MAY 23, 2023
14 min read
Creating a successful business requires more than just a great idea – it requires shaping business ideas, seeking funding, and executing a solid plan. This article is designed to help you explore the concept of business ideas, how to shape them, and how to transform the idea into a workable concept for seeking funding.
Whether you’re just starting out or have been working on your idea for a while, these tips will help you take your business idea to the next level.
What is a Business Idea
Essentially, a business idea is the first thought you have about your business. It isn’t specific initially, just an idea of what your startup is going to be. Being the initial spark that ignites the entrepreneurial journey, ideas can stem from various sources such as personal experience, observation, or innovation.
A business concept, on the other hand, is a more refined version of a business idea. See it as a comprehensive plan that outlines the hows, whats, and whys of your startup.
In simple terms, a business idea is a seed that has the potential to grow into a business, while a business concept is a fully-formed plan that has been thoroughly researched and analyzed.
So, the former is abstract and lacks depth and specificity, while the latter is definite and structured.
So, here are some factors you need to consider while evolving your business idea into a concept.
- Market and industry research. Understanding the market demand for a product or service is crucial for a business idea to become a concept. There is some market need in your niche. You want your business to thrive, you need to satisfy it. So, conduct market and industry research to determine a gap in the market, a demand for a particular product or service, and if the target audience is willing to pay for it.
- Market competition. Before you start working on your idea and turning it into a concept, consider the competitiveness of your market. Specifically, look for your unique value proposition – what do you bring to the market that others can’t? Are you better, faster, or more unique compared to your competitors? The idea you have might be relevant and needed by your audience, but if they have a better choice they won’t end up buying from you. So, start by creating a list of your company’s core values, strengths, and weaknesses, and define what sets you apart. There is also a way to make competitiveness irrelevant, did you know that? If you start in a non-contested niche market or create a new niche based on users’ demand. A lot of disruptive innovation companies have similar strategies, which allows them to capture a market segment they initially created. More about that you can read in a book by Renée Mauborgne and W. Chan Kim, “Blue Ocean Strategy”.
- Potential for profit generation. A thorough competition, market and industry research can help determine the pricing strategy and profitability of your business concept. Ideas have to be profitable to prosper and to attract investors. Work out a clear revenue model, cost structure, and a projection of the financials. Also, remember about viability. It signifies your idea’s potential to generate sustainable profits and return on investment. Hence, you must ensure that your business concept is sufficiently prevailing.
- Ability to scale. A business idea should have the potential to scale up and grow over time, otherwise, you will be stuck in stagnation. Scalability ensures the business can grow and expand to meet the increasing demand without significant additional costs or resources. Scalability is essential for a business to become sustainable and profitable in the long run.
- Goal. A well-defined goal helps to focus on the essential aspects of the business and creates a roadmap for the business’s growth and development. The goal should be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) to ensure it’s achievable. While your primary goal would be profit generation, it’s good to set smaller and more measurable goals, therefore more achievable and relevant. For example, try setting a goal to maximize profits by a certain amount, or improve customer retention rate. The best way to set achievable goals is to separate them into long- and short-term milestones. Define what you strive to achieve after the first launch, in a month, in a year, etc. Get creative with it, and think about everything you want your business to grow to – number of users, monthly sales, customer satisfaction rate, etc. Set KPI to check the effectiveness of your project and current processes.
- Feasibility. The feasibility of a business concept is determined by its ability to be executed within the given resources, skills, and time frame. Apart from setting realistic objectives, think about the resources you have and implement that calculation in the milestone roster. It’s imperative you prioritize goals that bring value. For example, don’t start creating functional requirements for your idea before you determine the target audience and core services/products.
What if I decide to take the risk and skip shaping business ideas?
Quality business concepts can help you assess the typical problems of the target market and outline them. This, in turn, enables a more detailed growth strategy template, and understanding of your capabilities and items to focus on. However, if you disregard business concepts it leads to a few risks associated with poor idea evaluation. Here are some of them:
- Poor resource planning. Take into account how many resources you have. Remember the idea’s feasibility? It’s not only about realistic milestones; you also have to consider your budget and the time spent on the development. BHS, a renowned British retail chain, is an example of a business that shut down due to poor resource planning. The company miscalculated its financial obligations. Inadequate investment in store upgrades and online platforms, as well as the lack of effective resource allocation ultimately led to the closure of BHS.
- Lack of market demand. Without a clear understanding of the market need and customer preferences, a non-refined business idea will fail to generate sufficient demand. Ever heard of Juicero? This startup created a $400 juicer that was quickly deemed unnecessary by customers, and in 2017 the company shut down.
