What do WhatsApp, Groupon, Slack, Instagram, Uber and Pinterest have in common? They were all born during the last recession and many entrepreneurs struggling in the current economic client retain a sliver of hope that their idea will be a winner born in the Great Lockdown.
I find it very cheering thinking about the entrepreneurial visionaries currently scribbling away at home on their ideas. Some businesses may mushroom from spotting an immediate business opportunity brought about by the current crisis, others from more futurist visions. Think of a three-legged stool when appraising and evaluating your business idea: the legs being (1) market (2) product and (3) management.
The scale of your ambition drives whether the size of the addressable market is large enough to justify the idea. There are no hard and fast rules except the market needs to be big enough for your expected market share to earn you the revenues you target. Certainly, if you want to attract external investors a market size of greater than £200m is in the right ball-park. You need to specifically define your addressable market, as it may be a subset of a bigger market. Be realistic and don’t make a plan to attract investors, make a real plan for you. The worldwide market might be £1bn, but the bit of this that you can access could be far smaller.
When it comes to the product (or service), there is one key to success – your product must meet a clear customer need which is under-served. This doesn’t mean the product or service has to be completely new or novel; your idea could just be an improvement on an existing idea or a better or more convenient way of delivering a traditional product. Have in the front of your mind Porter’s Model of Generic Strategies for Competitive Advantage which identifies sources of competitive advantage as differentiation or lowest cost. This has particular relevance depending on market positioning, will you be a pioneer and first to market, a fast-follower or take advantage as a late-mover?
Many entrepreneurs are a team of one as they alone have the ideas, the vision, the drive and the willingness to take the risks. Often as the business grows it retains the shape of a single clear leader with a steep hierarchy of employees. There are drawbacks to power being so isolated in one person particularly because every leader has gaps in expertise which can impede growth. Organisations that set up initially as a team, with several similarly capable people taking on different responsibilities suited to their skillsets, tend to be stronger but we all know people can fall-out with each other. Be you a single leader or a founder team, identify your strengths and weaknesses and work out how to plug the gaps with services, advice, guidance, expertise and counsel from others. Plan to learn new skills and competencies but balance the costs of learning-on-the-job with buying in, or employing, someone who will do it quicker, better and correctly first time. For an early-stage investor, their opinion of management ranks highest of all in their investment criteria and their decision to back you or not will rest on their judgement of your competency and management plan.
So billionaire entrepreneurs in waiting, please keep scribbling, refining, rejecting, perfecting and advancing your ideas. Sometimes an exciting germ of an idea falls flat on deeper analysis but this is why it’s so important to do this work before committing. Does it stack up across the criteria of market, product and management? Could it stack up over time with a few little changes? Take the time in the Great Lockdown to craft your idea. I’m certainly excited thinking about what entrepreneurial successes we will be celebrating in ten years.