DO I HAVE A VIABLE BUSINESS IDEA?
How to tell if your business idea stands a chance in the competitive market
Anyone who starts their own business does so because they believe in their business idea and its potential for success; however, belief alone will not ensure that a business survives even a year. In fact, many businesses fail within their first five years (here are 5 reasons why that might happen).
Before you set off into the wonderful world of business ownership, you should know everything about your business, the industry into which you are entering, your target customers, and the strengths and weaknesses of your own business and those of your competitors.
This article will help you gauge the viability of your business idea by asking valuable questions that test your knowledge of your own business idea and the target market, customers, and competitors that you will be dealing with on a daily basis; however, we would be bad business consultants if we didn't also tell you that you really should speak with one of BizAcademi's partners to ensure that you are on the right track – and that you stay on the right track.
Describe your business idea in 25 words or less
What, exactly, is your business idea? Create a precise yet detailed description of your idea and the products or services that you will offer, along with their uses. A good description of a business idea identifies:
Identify the opportunity
Why do you feel that this opportunity exists? Is there a proven need for the product or service that you will be providing? Not only that, but why do you feel that you can capitalize on this opportunity? What kind of time, resources, and knowledge will you need? Is this feasible for you?
Weigh the odds
Some questions that you should consider when you weigh the risks and the benefits of carrying out your plan to create a business based on your idea:
List required resources
This doesn't just mean financial resources (although that is a very large part of starting and running a business). It also means licenses and permits, building leases, and any services required to open your business (internet, utilities, machinery). It's employees, equipment, vehicles, inventory, and supplies.
Identify the target market and customers
This step is key, because determining the size of your target market also means calculating the total potential revenue for your business from that target market. Some questions you need to ask yourself:
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Barriers to entry
There are many stumbling blocks in business, not the least of which are the hurdles that entrepreneurs and start-ups must overcome in order to get their business off of the ground. Not every barrier will be relevant to your company, but potential obstacles may include:
Your business's strengths and weaknesses
If there was one section in this entire article that you should take your rose-coloured glasses off for, it's this one. Let's be realistic, here. Nobody is perfect - your business will excel at some things and fall short on others; it's the identification of these aspects (and a willingness to fix them over time within you and your business's means) that makes the biggest difference when starting a new business. Some questions to consider:
Capacity
Understandably, as a new start-up, you will likely have a hard time keeping up with increases in production that require you to purchase more inventory with money you may not yet have - and then you will have to sit around and wait for that inventory to sell so that you can make your money back. What is your financial capacity for this?
Think about how much capital you will need, whether or not you have family, friends, or others who would like to invest in your business, which assets you can use as collateral, and the strength of your personal credit rating in the case of loans.
How will you acquire the goods you need in order to make the products you want to sell or to deliver the services that you want to provide? What will that cost, and how much of that will have to be paid upfront before you are able to proceed?
Belief in your business idea alone will not ensure its survival.
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Competitors
Last but certainly not least is an analysis of your competitors. In order to compete alongside others, you need to know about them.
List your potential competitors and arrange them from largest to smallest by market share. By arranging your competitors this way and writing a detailed overview of each, you will get a clear snapshot of how they differ from your business and you, in turn, can create a strategy that sets you apart.
For each competitor, list everything that you can about their product/service offerings and marketing activities. In addition to your competitors' pricing, write down everything you know about their sales force, terms of sale, advertising, distribution, and services.
Take note of their social media platforms: how many followers they have, the number and type of interactions they get on each platform, and what the general sentiment is. Read the comments to find out what their customers love about their product/service, and what they don't.
Next steps
Now that you have all of this information, where do you go from here? Or, conversely, who can you turn to for help with identifying all of the factors that have been identified in this article?
Here at BizAcademi, we work with entrepreneurs to build and grow their businesses. With decades of practical knowledge and learned experience, Lana and Linda help startups avoid common mistakes while guiding them down a path to business excellence. To learn more about how BizAcademi can help you achieve your business goals, contact us.
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