Four reasons a great idea isn’t enough

Getting into business can be the best decision you’ll ever make. This, however, doesn’t mean the journey will be easy.

You might have had a good time brainstorming and converting your ideas into a business, but you’ll need a little bit more than just a great idea.

Execution is just as important as the planning itself. The big mistake many entrepreneurs make is to think that because their business ideas are wonderful, they can relax on planning and research.

Customers, however, will find the gaps quickly and investors, as we saw on KCB Lions’ Den yesterday, will rarely put their money behind a great idea that isn’t backed by solid numbers and a concrete business model.

So what are the pitfalls of a great idea? Here are four.

1. It’s excellent but too open to copycats

You might be the smartest entrepreneur in the room by coming up with something unique yet straightforward.

We all agree that there’s something beautiful in simplicity, but when it comes to business, the simplicity of an ideamight turn out to be a demerit. This is especially true if the barriers to entry are minimal to none.

The open business approach model is risky in sectors where patenting of ideas is wanting.

This, therefore, means that the idea that can be duplicated by anyone as soon as they notice you’re succeeding.

A wise investor will hesitate to invest in such a venture because there’s very little leverage. It can also be tough to scale such a business in cases where the industry gets inflated with new entrants.

2. There’s too much clutter

It is one thing to develop a great idea, but it’s another to define it and explain it to your target customers and investors. It may make sense in your mind, but you have to be able to translate your value offering to others. Fine-tune your thoughts and narrow your business’ promise to three points.

Research has shown that people are able to retain things in multiples of three, so take advantage of that.

Do your research and consult widely to gain the clarity you need to sell your product or service.

3. You get greedy

Your great idea may sometimes overwhelm you as an entrepreneur. When you know that your idea is unique, you can easily get carried away when it comes to pricing or valuation. And if you’re not careful, this greed can blind you and cause you to price yourself out of the market.

Be realistic with your numbers. Value your time and input fairly, and be sure you’ve put in your own investment before asking others to buy equity in your business.

And when it comes to selling your final product to customers, don’t add huge margins simply because you can.

Conventional wisdom suggests a mark-up of between 35 per cent and 50 per cent of your costs to arrive at a retail price. That means if it cost you Sh100 to make a product, at a 50 per cent mark-up, you’d end up with a Sh150 retail price.

Try not to get outrageous with your pricing as you may lose out on excellent opportunities to build your business.

4. It’s entirely too new

Innovation is the name of the game, and it can see you navigate unchartered waters. However, as exciting as this sounds, an entirely new idea isn’t always going to find the support it needs.

It could mean setting up new structures and modalities of operation, and investing in creating and shaping a non-existent market.

All of these require loads of cash and time.

An investor may, therefore, pass on your great idea only because they find it tedious to trailblaze with you in the hopes of breaking even in the distant future.

But that’s not to say you can’t find people who’ll believe in your idea and the huge rewards it can bring in despite the risks.