14 Mar How to Create a Million – Cedi Business
Create a Million Cedi Business
Find Your Profitable Idea
The first step is to find something that people are willing to spend money on. So grab a pen and paper and write down a list of ideas that you think might be profitable. (check out our post on how to find a Killer Idea). If you are finding it difficult to come up with any ideas try one of these methods:
Go through Amazons list of top sellers and find products that have guaranteed customers, then build something that complements it. An example of this is making an iphone case or cover protector for people to buy for their Iphones (which cost over GHS2000 unlocked, and have sold over 5 million)
Similar to Amazons list of top sellers. You can find which businesses are selling for high prices and which categories have the most sales and develop an idea in that category.
- Think of the things you do daily.
Anything that you find yourself doing more than once is something that could potentially be improved by a product or service. An example is being able to buy credit remotely with expressPay. Instead of having to go and find a credit seller wherever you are or be rendered useless, you can just open the app and purchase credit right then and there instantaneously.
- Think about products you use often and complain about.
Often times the tools or features that you wish you had or that the product could do is something that could be a great business idea to develop.
This allows you to determine how well certain products and categories are selling. It is also an easy way to measure sales price of items and gauge the overall percentage of the market that is in demand.
- Look at requests that come in often on Craigslist gigs/jobs section
These listings are from people actively searching for someone to give their money to in exchange for particular services. Try searching for certain keywords (like advertising, photography, computers) and keep track of the number of results displayed. Evaluate the most popular keywords and see if you can create a product of service around those requests.
- Repeat step 5 but with Ahaspora
There are so many requests on Ahaspora for different things. Again keep track of the number of requests and see if you can create a product or service around those requests.
Find GHS1,000,000 worth of customers
Now that you have your idea, it is time to determine whether you have enough demand for it to be worth your while. In Step two, you will also want to make sure that your idea is not a fad (temporary) and that it is doing well compared to similar markets.
Three tools to get acquainted with and to use to assess the growth potential of your target audience are:
Let’s say you decide to build an information product for Rottweiler owners in Ghana. Here is how you would check to see if there are enough customers.
- Search Google Trends for the term “Rottweiler” specifying Ghana as the region and other similar words, eg german shepherd, Boerboel, Bulldog, dog for comparison:
From this graph, we can see that the word “Rottweiler” has decent search volume (relative to “dog”), and that while German Shepherd, Bulldog, and Boerboel, show spikes and peaks, Rottweiler has been steadily for the last few years.
Google Trends is great, because it also breaks down the search data by location, so you can see what region people are searching the most for your search term to know where your market is. In this case it is the Greater Accra Region.
- We double check this market in Google Adwords, using the keyword planner tool. We look for search volume data and trends for the keyword “Rottweiler” to confirm whether it is a viable market.
Looking at the data, there are about 880 average monthly searches in Ghana for the word “Rottweiler”
but if you look closer, you will see that in Jan of 2016, there is a spike to 1300 searches.
Based on this, we know that there is enough search volume for us to do something with this segment.
- Look at the total number of people available on Facebook for “dogs”: 280,000
That’s not too bad.
And for “Rottweiler”:
69,000 people. That’s workable.
You can also see if there is a large property that you can piggyback on.
You can also see if there is a large property that you can piggyback on. If you can find a comparable site with a large number of potential customers, you’ll be in good shape. A good place to get business information is CrunchBase. For example, you might research uber.com and find out that they have a profitable and growing marketplace, then decide to create a similar service for alternative verticals.
I like to create a Google Spreadsheet of the key numbers for my competitors’ businesses. Below is an example of what that might look like for, for a competitor. [Warning: This is just showing estimates, just to give an example..]
Assess Your Customers Value
Once you have found your idea and a big pool of potential customers, you need to figure out the value of these customers.
For out example, we’ll need to estimate how much a Rottweiler owner (i.e our customer) is worth to us. This will help us determine the likelihood of them actually buying our product, and will also help with pricing. So this is how we go about it:
- Find out how much it costs on average, to buy a Rottweiler (about GHS 800). This is the base cost.
- See how much it costs to maintain a Rottweiler and keep it fed and healthy (recurring costs like food, vet bills, etc). Let’s say its around GHS 2800 to GHS 4800 a year. For this example we’ll make it GHS 3000.
