Alex bought a health food franchise a while ago. This opportunity seemed like a wonderful idea in our increasingly health conscious society and besides, he’s always wanted to do something like this, being himself very health conscious and clued up on nutrition.

Well, instead of the ROI benefits he was looking forward to, the sizeable hole in his wallet was now bringing him worry and heartburn as there were not nearly enough customers and after he’s covered all the business expenses, enable him and his family to live as well. Now’s he trying to rescue his investment from bankruptcy by investing in other related projects that at the end of the day, is eating up what little he has left, while yielding as slight a result as the first deal.

Everything looked good from Alex’s vantage point. The ideal business opportunity he had been searching for became available on the franchise network he regularly monitored, the money to go for it was accessible and he was passionate about this particular kind of venture. So why did it not go according to plan?

The difference between an idea and an opportunity

The classic mistake Alex made was to not differentiate between a good idea and a real business opportunity with money-making potential. Quite frankly, he didn’t do his homework.

You see, all business ideas are indeed based on the premise of solving a need or problem for others, but many ideas do not represent genuine business opportunities. This distinction between ideas and opportunities is so important that failing to understand that difference, can and often does, lead to great money loss.

Sure enough, a lot of factors were in place, creating the illusion that everything was in place. The opportunity was there. The money to go for it was there. The passion to make a success of such a venture was there. But one essential ingredient was missing.

Alex never asked himself the crucial question whether his idea could be implemented in a profitable and sustainable way. He neglected to make sure that enough funds could be generated to not only start his business, but keep it running until it made a profit.

And that is something Alex should have determined before plunging headlong into something without the necessary hard facts.

To determine the real business potential of an opportunity, you need to do an in-depth market feasibility and financial viability study on it. Problem is though, that kind of study takes a lot of time, money and effort.

Solution: you need a way of doing a preliminary feasibility study and viability check on an idea or ideas before going to all the time, money and effort hassle a full scale feasibility and viability study would take. A practise run in other words, to see if the real deal is going to be worth it.

So, just how do you do that?

Easy…find the answers to these questions!

Such a prelim check can be done by finding answers to the following questions:

1. Does the idea / concept match my personal vision, mission, goals, qualities and skills? – Personal alignment
2. What will the product / service (material and labour) cost to produce per unit. – Direct costs
3.  At what price can I sell it? How much would potential customers be willing to pay for my product / service? – Selling price
4. How much profit can I expect to make directly from each unit of the product / service I sell? – Gross profit
5. How many people will buy my product / service on a daily, weekly and monthly basis? – Market potential & sales volume
6. How much income can I expect to generate per month? – Turnover
7. How much will it cost me to run the business per month apart from costs directly linked to producing my product / service? – Overheads or fixed costs
8. How much net profit will I make per month? – Profitability

9. How much money will I need to implement / launch my idea? Capital   cost

• Capital to buy equipment and machinery
• Capital necessary for daily operations

10. Why will my potential customers rather buy my product / service than those of my competitors? Competitive advantage or Unique selling point (USP)

11. If this idea should fail, what will happen to me and is the risk worth the opportunity? – Risk

A simple example

Let’s assume you have the following info available:

The unit selling price = $50

The direct costs in making each unit = $10

The volume you will be able to sell per month = 150 units

The expected fixed costs per month = $3000

Now by applying the formula given above, you can calculate how much profit you’ll be able to make each month:

[($50 - @10) x 150] – $3,000

= $6,000 gross profit – $3,000 fixed costs

= $3,000 net profit

So, simply applying the above formula to any idea you might have, will enable you to scan your ideas for business potential and then take only those that pass this prelim scrutiny further for the full treatment, investing the resources such an exhaustive scale study requires.

Well, there you have a prelim device to scan your idea(s)! Next time we’ll delve into the real deal with all its bells and whistles like market analysis, calculation of break-even point and developing a cash flow forecast.

See you there!

Elmarie is a wordpreneur for theEntrepreneurialBusinessSchool(Pty) Ltd and a freelance creative-, web- and copywriter.

Resources

1. EntrepreneurialBusinessSchoolManagement Course.

2. Bekker, Mauritz. Where will I be without your encyclopaedic knowledge of all things entrepreneurial and business? A million thanks!

An amazing discovery

I was most amazed to discover just how many people have a problem to finish what they start. A simple Google search revealed many links to the words “how to finish what you start” with lots of written articles, advice and reply comments on the subject.

Countless people seem to flit between projects, having so many going simultaneously, that being able to finish any will be a miracle, let alone all of them. Others complain that they suffer from indecision and hence simply force themselves to make a choice, right or wrong, and then find down the line that they were anyhow unable to finish what they decided to start. Some start a course, or several courses, but never complete them. And on and on it goes.

Why do so many people have a problem with this? Obviously, there are countless reasons, but…

…here are just some of them:

• Some things just aren’t worth finishing (some folk discover that down the line) and so they move on to something else which they believe is better.
• A lack of self-discipline. It is for instance much easier to get great-tasting McDonalds in about 5 minutes than it is to slave an hour in the kitchen preparing nutritious food. Or watching a fun DVD rather than studying for an upcoming test.
• Our “add- and-stir” culture condition people to expect instant gratification. Any challenges or obstacles are simply too hard to deal with (they require effort), or are the cause of immediate disappointment and/or dissatisfaction, so they take the easy way out. They cop out and stop what they were doing.
• Poor time management etc…

I suspect that whatever may be the reasons for people not finishing what they start, a great many of these reasons, if not most, have to do with a lack of passion.

