The Beginner’s Guide to Choosing High Quality Business Targets
Trying to pick a winner is nothing new; businesses have been doing this since the dawn of time when a chicken was first traded for a particular service. Even then, the early business entrepreneur was perplexed with deciding which chicken to trade, how many for a given service, and “what happens if I offer a hen instead of a rooster?”
Every day businesses continue to grow (or decline) based on this fundamental principle of exchanging value, and with that exchange comes the careful assessment of what constitutes value. The real challenge is that value is determined not by the business entrepreneur but by the market in general; a market famous for generally saying one thing and doing another.
How can we, as business decision makers, begin to apply our precious, limited resources to the right ideas at the right time? How can we do this with consistency, accuracy and scalability in mind? Our early history entrepreneurs were beginners in choosing high-quality business targets and with simple “yes-or-no” questions in hand, here’s how they succeeded.
Simply put, they had to determine if they were offering the right thing (was their offering Specific), at the right time and for the right price. They had four variables to consider in making their decision: time, cost, risk, and market value.
Time was an objective, variable to track; they knew how long it took to produce their product and they knew that the value of that product (the chicken in this example) changes as it matures; the same is so for many of today’s products and services. Things have a shelf life and those lifespans have both benefits and limitations. Thus the first step in making the right business decision is to ask ourselves if the timing is right. Will the market wait any longer for us?
This leads to the next, closely related variable to consider: Market Value. Consumer preferences change over time and early entrepreneurs knew that their customers may want eggs in the morning and fried chicken for dinner and that sometimes, they reversed that order. We must consider if our product offering has enough of a “wow” factor to be worth doing at a specific point in time and if not, can we combine it with something else to make it more valuable? As an example, a major consumer packaged goods producer in the US is not really known for the fine wine it sells but is known the great deals they offer on other volume-based, consumer goods. Somehow, they are capable of selling a fine Cabernet to their customers along with a crate of napkins and 5 pounds of potato salad! They do it by timing their buying of all the “not perfect” Cabernet Sauvignon grapes from upscale vineyards across California and then they bottle and position them as them as volume-branded, quality item for their consumers who are not willing to pay $50 for a bottle of wine. The wine is exceptional in quality and carries market value in the minds of their price-conscious customers. Ask yourself, will people see the value that’s being offered or, are we ahead of the curve? If you’re uncertain, test the idea out in the market. Run little experiments and vary the offering until you’ve dialed in the idea and you’re confident that you can gain some traction in the market.
Cost was another pretty obvious component; “how much did it cost me to produce this thing in time and materials?“ This is typically the first element in the Measurability of the idea but it certainly shouldn’t be the last one. Cost can revolve around monetary as well as the human effort to produce it and begs the question, “is this truly worth doing?“
Risk is a bit trickier to assess, as it relies on speculation. “What happens if I delay?“ “What happens if I find out it’s not feasible to raise chickens in my municipality?“ “What happens if the ‘unknown, unknowns’ that come along in life suddenly hamper my business opportunity?“ A careful assessment of your capability in producing this idea (the feasibility) will go a long way in reducing the risk you carry.
These very same decisions that our early entrepreneurs wrestled with bear much similarity to the decisions we make today in business, yet we still wrestle with making decisions that ensure we’ve picked a winner. Ensuring that your idea has sufficient character to not only survive but thrive in the marketplace is best done by hedging that risk in a solid understanding of the specific value proposition that you’re offering, along with a clear understanding of the feasibility of your idea, which in turn, is propelled by the confidence you have in knowing that your idea is meaningful (it has “wow”!). Take a lesson from history: evaluate your idea against the value markers we’ve discussed and see if your idea is ready to fill a need!