It takes a lot of time, effort, and planning to turn a brilliant idea into a successful business. While many people have an idea for a product or service, it's often hard to determine if it has traction given location, timing, and a slew of other factors. If you're trying to determine if your idea is viable, start by analyzing the most common reasons businesses succeed and fail. Then, look at your personal situation, the current market, and funding opportunities to see if you can feasibly grow your idea into a lucrative venture.
Evaluating Personal Risks
New business owners must invest most of their time and a lot of their money into the endeavor. The process is often physically, mentally, and financially draining. Before you jump into a new business commitment, consider if the personal gains outweigh the personal risks.If you're new to the business world, it may at first be hard to determine if the gains justify the costs. Start by deciding if your financial well-being will be on the line if the business fails. How much of your personal funds can you afford to invest in the company? Will you have to continue working another job to stay afloat?
There isn't a magic formula to determine if gains outweigh costs. It is a personal decision that you'll have to make before you commit to starting a business.
Prototypes and Market Research
You can't run a business if there isn't a market for your product or service. A market is a geographic range and customer base your business plans on targeting. If you plan on having a brick and mortar store, your market will be your building's geographic region. For online businesses, you'll need to spend time determining which markets are best suited for your products and services.If there isn't a market for your product or other businesses are already filling that need, your business may not be viable. Or, it may mean you need to pivot into a different market whose needs are unfulfilled.
You can determine if there's a market for your product by conducting comprehensive market research. Research the demand, business saturation, and current going price for the products and services you intend to offer. You also need to consider your market size and the average income level for the area.
It may also be useful to offer prototypes of your product if possible. Offer prototypes to would-be customers and ask for their feedback on the product, price, and if they would purchase more or similar products.
Cost Analysis
Many entrepreneurs underestimate the costs associated with running a business before you can turn a profit. To create a detailed business plan, you'll need to count the costs for business needs, licenses, market research, advertising, and your physical or online spaces. Don't forget, you also need to know how much is insurance in your state and within your specific industry. Businesses across all industries need to create a comprehensive business plan that discusses market analysis, organizational structure, services or products offered, and funding sources. Your in-depth cost analysis will be an essential section of your business plan. What are your estimated costs? What will those expenses look like after a full financial year? Do you have what you need to file taxes? If you need additional help, the U.S. Small Business Association (SBA) offers a cost analysis worksheet to help you get started.
Funding Prospects
You can't start a business without solid funding prospects. Self-financing may be viable for smaller companies with few costs. However, most will need to seek investors, grants, and loans. Learn how to successfully pitch your idea to banks, grant committees, and investors. Check with your local chamber of commerce, government office, or sites like the SBA or grants.gov to find potential funding sources.Additionally, ask friends and families if they'd be willing to invest or donate. If they are, be clear if it's a donation or loan. Other businesses have found success through crowdfunding or working with local incubators.
