Risk, Failure, and Important Steps (II)
What can an entrepreneur do to decrease failure and increase success? There are three important steps that an entrepreneur should take. These are part of a long and detailed planning process. They are: do market research, write a business plan, attract investors, and get financial support. Let’s briefly look at each of these now.
An experienced entrepreneur does market research. What is market research? It is the collection and study of information about what products people prefer to buy.
Entrepreneurs may think that their product will be successful, but they may not know if people in their target market will actually buy it. Market research helps the entrepreneur understand if the new product presents an opportunity. Will the target market want or need the new product, and will they pay for it?
An experienced entrepreneur also writes a business plan. Once entrepreneurs have done market research to show that they have an opportunity, they need to do more research and planning for these important parts of their startup. Operations, marketing, and finance – all of this will be written in a business plan.
The Operations part of the business plan will discuss how to manufacture or distribute the products sold. The Marketing section of the business plan will identify the target market and the best way to communicate with them. It will also identify the competitors in the market. The Finance section will discuss how the business will make money. It will discuss the cost to make or distribute the product and if these costs may change in the future. It’ll discuss how much money is needed to start and continue the business. This information will be supported by sales predictions. How many products will be sold in year one, year two, year three, year four, and year five?
Once entrepreneurs have written a business plan, they can use this to do the last important step: attract investors and get financial support. Most entrepreneurs do not have enough money to start and continue their own businesses; they will need funding from outside sources. Entrepreneurs need to understand their funding options, and how to present their new product and startup ideas to other people.
In this video, we’ve reviewed a number of reasons why new products and new businesses fail. Market research, writing a business plan, and getting financial support are important steps to avoiding failure. But there will always be risks for entrepreneurs and their businesses.
