When I have a new idea for my business, I tend to be really enthusiastic about it and to get wrapped up in the nitty gritty of how I'll develop it and what kind of people would want it, and what exactly they would want and, and, and...
It's a little like the early days of a relationship - it's all about possibilities and optimism. One of the main things I do with my clients is to take a good long look at their new business idea with them - taking off the rose-tinted glasses and just running the numbers. This goes pretty much as follows, with me asking some version of these questions:
- How big is your audience?
- Do you know the standard conversion rate for this kind of business activity (i.e. out of the people who hear about it and might generally be interested in it, how many would usually pay cold hard cash for a specific version of it)?
- How long will it take to get this idea ready to sell?
- How much money do you want to make from this?
- How much time do you have to put into this project?
- How much are you planning to charge for the end result?
- How many clients or customers would you need to get at that rate to make the money you're hoping for?
These questions all lead up to the last one, which is, do the numbers add up? Or, more simply, is it worth it?
If you have a new idea brewing, it really is worth taking ten minutes to run through your numbers in this way - you could save yourself months of misdirected effort. The key is to take the rose-tinted glasses off whilst you're doing it though - so I strongly recommend doing it with an accountability partner - preferably one who knows something about your field of work.
They don't have to be a business coach - if you're a yoga teacher or an artist or a fundraiser then it can work to run through these numbers with another yoga teacher/artist/fundraiser whom you trust. Just bear in mind that they need to have some experience or knowledge about the kind of project you're thinking of taking on (so, for instance, if they're an experienced yoga teacher but they only ever work in-person and you're planning an online course, they may not be able to help you work out how realistic your plans are).
If the numbers come out just as you hoped they would, then, of course, celebrate! And know that you'll likely have more motivation to push through the hard bits of bringing your new project to life, now that you're confident that it will more than pay its way. But if they don't show a profit, it's time for the next stage in this process. This involves deciding whether you want to tweak the project until you can get the numbers to make sense (maybe raising the price and creating a more premium service or a bigger end result for your clients, or it may mean bootstrapping the tech aspects to lower your costs - or any one of a number of different tweaks you might want to make) - or you may decide you have to shelve this particular project until you have grown your audience sufficiently for the conversion rate to work.
Either way, your numbers give you the information you need to make the best decision for you and your business. I'm all for leading with your intuition, but it's got to be backed up with the facts. And if your intuition is saying that this new idea is going to be fantastic - trust it, but make sure you can make the numbers work in your favour too.
If you want my eyes on your next project, the easiest way to get started is with a free, no obligation, consultation call, which you can set up here.