One of the most fundamental decisions for any aspiring entrepreneur who’s about to start own business is the choice of business idea. But to come up with idea is only a part of assignment. The next step is to carefully evaluate it, extract all pros and cons and make a decision on whether it is worth your time and money. Sooner or later every entrepreneur understands, that management, marketing and sales strategy are important, but the quality and profitability of business idea is what determines the success of your project.
Here we have a three step system that will help you to choose a business idea:
- Determine a business market. Think of what business will be suitable for you, according to your expertise, knowledge and education. Try to extract a business niche that is not yet overcrowded. For example not just any handmade business, but business on creating unique handmade indoor water fountain etc.
Do not stop at one idea, consider few options and compare them to choose the most promising one: take a sheet of paper, draw two columns and write down all pros and cons of each idea. Analyze the results.
- Think of a business model. The best option is to come up with a completely new innovative business model, but that’s really tough. If you are not that creative, then there are two main ways: to use existing business model that successfully works on this market or to take an existing business model that works good in another market and try it out in your business niche (eg. – first subscription model was used only for newspapers and magazines, but now this is a very common business model for selling any product)
- Create a full vision of your future business: what to sell, at what price, where to buy raw materials, how many people will be involved in this business, who are the competitors and what are their advantages, etc. Don’t leave anything for chance and prepare several plans (A, B and maybe even C) in case things don’t go the way that you expected. If this business can’t have a Plan B, then think the idea over again – is it really as good as you first thought?
When all of this done, try to take a last critical look at your business idea. From a different point of view. There are two most common mistakes that you better avoid:
– To start a business that you know from the inside. It might be a good idea, but not necessarily. If you are a good chef, this doesn’t mean that you’ll become a successful restaurant owner.
– To choose a business idea that you felt in love with. The fact that you love this product or services and would be happy to get/use one, doesn’t mean that others will think the same way.
So, now when business idea is chosen and you are pretty sure that it is exactly what you need, go on to the last stage and see if this business is viable. There are three crucial aspects that you need to consider:
- Make sure that people will buy your product or service over and over again. This is one of the most important aspects of long-term business success (eg.- there are more perspectives in pool cleaning business then in pool constructing business). Or you can look at it from another angle: entrepreneur should focus not only on attracting a client, but also on keeping him for a long time.
- Be sure that you have a high profit margin. There are very few companies that can sustain long-term competition if their only advantage is a cheap price. Starting a business you need to keep an eye on cash flow: if you work with low profit margins trying to make money on volume, you need a large initial capital that can support you at the start, when profit is low. Having a higher profit margin is much better when your business is growing, because thus you’ll be able not only to keep the company going, but also to ensure its development.
- Good business idea should be supported by a professional team. The idea itself is extremely important, but a good idea needs a great team that will implement it. Get a mentor. Create a team of professional accountants, lawyers and bankers. Great team will increase the chances of success of your business.
If you have successfully completed all the three stages and still think that your business idea has good potential, then, most probably, it is true. Forget about all doubts, leave the fear behind, concentrate on the goal and get going!