee.
- Number of employees: number of hired employees.
- Total wage fund, UAH per month (Net): total wage fund excluding taxes.
- Taxes and insurance contributions (18% and 22%): taxes and contributions accrued on salaries.
- Total wage fund with taxes and contributions, UAH: total wage fund including taxes.
- Other expenses (FOP = 40% of Cost): other expenses amounting to 40% of total costs.
- Total cost: total business maintenance costs.
- Profit margin in this industry, %: average profit margin percentage in this industry.
- total monthly revenue, UAH: total monthly revenue.
- Average check, UAH: average cost of one order.
- Number of orders per month: number of orders per month.
- Number of orders per day: number of orders per day.
- Labor productivity, orders per day / per person. Average number of orders fulfilled by one employee per day.
- Is This Realistic? Whether this business idea is feasible.
Justification
- The employees’ salaries are competitive enough to retain qualified personnel.
- The number of employees allows for effective servicing of the necessary number of orders.
- The wage fund with taxes corresponds to real calculations and includes all necessary expenses.
- The profitability in this industry allows for sufficient profit to support and grow the business.
- The number of orders per month provides the revenue needed to cover costs and generate profit.
This example helps evaluate the viability of the idea of selling goods on a marketplace. If you have specific questions or need additional information, let me know!
Always keep profitability in mind when thinking about starting your business. If you don’t account for profit, it’s a serious mistake. You can talk about revenue as much as you want, but the main goal of entrepreneurial activity is to make a profit.
Business from the Heart — It's Real
A business done with passion exists! The best example for me is a project from WOW PROJECT — WOW YALYNKA. I have been working with Christmas trees for over 15 years.
I love the forest, I love New Year, and I adore New Year’s wow trees. This is the project that ignites my heart to create breakthrough business models and a product that enchants with its mission.
What is needed for this?
- Generate ideas.
- Share your ideas, listen to criticism.
- Assess the economic feasibility.
- Move on to creating a business model.
To Summarize
This article has helped us identify the main mistakes to avoid when creating a business idea and provided examples of successful case studies.
Important Lessons we Learned:
- Avoid Overcomplicating: sometimes the simplest solutions are the most effective.
- Analyze the Market: understanding the needs of your target audience is key to success.
- Evaluate Costs: carefully calculate all possible expenses to avoid financial problems.
- Be Open to Criticism: openness to feedback will help improve your idea.
- Formalize Your Ideas: turn your ideas into concrete business plans with clear goals and objectives.
It is clear that developing a successful business idea is a complex process that requires time, knowledge, and effort. However, to make this journey easier and more effective, we are excited to introduce you to the WOW Mentor program by Matvieiev Academy.
So, don’t miss the opportunity to turn your idea into a successful business! Sign up for the WOW Mentor program today and start your path to entrepreneurial success.⚡️
May your business bring not only profit but also satisfaction from realizing your own ideas. I believe in you!
Share your thoughts in the comments. In the next article, we have prepared entrepreneurial AI tools for you to solve specific business tasks: AI for business: the best AI tools for entrepreneurs | MATVIEIEV ?
