Great ideas are big business. And as entrepreneurs, we all dream about coming up with ‘the next big thing.’ So if you’ve been struck by a bolt of inspiration–congrats! You’ve taken the first step. But as every small business owner will tell you, these early stages can make or break your company.
It might be tempting to skip the research phase or just jump in at the deep end with your new idea. But setting up a business takes time and financial investment. That’s why we’ve put together this guide, to help you find out if you have a viable business idea on your hands–before you invest your hard earned cash.
Got a new business idea? Let’s get started! Take these steps to evaluate your idea before setting up a business:
- Write your business plan.
- Assess market demand.
- Research your direct and indirect competitors.
- Get to know your customers–who are they, what do they want?
- Ask for feedback on your idea.
1. Write your business plan
It’s easy to procrastinate and put off getting started on your business plan. But look at this as an opportunity to get your ducks in order. Jot down what your business idea is. Then follow-up with sections on:
- The customer (your target group, sales projections, and customer loyalty)
- The company (legal form, location)
- About you (the founders, your mission, long-term goals)
Writing a business plan from the start can save you a whole lot of heartache down the line. Your business plan’s job is to guide you through this process, encouraging you to consider your idea thoroughly, and assess the risks before putting your all into a new venture. There are also lots of example business plans you can check online to help you get started.
Look at your business plan like an opportunity to sit down and look at the numbers. At the end of the day, you’re setting up a business to make a living. Before you start your company, you’ll need to decide how much money you want to make from it (is this a part-time venture, or a full-time career?) and then work out how much business you’ll need to do to turn a profit. Do your estimated costs and projected profits add up? Be realistic!
Still feel like you need some help? Use this expert advice from Jan Evers on how to create your business plan to guide you.
2. Assess market demand
So, you’ve heard the phrase ‘putting the cart before the horse.’ But have you applied the same logic to your fledgling business? If you go ahead and launch your product or service before testing the market, you could be heading for disappointment down the line. Here’s exactly how to avoid it.
You have a practical business idea, but is there space in the market for it?
Ask yourselves three questions:
- What problem will my business solve for its customers?
- How are people dealing with this problem at the moment?
- Does my product or service already exist? If not, how will my company be different or how will I improve on what’s already available?
Your idea could be brand new, but more than likely, there’s already something similar out there. Even the most ingenious business ideas rely on market demand. The real question is, is there room for one more? Either way, your answers will help you discover if you can offer a unique solution to an existing problem, or do it better than the competition.
3. Find your competitors
No matter how great your business ideas are, you’ll always have some kind of competition. And that’s no bad thing. The key when evaluating your business idea is to find your competitors, look at what they’re doing (or failing to do) and identify what you can do better.
Research direct competitors
Direct competitors are other companies who offer exactly the same product or service as you. For example, if you open a pizza shop you’ll be in direct competition with other pizzerias in the area. When you start your own business and Jenny from accounts fancies a pizza–you’ll be competing for her cash with neighboring pizza shops and restaurants that also serve pizza.
Don’t forget about indirect competitors
Indirect competitors sell different products or services which satisfy the same need. You’re heading home after a long day at work. You can’t be bothered to cook, but you have a hankering for a stuffed-crust margherita. You might call your favorite pizza store and put in an order. But maybe you’ll decide to stop in somewhere for a burger and fries, instead. Both products are going to satisfy your craving. If you’re the pizza shop owner, the burger joint is your indirect competition.
Can your business idea compete?
Once you know what’s out there, consider how likely customers are to choose your company over the alternatives. Are your plans to compete for the same customers realistic? Will your customers have a reason to choose your business? This reason is called your “unique selling point” or USP and it’s what sets you apart from competitors.
Even if there are hundreds of fast food outlets in your area, opening a new pizza shop might still be a viable plan if–for example–your USP will be that you’re the only vegan pizza shop in town.
TIP: Search for customer reviews of your competitors online. Pay special attention to those in the 3-4 out of 5-star range, because these are from customers who like the product or service but who are likely to point out specific areas where your competitor is falling short. That’s where your business comes in to save the day!
4. Get to know your customers
Now that you’ve spotted a gap in the market for your new company, it’s time to get to know the people who’ll be buying from you. Who are your customers and what do they want? How will you help them reach their goals? Doing some market research will help you find out.
Gone are the days of door-to-door surveys. It’s now quick and easy to get answers from potential customers online. You can use free online software like Typeform and Google Forms to create basic questionnaires then share on social media. If you still prefer to keep things old-school, or if your potential customers aren’t tech-savvy, you can always print off your survey questions and hit the streets!
However you share your questionnaire, use it to find out what kind of people are interested in your product, what they need, and how likely they are to become paying customers. About 8-10 questions are generally enough to get some useful intel, without boring the socks off anyone.
- How old are they?
- Where do they live?
- Are they male or female?
- What kind of job do they have?
- Do they buy any products or services similar to yours? If so, how much do they spend and how often?
- What are their goals?
- What are their hobbies?
- Which brands do they like, and why?
Use your responses to build up a picture of your potential customers. You’ll then be able to consider your business idea from their perspective and decide if it can meet their needs.
Not sure where to find your customers?
To track down potential customers, you need to think like a customer. Try searching for the kind of Facebook groups they’re likely to join. For example, if you want to start a dog walking service in Portland, try looking up ‘Dog owners in Portland’ or ‘Dog-friendly Portland’ to find groups of people who could be interested in your business. If you’re going to be starting your own business offering a high-end wedding service, then hanging out in online bridal forums or attending wedding fairs would be good starting points.
TIP: Having a clear picture of your ideal customer will come in handy as you build your business. Setting goals and marketing personas will help you get the most out of any marketing spend because you’ll be able to target those who are most likely to buy.
5. Ask for feedback
What’s the best way to find out if your business is going to work? Give it a try! But there’s no need to spend time or money on testing your idea. You can create a free website in minutes with Jimdo’s website builder and use it to showcase your product or service without putting any extra work in. Plus, if your idea is a winner, you’ll already be set with all the advantages of having a website for your business.
Once you’ve created your website, share it with your friends, family, and colleagues to get instant feedback on your idea. Or better yet, share your new website on social media and monitor the response. This could be the first step in creating a social media strategy for your new enterprise.
- Do people want to know more about your business?
- Have you received any inquiries?
- What are people saying in the comments section on social media?
A real customer might even find your company through your website. Then you’ll know you’re in business! Create a website and give it a go because trying out is the best way of finding out.
Ready to get cracking with your business idea? Follow these steps to check if your idea will work before starting your own business. Build your business website, talk to your customers and ask for feedback on social media to find out if your idea could grow into a thriving enterprise. You can even try out multiple ideas this way—why put all your eggs in one basket, after all? And if one idea isn’t a winner, don’t worry. You’ve just saved all that time and money to spend on your next big idea!