For many entrepreneurs, determining if your business idea is worth pursuing is the first step towards success. Evaluating the feasibility of the business before you jump head first, can save you time, energy, and money. Below are a few things all potential entrepreneurs should consider.
Current Competition
Before you develop a market entry strategy, it is important that you evaluate current market conditions. There might be a lot of companies being engaged in a price war, with little or no unique features offered to customers. This could be your chance to develop something truly innovative. If there are only a few companies in the marketplace, chances are that the niche you have chosen is not profitable enough to pursue. Make sure that you are checking the government’s and industry’s statistics before you make your final decision.
Demand Trends
Demand is also important when you would like to introduce a new product or service in the market. Unless you believe that you can create demand like Apple did when they launched the iPad, you will have to study the trends. Demographic trends, regulations, and political stability are likely to influence the future demand for your product or services. For example, if you would like to launch a business consultancy service for startups, any policy that favors small business and entrepreneurs will be influencing the market demand in a positive way. However, if you are launching a service to teach another language, and the demand for learning the language declines, you will be struggling.
Technology
The technological environment of the market is also important. Are there any innovations you can invest in and take advantage of? Will they help you deliver your products and services cheaper than the competition while providing more value? Is the service you are offering likely to become cheaper or will your job be replaced by artificial intelligence? You need to study the related technologies before you develop your business plan and strategy.
Startup Costs
Make sure you can afford to start the new business. You should be prepared to fail before you can succeed, so have the means to support various experiments before you can break even. You should calculate the cost of business premises, licenses, equipment, training, software development, and personnel, incorporation, and patents. Once you have the full cost, you will also have to check how long you will have to wait for your business to break even and produce profits.
Regular Expenses
Not all businesses are created equal. If you are a freelance writer or an online marketing consultant for small businesses, you will only need a reliable computer and some software to do the job. However, when setting up a regulated business, such as medical research, legal consultancy, or financial services, you will have to pay for liability insurance, have professional offices, and a business infrastructure that will help you serve the market. When thinking about manufacturing, your regular costs will include machinery maintenance, wages, etc.
What You Need to Learn
You wouldn’t arrive for a conference as a speaker unprepared. You are likely to be the main speaker of your brand and have to effectively communicate the unique selling propositions of your offer. For this, you will have to develop a solid knowledge of the industry and position yourself as an expert in the marketplace. Whether you need to improve your communication, marketing, or financial planning skills, there is a free or low-cost online course you can take advantage of.
Marketing Costs
There’s no point starting a business if nobody knows about its existence. It is important that you take care of your small business online marketing tasks and calculate the costs. From web development to paid advertising, social media engagement campaigns, local ads, and press releases, you have to know how much money you will have to spend before you can penetrate the market and get customers online and offline alike.
Economic Environment and Potential Business Partners
You will have to check the interest rate trends, as well as the profit predictions. Choosing your future business partners is equally important. If you start a wholesale venture, you have to contact companies offering delivery and crane transport so you can include this cost in your financial plans. In case you are planning on creating a software development company, you will need to get in touch with research labs, colleges, and universities, so you can build positive and profitable partnerships.
Return on Investment Calculation
The most important figure you need to be aware of is the return on investment before you make a final decision to launch your new business. Your business idea might be sound, but require a lot of investment and you are not likely to make money in the first few years. There are several online guides to calculate your return on investments, so you can plan your finances accordingly. You can estimate how long it will take you to break even, how much your business loan will cost, and determine whether your business idea is worth pursuing.
We all like dreaming big, otherwise, we wouldn’t be entrepreneurs. However, it is advisable that you conduct a reality check every now and then to avoid some of the most common mistakes people make when launching a new business. Focus on the big picture, calculate the startup costs and find out as much as you can about the current and future market conditions. Without thorough research, you might end up wasting your time, money, and resources on a business idea that was never meant to work.
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