Is your business idea feasible?
Once you've gone through the brainstorming stage, it's time to face reality and work out whether your idea is a viable option. Be thorough in your assessment: if the figures don't add up, chances are it's not going to work out. Don't be disheartened, though - if you've already had one idea, there will be plenty more where that came from.
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What makes a good business idea
- Once you've come up with your idea, you need to make sure there is a market for it. Do this by conducting extensive market research - find out how many people would buy into your idea, what the competition is like and what your customers will be like. Will they be able to afford your product or service?
- Do the figures add up? Look at figures from competitors to work out what sort of demand you will have. What will your production costs be like, and how much will you need to charge for your offering to make it viable? Will your target customers be able to afford it? What will your margins be like? How much repeat custom will you get?
- A good idea gives the business room to grow. Don't just latch on to a trend - your business needs to be more than a one-trick pony if you want it to expand and flourish. Try to forecast how the market will look in one, two and five years - will there be as much demand for your product then?
- Your business idea doesn't need to be new, but it does need to distinguish itself from the competition. Check it's unique by conducting an extensive competitor analysis, and even if you're not planning to lodge a patent, make sure it isn't violating copyright law by checking the Intellectual Property Office's patents database.
Why some business ideas don't work
- One of the major causes of business failures is bad market research. While you may be enthusiastic about getting started straight away, conducting exhaustive market research is absolutely essential. Without it, you won't have the information you need when you're marketing and pricing your offering.
- When the majority of business ideas fail, it's not because it was a bad idea - it's because it was the victim of bad marketing. Make sure you know exactly who your customers are, what their habits are and how they react to various forms of marketing. For example, while you may have problems eliciting a response from toddlers if you market to them by text message, teenagers are likely to be far more responsive.
- A business which doesn't distinguish itself from its competitors will find itself struggling. Define strong unique selling points (USPs) for your business to prevent this from happening. Look at your competitors' weaknesses and build on that: is there space for a premium version of their product? Could you add value by offering a wider range or better customer service?
- If your costs are too high, you'll find it difficult to make any money, so start small and keep your overheads to a minimum. If it isn't absolutely necessary to take office space, start from home instead - and while having your product manufactured in the next town may be great for your carbon footprint, there's a good chance it could hit your bank account hard.
- If your proposition is badly priced, your customers will be decidedly unenthusiastic about buying from you. Make sure you look at your potential customers' spending habits and earning power to determine how much - and how often - they will be willing to pay.
- If your business is started purely to make money, there's a good chance it will fail. To start a successful business, you need to be absolutely passionate about your proposition so you are committed to steering it through the good times as well as the bad.
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