Eureka sometimes referred to an AHA moment is a moment of revelation, a birth or realization of an idea. Oftentimes, this idea comes when we are thinking of a problem. This can happen anytime even in moments of chaos. It can also happen multiple times throughout our lives. So, what do we do with our eureka? Ignore, translate into owned business or hand over to someone to translate into a business?
Circumstances and life goals influence what we do with our eureka but for the sake of those who dream of starting or being a part of a business, there are some things to consider.
- Value Proposition
What is the solution and what problem does your solution solve? Your offering should solve a problem; if it is solely influenced by money-making, all activities would be geared towards that at the expense of value creation. So, consider what your offering will be, why, to whom, where, when and how. (Kiplings’s 5W1H). This is the nucleus of the business.
- Key Activities, Resources and Partnerships
Identifying key activities, resources and partnership before launching any business is critical to the survival of the business. People start businesses without having an understanding of critical activities. For example, an e-commerce business would need an online platform to sell, would need to procure products from various merchants, would need to have a payment gateway where products can be paid for, and would also need to receive and process products for distribution at the warehouse. These identified activities reveal the resources and partnerships the business needs.
Using the same example, website, warehouse, dispatch riders, payment gateway are needed and partnerships with merchants and e-commerce hosting companies will also be critical to the survival of the business. The resources also include human resources needed to execute a business plan; web designers & developers. Do you have the skill needed to execute the promised services? Or do you want to employ those with the skill to execute? There are pros and cons associated with any but having or equipping yourself with some business skills can minimize costly and unnecessary mistakes made from ignorance.
The effectuation method (working with your means) is a known method of acquiring resources:
What do you know? Here, you need to evaluate the skills, knowledge and competence needed by the business that you have so the gap can be identified and addressed.
Who do you know? What network of individuals can give you access to what your business needs? Classmates, alumni, colleagues, Linkedin.
Who are you? What are your values, passions, interests etc? You do not want to feel jaded after a few months of business.
Finance resources can be considered in stages below,
- Own cash / family / friends
- Grants / debt / equity
To keep going
- Factoring / asset finance
- Own capital
- Debt / equity
The focus should, however, be on the first stage since we are discussing “starting a business”.
- Finance-Revenue Stream and Cost Structure
In simple terms, how will your business make money and what will be the associated expenses of running the. business? What are the streams of income? Is the income enough to net off your investment in 3 or 5 years, when will you break even? Using our e-commerce example, your streams of income could be % payment from merchants on sale of products; payment from adverts; you can get other companies to market their products on your site if the traffic (no of visitors) is huge. So, what are the associated costs of running your business? Some activities identified above require funds. Payment for website, taxes, office space (if you require one), rentals, warehouse, salaries for human resources, and other costs. You may not be able to identify all costs, but you should be able to identify the costs of the critical activities and project miscellaneous expenses.
Your financial projection should include all these as well as the investment needed (short term or long-term loan), the interests and how the investment will be paid back. Investors are interested to know how their funds will be used; how you will pay back and the interest they will receive from their investment. Your financial projection is an important aspect of your business plan.
So, ask yourself, why should an investor invest in your business?
- Customer Relationship and Segment
The customer segment determines the relationship strategies. Identify the most attractive segments and their needs that can be satisfied. In considering the segment, factors like age, gender, style, taste, group and even location come to bear. The product, “Pampers” is a baby product but its direct customers are mothers because babies are not old enough to make decisions for themselves. This does not mean fathers, teenagers and others may not purchase pampers as they could for the mothers so they can be categorized as indirect customers. Once you have identified the segment, do your market analysis to know the number of mothers (with babies from 1 day to 6 years old) in a certain location (target market, i.e African). Identify the number that uses other products and their loyalty to the products. Also consider if their loyalty is based on quality, service or rewards from the products. So how do you intend to attract these identified customers?
Your customer relationship strategy should showcase how you intend to attract and retain your customers. This is also where your marketing strategy is defined. Some of the strategies that can be considered are:
- Adverts: online, TV, celebrity brand ambassadors can bring awareness to a product which can translate to the acquisition of new customers.
- Price: This can influence the shopping habit of consumers so having a competitive price with the aim of attracting customers is key. If you choose to sell as a premium price, your narrative should support and drive sales.
- Freemium: you can offer a freemium service (particularly service-oriented firms) to get a premium price on paid service but ensure you tie the freemium service to a paid service to minimize your losses.
- Social engagements, Content creation, Seasonal meet-ups: some companies have been known to use this strategy to retain and attract new customers. Imagine you have a product for new mums, creating a platform where there are contents to educate and having seasonal meetups for experience sharing and interaction would give the mums (customers-prospects and old) some sense of belonging and their appreciation from that could birth new customers.
- Loyalty schemes: used by airlines and in the hospitality business whereby the customers can accrue points which can be used to reduce future fare rates or used to purchase an item. Initially, the fear of loss of accrued points can keep a customer but overtime, comfortability wins and loyalty creeps in.
Every relationship has to be nurtured otherwise it will wither and die. It is important to understand the preference of the various categories of customers so you can roll out strategies that align with their preference.
- Channel of distribution
How will your products get to your customers? Consider ease of access! If a customer has to travel far to get your product, there is a possibility that the product will lose its relevance.
These are the nine building blocks of any business plan but there are other considerations for your business. In our next article, we will discuss execution plans, attributes of an entrepreneur and untrue myths about entrepreneurs.
Book: Effectual Entrepreneurship, written and published by Stuart Read, Saras Sarasvathy, Nick Dew, Robert Wiltbank, and Ann-Valerie Ohlsson: Routledge. 2011.
Book: Business Model Generation, written by A. Osterwalder Kipling’s 5W1H
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Linda Uneze is a Change Agent with ten (10) years’ experience in HR and Finance combined. She currently works with Maurice Xandra Solutions, an HR consulting firm with clients such as GE, NestOil, Addax, Energy Quest, Genesis Group, Obasanjo Farms, Elizade, and many others. Before joining Maurice Xandra Solutions, she worked for Environmental Accord, an Environmental and Sustainability Company in Nigeria as the Human Resource Manager; and MTN Nigeria as a Finance Administrator at different times of her career. Linda has an MBA from Manchester Business School and a B.A from Anambra State University where she graduated with First Class Honours and has taken some courses with Harvard Business School and Chartered Institute of Personnel Development (CIPD), UK. She is certified by the Human Resource Certification Institute (HRCI), USA as a Professional in Human Resource (PHRi) and by Chartered Institute of Personnel Management, Nigeria as a member (MCIPM). She also has the Human Resources Practitioner's License as well as a professional diploma in Human Resource Management, both from CIPM. Linda is passionate about solving real-life issues and helping the youth to discover their purpose. In this regard, she is a member of the Institutional Development Committee, CIPM; a Gold mentor on Manchester Spring Mentoring 2019; and a Business Mentor on Venture4Africa.