New business ideas and what makes a good idea
Not all great business ideas turn out to be viable business opportunities, more's the pity. So how do you assess if a new business idea has what it takes to flourish into a going concern? Well there's certainly no official 'ideas for small business' test, but start by asking if your small business idea stands up to the following questions before you go any further:
- Is there a market for it?
- Does it make life easier or solve a problem?
- Is it viable?
- Can it generate profit?
- Is there room for growth?
Is there a market for it?
Very thorough market research is an absolute must for new business ideas. If there's not enough demand for your product, your business will never take off. Remember that if you're only planning to make a small profit margin on your product, you'll need a much greater demand. Growing markets are going to appeal more to investors and provide better business opportunities.
- Do thorough market research
- Smaller profit margin requires greater demand
- Growing markets are preferable
Does it make life easier or solve a problem?
Every product serves a purpose - successful businesses are rarely built on novelty value. It could save people time, make a much-used process easier, provide them with a new luxury. It's crucial to be clear about how your product helps people or solves a specific problem. Again, market research will help loads.
- Know what purpose your product serves
- Make sure this responds to a market gap
- Market research
Is it viable?
Unless you have lots of your own money to pour in, you need a business that can operate cheaply to begin with, and one that doesn't require dozens of staff. Your business will only work if your product is technologically possible and manufacturing costs are feasible. Work out who would make it and for how much.
- Be realistic
- Low starting costs and fewer staff are more likely to work
Can it generate profit?
Work out how you'd make your product and how much you'd sell it for. You need enough profit left over to sustain a business. Factor in employees' salaries, expenses, administration costs, labour, transport and material costs. The smaller your profit margin, the more demand you need to make up for it. Talk to manufacturers to find out about costs.
- Work out all costs
- Compare with estimated sale price
- Smaller profit margin needs higher demand
Is there room for growth?
You could gradually offer a bigger range of products, set up business in new locations, make ongoing improvements to your service, reach more customers. Look to web technology for ways to evolve. It's best if plans for growth correspond with how the market your working in looks set to develop over the next few years. Operating in an expanding sector is a much better guarantee for growth potential. Avoid markets based around trends - you don't want your idea to become passé after a year or two.
- Expanding sectors, the web, more products, new locations, bigger customer base
- Look at how your market will develop
- Growth markets preferable
- Avoid trends
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