How to Turn Your Great Idea into a Profitable Business
By Lucy Reed
You’ve had it — the lightbulb moment to end all lightbulb moments. Now, you’re ready to take your great idea public and start earning income from your innovation.
Not so fast. There’s a lot that has to be done to transform an innovative idea into a successful startup, and it doesn’t happen overnight.
1. Clarify your idea
Odds are, your great idea started out as a vague concept swirling around in your mind. But in order to take it to market, you need a clearly-defined vision. To clarify your business idea, ask yourself these three questions:
- What will it do? You don’t have to hammer out every detail at this point, but you should have a clear concept of how your product or service functions.
- What problem will it solve? No matter how brilliant your idea, if it doesn’t solve a problem for consumers or businesses, people won’t buy it.
- Who will buy it? Successful businesses have a clearly-defined target market. Consider what types of consumers or businesses would be interested in your product and whether they have the capital to afford it.
2. Test your idea
Before investing time and money into your business idea, you need to make sure it’s viable. Develop a prototype and find customers who are part of your target market to test it. Are people excited about the idea or do they seem hesitant? Are there problems or design flaws that interfere with your idea’s usability? Take the input you receive from the testing phase and use it to improve your product or service, then test and test again until your idea is ready to execute.
3. Write a business plan
Now that you’re confident in your product, it’s time to get it to market. But first, you need to figure out how. This is when it’s time to create a business plan. In your business plan, you’ll answer questions like:
- What will it cost to take the product or service to market?
- How much financing will I need and where will it come from?
- What will I charge for the product and how will I accept payments from customers?
- What will my cash flow look like? When will I turn a profit?
- Who is my ideal customer? How will I reach them?
- Who are my direct and indirect competitors? What sets my business apart?
You can find a basic template for writing a business plan at SCORE.org.
4. Find Funding
Few people have the capital to self-fund a startup, especially young entrepreneurs who are just starting out. These are some ways new business owners can access start-up capital:
- Venture capital: Venture capital firms make a business of investing in startups, but this form of financing isn’t easy to obtain for entrepreneurs without a history of successful startups.
- Angel investors: Angel investors are individuals or groups of individuals who invest in young startups. When a startup needs less funding than is available through venture capital, angel investors are a viable option. However, like venture capitalists, angel investors expect high returns on their investment.
- Small business loans: The Small Business Administration backs a variety of loans for small business owners, however it can be difficult to access loans for a brand-new business. Most banks want to see proof of a business’s financial history before lending money.
- Crowdfunding: Crowdfunding is an increasingly viable option for startup funding, especially if you’re savvy with social media marketing. If you’re offering rewards for early crowdfunding backers, make sure you can deliver on promises.
- Bootstrapping: Bootstrapping refers to using your own funds to start a business and it’s the route many first-time entrepreneurs take. Rather than using credit cards, tapping into home equity, or draining an IRA, consider keeping your day job to pay startup costs.
As you can see, there’s a lot of work involved in taking a startup from idea to reality. However, you shouldn’t let it scare you away from pursuing your goal of business ownership. By taking these steps and developing a great product with a strong business plan, you’re giving your startup the best possible chance of success.
Lucy Reed has been starting businesses since she was a kid, from the lemonade stand she opened in her parent’s driveway at age 10 to the dog walking business she started while in college. She created GigMine because she was inspired by the growth of the sharing economy and wanted to make it easier for entrepreneurial individuals like herself to find the gig opportunities in their areas.