To make a success of any undertaking, you must be committed to it.  One of the major factors contributing to commitment is to have a passion for what you do.  To have such a passion, you need to enjoy something and be good at doing it.

And that I think is the ultimate reason so many people start something and don’t finish it. They make a decision to begin something, but that decision is not driven by a sense of inner enjoyment or passion and so after a while, their engine runs out of steam, they lose interest and the project dies, incomplete.

Now, this of course is just a very bad way to go about deciding on viable business opportunities and a sure recipe for disaster, even if an idea should prove to be quite profitable.

To choose or not to choose

So, let’s assume that you have identified a great business idea and now want to suss out whether it’s going to be worth investing all your time and money in it. Not all business ideas after all, are good ideas!

It is critically important for you to know that the distinction between a mere great business idea and an actual money-making opportunity is so important, that failing to understand that difference, can and often does, result in great money loss.

So, how do you determine whether that super-cool idea you’ve had is the real deal with a solid money-making possibility or whether it’s just that: a great idea but nothing more?

The hard question

The place to start scanning ideas for some real opportunities is with… you!

Ask yourself the hard question: apart from making a success of a business idea, will you also enjoy it and find fulfilment in it?

And be honest! Any answer here that is short of brutal candour will only short change you. Nobody else.

Why?

Because enjoyment in what you do is 80-90% of success!

Aha! So that’s why passion is important! If therefore a + b = c and ‘a’ is the project, ‘b’ is passion or the lack of it, then your sum will be either completed or incomplete projects. (Hope you could follow that. My mind went up in smoke before I could figure out that one! No joke).

Now why is this crucial when choosing a business idea? Especially when you have to scan preliminary ideas for real opportunities?

All great achievers and truly successful people will tell you: love what you do! You must be passionate about your business idea! It is key. Remember, work passion is one of the major attributes all successful people have in common, because work passion will bring energy into the equation.

It will also bring the necessary focus to bear on your efforts and that is especially important, because when things begin to press in on you, passion is the number one ingredient that will have you dig in your heels and see difficult business times through.

Remember, you’ll only have a passion for doing something if you really like doing it. Why? Because you’ll not only really like or even love your idea, you’ll believe in it!

So, start by getting married

No, not to the bright-eyed wonder next door!

Your business idea and those of your personal entrepreneurial resources – personal vision, mission, characteristics and abilities must hitch up. They must match. If you hate filing for instance and/or are forever misplacing stuff, it’s probably not a great idea to start an organizing business, even if there’s ample opportunity and finances to do so.

And remember that it makes sense to build on strengths and to avoid weaknesses. The wider the range of skills you have, the greater the chance of success. A car salesman will probably not discover a cure for AIDS, neither will a highly trained mathematician who loves jiggling numbers all day suddenly become an ace marketer. But you get the point.

Be honest with yourself and look critically at what you do well, what skills and knowledge you do, or don’t have.  You also have to think of your vision, mission and values.

For instance, why do you believe are you here? What is your mission? Or vision? The values you hold?

A visit to planet You

A quick guide to some questions about you that you have to find the answers to, would include:

• Mission(Make a difference)
• Vision (Excitement)
• Strongest values
• Career profile
  • Strongest Interests
  • Weakest Interests
  • Strongest Abilities and Skills
  • Weakest Abilities and Skills
  • Strongest Personality Traits
  • Weakest Personality Traits
  • Strongest Needs
  • Weakest Needs
  • Summary of strong areas
  • Summary of weak areas
  • Summary of life plan
    • In 10 years’ time I want to…
    • In 5 years’ time I want to…
    • In 3 years’ time I want to…

Next, do the following:

Envision yourself doing this for life

Work through the business concept you have selected (if you have more than one idea, please work through them all) and…

Imagine yourself in this business. (See it actually happening in your mind).

Now ask:

• What is my business called?
• What am I doing most of the time?
• Am I enjoying it and am I happy?
  • Will I be willing to do this for years on end?

Imagine your customers.  (See yourself actually interacting with them).

Then ask:

• Who are my customers?
• What are they buying from me?
• What are their needs and expectations about my product/service?
• What are they complaining about and how do I handle the complaints?
• Do they like my business? / Will they come back to me?
  • Will I enjoy working with such customers every day?

Imagine the place and set-up of your business.

Questions include:

• What area or community, street and building is it in?
• Under what conditions am I working?
• Am I about to do all activities needed in order to run the business OR is anyone helping me?  Who?
• What equipment do I have?
• Do I enjoy working with them day to day?
  • Am I happy working under these circumstances?

Think about the kind of business it is.

Now make a brief description of the main daily activities involved in running this business.  The following are possible examples:

• Manufacturing and selling things.
• Buying and selling ready-made things.
• Creating and providing a service(s).
• Growing and selling things.
• Repairing goods.

Then image yourself in this business – see yourself doing and managing the activities of this business every day of your life:

• Do I have, or can I obtain the necessary skills to do this?
• Will I really enjoy doing this for life, or will it bore me?
• Does it line up with my personality and emotional profile?

Finally ask yourself:

Am I still excited and happy about this business idea?

*****

It really is most critical that you first do this in-depth survey of your inner landscape and then ask these crucial questions about your idea, before we tackle that feasibility study next.

Have fun digging!

Until next time

Elmarie

Elmarie is a wordpreneur for the Entrepreneurial Business School (Pty) Ltd and a freelance creative writer, web writer and copywriter. Email her at ebouwer@ebschool.com

Resources:

1. EntrepreneurialBusinessSchoolManagement Course.

2. Bekker, Mauritz. Your knowledge and advice is as always, invaluable. Thanks Mauritz. You’re the greatest!