Every business starts with an idea. Whether you have an idea for a great new product or a service that will revolutionize an industry, your inspiration is a great start. But how are you going to bring your idea to life? Building a successful business takes more than a great idea and a vision—it takes planning, discipline, research, and a whole lot of money.
Before you can get funding, there are several steps to making sure your idea is solid and marketable. While it’s true that not all startups will make it, you don’t want to set yourself up to fail! If you have a great idea but no funding yet, here are five steps you’ll need to take on the road to wooing investors.
Step 1: Find a mentor and ask for advice
When you ask for money, people will automatically be skeptical and want proof that your idea is viable. But is it, really? Have you gotten the objective opinion of someone who has been in your shoes?
Finding a mentor is an important step in the entrepreneur’s journey, and a good, experienced mentor will give you the honest truth about your concept. After all, you don’t want to waste your time on a bad idea—there’s always another opportunity around the corner.
Start attending networking events and leverage people in your network to connect with a mentor. Many cities have innovation labs or mentoring programs that can help you get your idea off the ground. You never know—you may just get a potential investor out of it like Michael Litt, co-founder of Vidyard. Litt says he’s never made a formal pitch—he’s gotten all his funding out of asking for advice and building relationships. Many seasoned entrepreneurs are happy to share their knowledge and opinions—you just have to ask!
Step 2: Perform market research
Finding your target market might be the most challenging step of making an idea into a business, but it’s also one of the most important.
Your second step is doing market research, and this process should begin by asking yourself a couple of questions:
- Who are you targeting with your product or service? Age, gender, education level, and other traits should be included—be as specific as possible.
- Are people interested in your product? Many entrepreneurs waste a lot of time and resources on their idea, only to find no one wants to buy.
To conduct your research, you should use a variety of different sources to examine the opportunities and pitfalls of the market. You will also need to gather direct data from your target audience. This can easily be accomplished by surveying current and potential business customers, testing focus groups, conducting one-on-one interviews, utilizing social media polls, and observing data through platforms like Google Analytics.
Some great secondary data sources include:
- Industry associations
- Government statistics
- D&B financial and business services
- Local chamber of commerce
- Business development agencies
- Online business databases
One of the best ways to conduct live market research these days is to try crowdfunding. Many startups have launched Kickstarters to do market research and prove there is interest in their product. Oculus VR was able to secure their initial funding from a crowdfunding campaign, and later sold to Facebook for over $2 billion!
Step 3: Determine your capital needs and write a business plan
Throughout the course of your research, you’ll get a more realistic idea of how much funding you’ll need. Even if you manage to get a crowdfunding campaign off the ground or find a way to fund your startup yourself, the costs of running every aspect of the business can go way beyond your initial capital needs for launch.
Before you look for investors, it’s important to have a solid idea of how much money you actually need to start and grow a business. There are many different factors to consider, including increased inventory buildup prior to the Christmas season, experiential marketing budget, and much more. Your mentor may be able to help you come up with a ballpark number you can use when seeking funding.
In addition to knowing how much money you’ll need to get your business off the ground, you’ll also need to show potential investors how you intend to use it. You can do that by creating a business plan. Writing a business plan may seem intimidating, but it doesn’t have to be. As long as it contains the most important components, such as your target market, product information, financial plan, and the metrics you’ll use, the plan doesn’t have to be long—in fact, the more concise you can be, the better.
Step 4: Enter a contest
Major corporations know there are entrepreneurs out there with fantastic ideas who need funding. To find the best of the best, many of these are offering contests for entrepreneurs. The competition may be fierce, but hey, someone has to win!
Each contest has its own requirements, so read them thoroughly and follow all the steps carefully. You don’t want to waste your (or the judges’) time on entering a contest that doesn’t apply to your idea.
Step 5: Consider outside investments
Now that you’ve done your market research, created your business plan, and discussed your idea with an honest, objective mentor, you can start thinking about funding. After following the steps above, you might be ready to seek outside investors to generate more capital and grow your business.