Today we are covering mistake number two on my list of the seven biggest mistakes entrepreneurs make. This mistake is:
Entrepreneurs create products or services without first proving they can sell
So many businesses die because they run out of money. These entrepreneurs keep sinking more and more money into their idea, but the results never come close to what the founders expected. Why does this happen? Because the entrepreneur never proved a market for their product or service exists.
One of the worst feelings in business is to think you have an incredible product or service, only to realize no one wants it when you bring it to market. The following story gives a real-world example of testing a product before starting a business.
The Sports Popsicle
One of my clients once asked me to invest in an idea he had to create sports drink popsicles. I wanted to see how serious he was about this idea, so I told him to prove the concept sells.
He said he had been working on it for six months. He had found a company to make the mixture, a packaging company, and had mapped out a distribution strategy. The start-up costs were estimated to be $500,000 and he asked me for $200,000.
I didn’t give him a yes right away. He could prove his concept with an investment of about $100. I told him to buy some Gatorade and a bag sealer from Target. Then I had him make a “prototype” of this popsicle. He bought a portable freezer and went to a local gym. He offered the popsicles for $2 each to see if anyone was interested in the concept.
It is crucial for you to test the market before you scale your business. Once you prove your product or service can sell, you are much more likely to succeed.
Now, let me tell you a story about someone who didn’t test their product or service.
The Amazon Investment Gone Wrong
A coaching client of mine recently invested $11,000 in these $1 products that are currently selling for $20 on Amazon. The catch was he had to buy ten thousand of these items to get this discounted price.
The problem is my client had no proof this product would actually sell. Just because it was listed for $20 doesn’t mean it is selling for $20.
It would’ve been better for him to invest in 10 at first, even if they cost him $25 each, and then sold them at $15 just to see if they would sell. Ten thousand is a lot of inventory. At 10 sales a day, it would take him two years and nine months to get rid of his initial supply.
Testing the market for your product or service sets you up for entrepreneurial success. How can you test your idea? Answer this question before moving on to part three of this seven-part series on entrepreneurship.
A business coach can help you figure out how to test the market for your product or service before you waste all of your capital. Schedule a consultation with Titanium Success today to come up with your testing strategy.