Homework is cheap insurance.
Just like shopping for the best mortgage rates or the best price on a television, conducting due diligence before you buy or invest in your start-up will be the best and sometimes most defining moment in your start-up. Good entrepreneurs try to disprove their assumptions before sinking all that they have to launch their start-up. When you can no longer disprove that your assumptions are true and that your business venture can succeed, you will have a greater probability of success.
The reason many start-ups fail is because they tend to act before they validate and plan. Validation with potential customers can give you insight into whether you are on the right track or not with your ideas and products. Many entrepreneurs also fail to plan properly. They forget about competition and other factors that allow a new business to be successful over time. We all know that simply opening a store and putting a sign in front is not the recipe for success.
Before you start to sink large sums of money into your business, you should have everything lined up with your business as if you were ready to start selling tomorrow. By going through the work of having everything "ready-to-go" you go through the exercise of getting your hands dirty with the business, having the opportunity to speak with customers, and ultimately will having better insight into to the potential success of your venture before you even open your doors.
Before you go around pitching your idea to potential customers, listen to and understand their core needs that are central to the solution that you are looking to provide. Once you have gained a thorough understanding of your customer's needs, then talk about the potential solution you are looking to offer. Listen to their feedback and determine what their level of interest is. Ideally, your potential customer should be just as excited about your proposed solution as you are. However, even if your potential customer says that this is not a product they are use, understand the reasons why and make necessary adjustments to your value proposition.
Another must-do is to speak with other business owners and experts in the industry that you are looking to start your business in. With our giving away the house, try to probe them on their thoughts of your idea and see if they'd be willing to provide their feedback. Ask about industry trends and try to disprove any further assumptions that you had about the industry.
The more homework you have done, the more risk you take out of the equation with your start-up. Simply starting a business based on a hunch or an idea may seem the most exciting path to launching your start-up, but it is also likely to be the most unsuccessful path. The more you can try to disprove your assumptions that your business plan can work, the more likely your business venture will succeed.