Before you start on your business journey, it’s important to make sure your business idea is worth pursuing. Here’s 5 things to consider before putting your idea into action:
1. Is there a market for your business?
This is the very first question I ask my clients because if there is no market for your business then most likely you will have a very hard time getting your business off the ground. You’ll want to do some research before you commit to a business idea, including:
- Are there competitors?
- If there are competitors, are they already offering an excellent product?
- Can I compete with what my competitors are offering?
- Is there a need for my business idea?
- Is the need for my business idea large enough to be sustainable to my business?
2. Does your idea have a benefit to customers and/or a social cause?
This is second question I ask my clients because if your business idea does not have a benefit to customers then most likely they will not buy your product or services. And if your product gives back to the community in some way people are much more likely to jump on board and support you in your cause. The most successful businesses are those that offer a benefit to customers and go above and beyond in helping out businesses, organizations, families, communities, or individuals. A great example of this our affiliate friend, eyeglasses company Warby Parker. Their mission statement is excellent: To offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses. This is a business that has a benefit to customers AND a social cause, a very successful double whammy.
3. Will your business idea be useful to customers in 2, 5 or 10 years?
Considering if your business idea will be useful to customers in the upcoming years is very important. You’ll want to make sure that your business idea will create a lasting stream of customers over a long period of time to ensure future success for your brand and the growth of your company.
When I started my first company selling Gluten-free food products, Wholesome Chow, I made sure to do my market research and found the Gluten-free industry was just starting to take off. I also found out that the medical testing for gluten allergies was recently improved and more people were getting tested for gluten allergies then ever before. This information was a HUGE benefit to my company and the timing of my business idea because I was able to forecast that the Gluten-free industry would be booming in the upcoming years. I was right and Wholesome Chow became a huge success!
4. Can you see yourself working for your business in 5 or 10 years?
Starting a business takes a lot of work so you want to make sure you are really passionate about your business idea before inventing all of your time and money into the idea. If you think you might not be very interested in your business idea next year, then you might want to consider modifying your idea, or if it’s an online business, building the foundation and then selling it to someone else (Check out our affiliate friends Flippa for websites you can buy or sell)
5. Most importantly, is your business profitable?
Creating a business that is profitable is the most important factor to consider when determining if your business idea will be worth your while. You can figure this out by doing some quick math:
Total up your Projected Cost of Goods Sold: the total of all your expected business expenses including how much it will cost to make your product and how much your monthly expenses are to run your business. Tip: It’s best to OVER estimate because unexpected costs will inevitably come up and you want to make sure they won’t take up your entire profit if they do.
Total up your Projected Sales Per Month: this will be a rough estimate based on how big you anticipate your customer base to be, how many sales you think you can make (literally, like how many cakes you realistically can make per month). Tip: Use the AVERAGE sales you expect to generate over a 12 month period of time taking into consideration your first few months will most likely be slower then the last few months. Also be as realistic as possible to avoid over-estimating. You will be happier if you sell more then you thought you would rather then less than you thought you would.
Calculate Projected Sales Per Month – Project Cost of Goods Sold = Projected Profit
If your profit is in the positive this is a good indication your business idea is a winner. Check out this article on Entrepreneur.com called “How to Calculate Gross Profit” for more detailed information on this topic.
Many business ideas can be winners, you just need to make sure you do your research before investing time and money into your company. If you’ve done your research and aren’t sure if your idea is a winner, consider modifying it, targeting a different audience or just scrapping it and thinking of a new idea all together. This the the true entrepreneurial spirit!
Have a question? Comment below!
Affiliate Further Reading:
For more information on creating business ideas, check out Brad Jones’ Business Ideas: The Ultimate Guide to Creating Innovative Business Ideas”