- Rigid business models. You may need help to adapt to the market that changes if your idea initially seemed successful. If your customers show demand for your services or products, it’s essential to understand you still have to adapt to their feedback. Rigid business models are harmful to established companies, let alone to startups. Remember the infamous Blockbuster Video? Launched back in 1985, the company failed to innovate and compete with online streaming platforms. This faltered the company’s activity, and it ceased operations in 2014. You could say Netflix destroyed them, but I believe it happened because Blockbuster LLC refused to adapt to the ever-changing market.
- Failed competition. A non-refined business idea may face intense competition from established players or new startups. Thus, you might find it difficult to achieve sustainable growth. So, it’s essential you have the point of differentiation and grow it, and evolve with it according to the market demand. Take Kodak, for example. They refused to adapt to the digital age, which led to the company losing market share to competitors such as Canon and Sony.
How to Refine Your Business Idea
So, you know that differs an idea from a shaped concept. But, how to make it tangible for a startup?
In my working practice, I hear a lot about how confusing this process of conceptualizing might be. To make your future startup not only interesting but attractive for both your customers and investors, I’d recommend following steps in idea development.
Describe your idea in one sentence
The first step in refining your business idea is to describe it in a concise and clear sentence. If you can’t do so, it is very likely that your idea is over complex and will appear bulky in both production and promotion.
Try to communicate the essence of your business idea in a way that anyone can understand.
- “An online platform that connects freelance writers with clients.”
- “Shop that sells books and coffee to go.”
- “Online education platform to obtain technical skills.”
Leave out any extra detailing for future planning. This way you won’t overload your idea with extra features, and you won’t be upset or confused if some of your hypotheses don’t validate.
Business model canvas and value proposition canvas
The Business Model Canvas and Value Proposition Canvas are powerful tools that entrepreneurs and businesses can utilize to transform their ideas into concrete concepts and develop a solid foundation for their ventures.
The Business Model Canvas (BMC) provides a visual outline for analyzing various aspects of a business model. It contains nine key building blocks: key partners, key activities, essential resources, value proposition, customer relationships, channels, customer segments, cost structure, and revenue streams.
The VPC, in turn, consists of two main components: the customer profile and the value map. The customer profile identifies the specific customer segment being targeted and delves into their jobs, pains, and gains. The value map outlines the value proposition elements that address the customer’s needs, like products, services, pain relievers, and gain creators.
Overall, utilizing the BMC and VPC can help you transform business ideas into tangible concepts. They provide a structured approach to understanding, analyzing, and designing the core elements of a business model and value proposition.
Evaluate your idea with feedback
The next step is to evaluate your idea with feedback from others. You can share your idea with friends, family, colleagues, and potential customers. Launch public surveys among groups of people close to your target audience, and analyze gathered feedback.
Listen to their feedback and take notes on what your potential clientele needs. Learn their pain points, and survey how they think your product or service can help them solve these problems.
Using the previous examples, after sharing your idea with potential customers, you might receive feedback that they would prefer a platform that also offers editing services. Or maybe you’ll see that your eLearning platform will need to educate people on financial literacy as well.
Dissect facts from hypotheses
Upon refining your idea, you must analyze facts and hypotheses separately. Only sometimes what you think is true. You might not be the best representation of your target audience or understand their pains the best.
So, first, dissect facts from your thoughts. For example, most fintech users use banking apps – that’s a fact. It is an actual survey conducted by Marketing Charts in 2021. But if you say that most fintech users want to experience gamification while using your app – that’s a hypothesis based on your supposition.
Your experience might be relevant to you and help your idea grow, but sometimes your users might want something entirely different. So, defining facts about your business should precede upon testing the hypotheses.
Test your hypotheses
Once you’ve gathered feedback on your idea, it’s time to test your hypotheses. This means putting your idea to the test and seeing if it works. For example, you could create a landing page for your online platform and see how many people sign up. You can also conduct surveys or run focus groups to gather feedback on your concept.
I have written an article on hypothesis validation. There, I’m talking in more detail about interesting and effective experiments like Wizard of Oz, Pretend to Own, and others.
Make a business plan
Based on the feedback and data you’ve gathered, it’s time to create a business plan. This plan should outline your business concept, target market, marketing strategy, revenue model, roadmap, and financial projections.
For example, your business plan might include a detailed analysis of your competitors and how you plan to differentiate yourself.
Here, you can add more details to your concept. Think about how you want your software to work and your business to run; set some KPIs like monthly visitors on your website or a number of orders you expect to receive in a certain period.
Include data about your market and competitor analysis, a list of products and services, as well as a company description.
Overall, your business plan will help you pitch your startup and attract potential financing.
Create a roadmap
Finally, you need to create a roadmap to turn your business concept into a reality. This includes setting goals, outlining milestones, and determining what resources you will need to achieve your objectives.
