We hear so many stories about a college drop-outs starting a business in their parent’s garage and eventually transforming their ideas into a multi-billion dollar conglomerate. Although all of us entrepreneurs hope to be the next Bills Gates, Wall Street Journal says almost 3 out of 4 startups fail. There are many reasons for this statistic. I firmly attribute most of these failures to lack of thorough analysis of the concept and creating a solid business plans. So what is a motivated individual with ambitions of making it as an entrepreneur to do? In this article I plan to propose a systematic approach to analyze any concept that an entrepreneur plans to commercialize.
At Ozone Consulting, we help entrepreneurs and established organizations create business plans and assist them with technical matters related to marketing strategy, business process development and efficiency improvements through IT infrastructure deployments. Our guiding principle while making business plans is simple – “Measure Twice, Cut Once”.
While assisting clients develop business and new product development plans, we make use of various principles and techniques. One that I plan to describe below is internally referred to our C2C Analysis. We have completed multiple such analyses for our clients to date. Some of the concepts we have analyzed to date are on the track to attain sustained profitability. However, some of our studies have dissuaded our clients from investing into a concept that did not show the potential to provide the outputs that the entrepreneur expected. I consider both these outcomes as success stories.
The C2C Analysis is subdivided into 4 sub sections. It is my firm opinion that it is in the best interest of the entrepreneur to abandon the concept if answers to either of the first two sections is a “NO”. The concept have been revisited if factors affecting such an outcome change.
As entrepreneurs we are so focused on our concept that we often convince ourselves that our idea is the next best thing to sliced bread. What is more important is the thorough assessment of the practicality of the proposed concept. In other words the feasibility analysis must answer in the affirmative the question “Is it possible to convert the theoretical outcome into a commercial enterprise?”
For example, it is theoretically possible to harness energy from the algae in the sea and convert it into some form of bio energy. This concept has been proven in laboratories by various entities. However two key questions have to be answered. Firstly, is there a practical commercial process that can be created to harness this bio energy? Secondly, and more importantly, does the entrepreneur have the necessary resources to make this concept a commercial success?
If after the first analysis, it were to be determined that concept commercialization is feasible, the next step to consider is the Viability or profitability of the concept. At this stage a thorough analysis of the projected expenses and the potential revenue streams must be performed. Through this analysis, one must answer the question “Is it possible to turn a profit by commercializing the concept over a certain period? It is critical for the entrepreneur to understand the break-even point for his/her concept and his ability to fund the concept until this point must be assessed.
Being profitable alone is not enough. The concept must not only have the ability to not just create profit as soon as possible, but also continue to be profitable for years to come. Some of the key questions to consider in this section are, Is the concept evergreen? What technologies could cannibalize your market share in the future? Are there any secondary markets where the concept has applications? Is the market large enough to accommodate copy cats/competitors?
If you have reached this section of the C2C Analysis, you have a Feasible, Viable and a Sustainable Concept. Congratulations! Such a concept if managed well over the medium term will present the entrepreneur the opportunity for growth over years to come. What we try to analyze here is the ability of the concept to replicate itself over different geographies, sectors or processes.
The key questions to consider here are, Can the concept be expanded to other regions/locations? Is there a possibility of expansion through franchising or other collaborative strategies? Can the concept be replicated over and over again?
It is my opinion that our C2C Analysis is a highly quantitative methodology to analyze a concept. A negative outcome of the analysis must not be considered a failure. On the contrary carrying on is akin to fitting a square peg through a round hole. It will only lead to lot of frustration, disappointment and financial losses that could have been better utilized on some other venture. As Winston Churchill once said, “Success is not Final, Failure is not Fatal, What matters is how you move on!”