Peter White, managing director of YTKO, explains the importance of researching your market when launching a new business
You could be too secretive about your new business idea. Right from the start, engage and collaborate with potential customers to get it right…
Say too much about an idea and you could lose it. Say too little and nobody may notice the potential.
Businesses with innovative concepts often err on the side of caution, working away in isolation perfecting an idea, and then launch themselves at an indifferent market.
So, before doing all that work, do check whether there is a market – that means customers – to support your idea. Otherwise you massively increase the risk of failure. As an innovator, it is just as important to prove an idea commercially as it is technically.
If you are going to start talking to the market, commit to what information you are willing to disclose. Don’t reveal your secret ‘ingredient’ or how exactly you are different. But do talk freely about your objectives and the impact you are going to have.
You will be surprised at how positive the response is from potential customers when you admit you are at an early stage, but are looking for a steer from them on how to take an idea to market.
Once you gain an understanding of how much your innovation might be worth to a typical user, you’ll know how much you might charge
When you talk with these contacts, give them some indication of how your idea is going to be cheaper, better or faster. It should be enough to create the interest, and set up a meeting.
Now you’re in a good position to present your non-disclosure agreement. Make sure it is short and straightforward. If you demand a signature on a 50-page legal document, you’ll be shown the door.
In your discussions, build a picture of how your idea could play in the market and discover who the customers are. Do they see your invention delivering value in the same way as you? Or are they looking for a solution from a different angle, or at a different price? Are you missing a trick, such as another use for your idea? Who is your competition now, and in the future? And can you partner with them, to get a first sale or develop new capabilities, or routes to market?
And plan to collaborate with others in your industry, especially with prospective and existing customers, to perfect your offering at every step in development.
Once you gain an understanding of how much your innovation might be worth to a typical user, you’ll know how much you might charge. If it’s too little to make a profit, quickly re-position your idea or your business model: you’ve been given a price point to meet.
Ultimately, your goal is to frame a value proposition to capture all the benefits in your idea that your contacts have identified for you. This is ‘proof of market’: it is just as important as proving that an idea works technically. You need to be confident that customers – and plenty of them – will pay for your innovation and can benefit from applying it to their work.
Once you have launched, go back and talk more formally to all the contacts you have made at this proof of market stage. Now’s the time to turn them into customers, or into partners. Show you’ve a solution that resonates with known problems – the ones you’ve discussed and set a value for solving. They can now be more efficient, or profitable, or take less risk. Or they can work with you, in collaboration, to develop and sell your idea.
Too many great ideas are developed without being market-ready. Passion, money and determination only get you part of the way. Ensure you know at the earliest possible stage what value you should be delivering to which customer, without giving the game away.