- Goals. Start by identifying the goal of your roadmap. Define the objective as clearly as possible. After you’ve done that, break down the goal into smaller, achievable milestones. Each milestone should be a significant step towards achieving the overall goal.
- Milestones. Break each milestone down into specific tasks. These tasks should be actionable, measurable, and time-bound. Assign responsibilities for each task to team members who are best equipped to handle them, and set realistic deadlines for your milestones.
- Resources. Your roadmap might include hiring developers to build a platform, launching a social media campaign to attract potential clients, and partnering with other businesses to expand your reach.
Let’s say, your business idea is to create a meal delivery service that caters to people with dietary restrictions.
Your one-sentence description could be: “A meal delivery service that offers customized meals for people with dietary restrictions.”
To evaluate your idea, conduct a survey to gather feedback from people with dietary restrictions on what they look for in a meal delivery service. Based on the feedback, you might decide to offer a wider variety of meals or add more customization options.
To test your hypotheses, launch an MVP focused on a small area to see how many people sign up and their feedback. Based on the results, you might decide to pivot your concept or expand your offerings.
To make a business plan, conduct market research, identify your target market, and outline your revenue model. You might target people with specific dietary restrictions, such as gluten-free or vegan, and offer a subscription-based service.
Finally, you would create a roadmap that outlines the steps you need to take to turn your concept into a reality. This might include developing a website, partnering with local chefs, and launching a marketing campaign to attract customers.
Seeking Funding for a Startup
After your idea is formed into a concept and you’re ready to launch your startup, there is another issue that needs your preparation. Collect every nuance in your business concept, roadmap, and plans you’ve made, and finally look for investors.
This is both the most thrilling and the most anxious part of concept development because now you get to evaluate your startup for the first time. Seeking funding for a startup always comes with several questions, so be ready to explain to your potential investor what you’re doing with your business concept, why, and how much it will eventually cost. So, here are the tips and tricks I always share with customers that are looking to pump up their startup financing:
- Pitch your business model, not your dream. When pitching your startup to potential investors, it’s imperative to focus on your business model and how you plan to generate revenue. Investors want to know that your idea is viable and has a clear path to profitability, so emphasize these points in your pitch.
- Build a strong network. Having a strong network of mentors, advisors, and investors can be incredibly valuable when securing funding for your startup. Attend industry events, join entrepreneurship groups, and seek opportunities to connect with others in your field.
- Prototype or create an MVP by self-funding. Investors want to see that you’ve put your own resources into your startup before seeking external funding. Consider building a prototype or creating a minimum viable product (MVP) using your own funds before approaching investors. Also, it would be easier to find funding with an MVP on hand since it will demonstrate how your project will work, as well as pump up your self-funding since a minimum viable product can generate profits.
- Research the investor you’re pitching to. Before pitching your startup to an investor, research their background, investment philosophy, and portfolio companies. Tailor your pitch to their specific interests and needs, and don’t come to investors that aren’t interested in your services or products.
- Understand your needs and capabilities. Before seeking funding, it’s important to understand how much money you need and what you’re willing to give up in exchange for funding. Be sure to have a clear understanding of your financial needs and capabilities before approaching investors.
- Be adaptable and ask for advice. Investors want to see that you’re receptive to feedback and willing to adapt your business model based on market conditions and customer feedback. Be open to advise and feedback from investors and other stakeholders even if you don’t receive funding from them, and be willing to make changes to your startup as needed.
Imagine, you’re starting a tech company that provides a new solution for the healthcare industry.
- To pitch your business model, focus on how your solution can help healthcare providers save time and money, and how it can improve patient outcomes. Be sure to back up your claims with data and market research.
- To build a strong network, attend industry events and connect with other entrepreneurs in the healthcare and tech industries. Seek mentors with experience in your field, and consider joining an accelerator or incubator program.
- To create an MVP, consider using your own funds to develop a prototype or minimum viable product that you can test with potential customers. This will show investors that you’re committed to your idea and help you obtain more financial resources, making your business financially viable.
- When researching investors to pitch to, look for those who have experience in the healthcare or tech industries, and who have invested in similar companies in the past. Tailor your pitch to their interests and needs, and highlight how your solution fits into their investment portfolio.
- Understand your financial needs and capabilities, and be open to feedback and advice from investors and other stakeholders. Be willing to alter your business model based on market conditions and customer feedback, and be adaptable in your approach to securing funding.
Refining a business idea into a concept requires steps, including describing your idea in one sentence, evaluating it with feedback, testing hypotheses, making a business plan, and creating a roadmap. By following these steps and incorporating practical examples, you can refine your business idea and develop a concept that is viable and attractive to potential investors.
When securing funding for your startup, it’s important to pitch your business model rather than your dream and be adaptable and open to advice. I hope these tips, along with practical examples, can help you navigate the world of startup funding and increase your chances of success.