If you want to generate a business idea which will stand the test of time it needs careful consideration. It is easy to become passionate about a particular path, however unless you do some early research to ensure it is viable, you could end up a victim of the statistics which say that half of all businesses will go bust within the first five years.
The first step is to generate a range of small business ideas which you should then examine in more detail. Consider the following areas to create possibilities:
- If you are looking to set up a cutting edge business then consider current trends and think about how they may develop
- Take a current problem you experience in everyday life and see if you can solve it
- Think about how you could apply your current skills and experience in a new niche or by serving a different market
- Take an existing product and either attempt to compete on price or level of service, for example by taking a high end product and altering the features to make it more mainstream
- If you already possess knowledge in a particular business or career area talk to as many people as you can who either are part of that field or who purchase from it and ask them if there are any issues which need resolving
Researching the Competition
This is only the first part of the equation however. Once you establish which idea you are going to pursue you need to carry out extensive research to see if it is viable. First, you will need to consider your set up costs and how much you will need to invest in premises; equipment; staffing; and manufacturing or stock purchase.
Second, you should examine the competition. You should look locally, nationally and internationally depending whether your business will be location based or online. Study what the current rate is for products or services and assess market share for your competitors. You then need to consider whether you can compete on price or service levels or maybe you can approach it from a unique angle.
Third, define your target audience and how and where you will reach out to it through your marketing methods. This should include the design of your website, your branding and advertising. Any early testing you can do through social media channels will be a big advantage.
All the information you gather at the research stage, in addition to the documents you accrue once you have set up your business, should all be stored securely.
The Set-Up Stage
Once you reach a decision on the path you want to take you need to move ahead with setting up the business and at this stage there will be more key considerations. Do you need funding, how will you pay yourself for at least the first six months and what type of legal entity do you need to establish? Should you get a small business loan? These are the questions which should be asked before you take the next step.
You also need to fill any essential skill gaps you might have through training or mentoring and get expert help in areas where you need assistance, such as with legal, accounts or taxation advice.
All this information should be formulated into a business plan. This will be used by your investors to decide whether they believe your idea has long term potential. Even if you aren’t seeking funding you should still use a business plan as a guide to get you through the early months of your venture. If you have put in writing how your budget is to be allocated and what turnover you need every month to break even, it can help your keep track of your current level of success.
Founding a business is a very exciting time, and it is easy to get carried away by enthusiasm at the beginning. However, it is vital to look at every aspect in the cold light of day to ensure the decisions you are making now will lead to a business which is sustainable, profitable and ultimately enjoyable to run over the long term.
Great post as per usual Ivan. I agree that defining your target audience and understanding how to market to them effectively is paramount to having a sustainable business. In the past, I have found cold calling to be an efficient and inexpensive way to conduct market research. Open View Labs conducted research in 2015 which indicated that cold calls are 24% more effective than emailing.