How to Turn an Idea into a Business
Once you have an idea for a product or service that solves a particular problem in the marketplace, you need to calculate the value of that product to your customer, then assign a price.
What's the Latest Development?
With the economy in flux and technology changing fast, you have probably had an idea or two that could make a difference in the marketplace. Translating that idea into a (profitable) business is the next step. Bill Murphy and Jon Burgstone, professor of entrepreneurship at UC Berkeley, outline three essential considerations in bringing your idea to fruition: production cost, or what it will cost to provide your product or service; customer utility, or what dollar amount represents the value of the product to the customer; and how much is the customer willing to pay?
What's the Big Idea?
Murphy and Burgstone, in their new book entitled Breakthrough Entrepreneurship, recommend estimating the direct costs of making your product. If you want to sell a cup of coffee, for example, what will it take to make that cup of coffee? Beans, a grinder, etc. Then estimate the indirect costs: tables, chairs, a store front, etc. Estimating the value of your product to the customer will be more imprecise and vary from customer to customer. Caffeine addicts, for example, will value your product more. Finally, choose a price that allows you capture as much of that value as possible while keeping customer interest.
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