One of the most important concepts a beginning entrepreneur must understand is the idea of a pilot operation. For inexperienced entrepreneurs, learning how to pilot test their business is probably the single biggest lesson in practical entrepreneurship because it reduces their risk and gives them valuable experience.
Pilot testing is nothing more than the application of the scientific approach to business entrepreneurship. Seasoned entrepreneurs know that their own enthusiasm could be their downfall. There’s just no telling which business idea would work well in the real world. What seems to be a great idea could turn out to be a big flop while what may seem at first to be “a simple plan” could become a cash cow.
Risk is always inherent in a business but it doesn’t mean that an entrepreneur should not try to minimize it by testing the market. Indeed even big, established corporations take time to test a new product, business model, or advertising campaign before they go full blast. New restaurants and other service-oriented establishment routinely hold their so-called “soft launch” based on this same premise.
We all heard of stories of how a poor but industrious business entrepreneur built his business empire brick by brick. Similarly, we all heard of tales about inexperienced but overly enthusiastic entrepreneurs investing his entire savings (usually after sweating for years overseas) on a business he knows nothing about. They are usually very diligent at their business but end up a failure. These two classic tales imply that a successful business indeed grow out of a process of experience and testing.
HOW TO TEST A SMALL BUSINESS IDEA
Pilot testing simply means testing your business idea to see whether it will actually work in the market.
If you are planning to make a business out of your secret cookie recipe by selling it by the boxes, try selling just a few boxes and see how your target market will respond. Determine how much they are willing to pay for it and how often are they are willing to place an order.
If you think turning your garage into an Internet café is such a great business idea, test your assumptions by offering discounted Internet service using your own personal computer. Market response will give you an idea just how much success you will have if you go full blast.
One retiree I know opened up barbershop-café in the town plaza thinking that men would have more reason to frequent his shop by offering affordable freshly brewed coffee. On day one of shop operations, he realized it too late that coffee drinkers do not at all find it pleasing to have coffee while sniffing the scent of rubbing alcohol and baby powder.
WHY SOME DON’T TEST THEIR SMALL BUSINESS ASSUMPTIONS
While the idea of testing one’s business assumptions first is not a new one, few people actually put it to good use. One reason is overconfidence in one’s business skills or instincts. Indeed even experienced business people, who should know better, could end up being overconfident assuming that their prior success negates the need for a pilot test.
Those who have a lot of money also fall prey to this lapse. They think it justifiable to spend a lot since it’s an investment. They end up spending more than they should, throwing their money away on the business experiment until it worked.
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