- Look up the life expectancy of a Rottweiler, which is roughly 8 – 10 years.
Therefore a Rottweiler’s total cost of ownership is:
GHS 800 + (GHS3000 * 10) = GHS30,800
In any case, these owners are already committing to spend a LOT of money on their dogs (i.e. they are valuable). After putting down GHS800 on the dog itself and an average of GHS250/month on maintenance (a.k.a. food), spending GHS150 on an information product that could help them train their Rottweiler–or save money, or create a better relationship between them, etc.–does not seem unreasonable. Of course, the product doesn’t have to cost GHS150, but we now have some perspective for later deciding on a price.
Now we need to utilize the TAM formula (a.k.a. Total Available Market formula), which will help us see our product’s potential to generate a million cedis.
Here’s the TAM formula for estimating your idea’s potential:
(Number of available customers) x (Value of each customer) = TAM
If TAM > GHS1,000,000, then you can start your business.
Let’s plug in some basic numbers to see the TAM for our Rottweiler information product:
(69,000 available customers) x (GHS150 information product) = GHS10,350,000
With this you can see that you can even reduce your price to GHS50 and you would still hit GHS3,450,000
We have a winner!
Okay, we have to keep in mind that you are obviously not going to reach 100% market penetration, but considering this:
- This figure is only from Facebook traffic, and does not include traffic for Rottweiler’s on Google.
- This is only for Rottweiler’s. If you are able to successfully sell it for Rottweiler’s, you can easily repeat the process many times with other dog breeds.
- This is only for one product. It is easier to sell to existing customers than it is to get new ones, so once you have your product base, you can make even more products to sell to them.
It would appear we have a million cedi idea on our hands. Now for the final step.
Validate Your Idea
If you have reached this point, then you have successfully validated your idea and know it has million cedi potential. Don’t pat yourself on the back yet, it’s time to determine whether people will actually spend money to buy it.
This step is crucial and is the difference between wasting time and energy on a project no one will buy and knowing you have a winner. A lot of ideas tend to seem great in theory, but we never really know how they will turn out until we actually test our target market’s willingness to pay.
By now, you have successfully verified that your idea has that special million-cedi-potential. Feels good, right? Well, brace yourself — it’s time to test whether people will actually spend money on your product. In other words, is it truly commercially viable?
This step is critical. A lot of your ideas will seem great in theory, but you’ll never know if they’re going to work until you actually test your target market’s willingness to pay.
Before you try, set a personal validation goal… say 100 or even 50 sales. This number will help you determine if you need to keep going or you need to figure out what is wrong with your model. If you can hit your number, not only do you make money (100 * GHS50 = GHS5000) but you also now have an idea that is validated. Validation is absolutely essential for saving time and money, which will ultimately allow you to test as many of your ideas as possible.
Here are some methods to quickly validate whether people will buy a product or not:
- Set up a basic sales page.
Set up a sales page using WordPress, and create a few ads to run on Facebook or Google. Start with Facebook as ads are easier to run on there n this market. Set the ads to drive traffic to the sales page, then evaluate your conversion rate for ad clicks and collecting email addresses. The aim is not to get people to buy, but to test interest and gather data. (With Facebook advertising, $100 can get your ad in front of roughly about 37000 to 98000 people a day)
- Email potential customers you know would be interested and ask them to pay upfront.
This idea might seem crazy, but you are doing it to see what their response will be. If a few of them agree to pay up front, great. You now have validation and go ahead and invest your time and money in building and developing the product. If they don’t, figure out why they don’t want your product and make the necessary changes. The goal is to get validation for your product not to rip people off.
Kill Your Inner Wantrepreneur
You have made it this far. You officially have a GHS1,000,000 idea on your hands that you know people are willing to pay for. Now it is time to actually get started on building the product and creating the business.
So what now?
- You are excited. Check.
- You are inspired. Check.
- You get a link to a funny YouTube video, then you open up Facebook. Check.
- Suddenly, everything you thought you were going to do goes down the drain. Check.
- You go back to wondering why you can’t make money and if you were just meant to pay bills and die. Check.
- We are both sad. Check
Don’t let this guide become another notch in your Wantrepreneurship cap. The steps are easy to follow. Just take the time to do them. Remember, prove it before you roll it out. You can start laying the foundation for your product without building anything.
You now KNOW how to find and validate a product.
Better get started.