Last Updated Friday, July 17, 2020
Think your brilliant idea will make you a million bucks if you could just turn it into a business? Before you sink your life’s savings into launching that business, consider these points.
You’ve just experienced one of those light-bulb moments when you think you’ve got a dazzlingly brilliant idea for a business. Possessing the spirit of a true entrepreneur, you’ve decided to bring your idea to fruition.
But wait. Before you invest a big chunk of savings into your new enterprise, you’d be well advised not to jump to any preconceived conclusions about the merits of your prospective business. Remember the Edsel? If seasoned corporate executives can make a spectacular failure like that, then mere everyday entrepreneurs are certainly not immune to errors in judgment.
Will it sell and will you earn enough to make a profit?
Sure, there have been brash entrepreneurs who have been successful without giving a thought to researching their potential market or determining ahead of time what the potential for profit may be. But like any other investment, it is prudent for prospective business owners to perform the necessary research prior to putting their hard-earned monies into a new enterprise.
According to the U.S. Small Business Administration, two of the core questions prospective business owners need to ask themselves are:
- What service or product does my business provide and what needs does it fill?
- Who are the potential customers for my product or service and why will they purchase it from me?
If you feel your product or service truly fills a real need in the marketplace, get feedback from individuals, business associates and industry experts. What do they think about your idea? If your idea is a new product, make a prototype if possible, and present that as well. Utilize questionnaires and hold discussion forums.
As unusual as your idea may be, you will always be competing with someone else. Find out who your competitors are and determine if your idea will make the product or service better, different or more valuable. Understanding what you competitors are doing will assist you in doing it better yourself.
And just who is your target market? Determine factors such as potential size, income levels, age and geographic location. Is your target market shrinking or growing? How much are they willing to pay?
The next thing you need to determine is whether or not your new business endeavor will generate enough revenues for you to enjoy sufficient profits. One way to do this is to calculate your business costs and to determine your breakeven point, the point where sales cover costs. Anything above your breakeven point equals profits. Business Know-How offers calculators to assess business costs and your business breakeven point.
Prices charged to customers need to cover business costs, enable desired level of profits, and be competitive and in line with what customers are willing to pay.
Another important tool to assess the likelihood of new business success is the Business Plan, a summary of your business and the objectives and activities needed for it to succeed. Components may include the following:
- Executive Summary
- Company Summary
- Products and/or Services
- Market Analysis
- Strategy and Implementation
- Management Summary
- Financial Plan
Do You Need to Protect your Idea?
You’ve determined there’s a read need and market for your product or service, and potential profitability looks great. Now is the time for you and your attorney to decide if your unique idea will require protection under intellectual property laws — intellectual property being U.S. patents, trademarks, copyrights and trade secrets.
Be aware that whatever intellectual property protection you obtain, you may need to spend even more money on legal fees in order to defend and rectify any infringements.
If you promote your business, will they come?
It’s not enough to have a great product at a great price that meets a true marketplace need. In order for your new business to be an unequivocal success, you need to get the word out. Here are some basic guidelines to do just that:
A good quality business card is a new business’s best friend. Hand them out wherever you go. Be sure to include a logo, what your business does, and contact information.
Every business today needs a professional-looking and well-designed website. You want customers and others to be able to learn about your business and just what products and services you have to offer.
Nothing beats postcard marketing for cost and readability. Use as an effective way to generate sales leads, promote special offers or coupons, drive traffic to your website or introduce new products or services.
A well thought out and successfully executed grand opening can greatly assist with your ultimate goal: matching your business’s products and services to the people in your community who would most need and benefit from them … and increasing your profits along the way.
- Become a part of your local business and civic community
Join your local Chamber of Commerce and a service organization like the Kiwanis or Lions Club. Attend meetings and become involved in your community. Networking of this sort helps new businesses and their owners become readily known to people in the community … prospective customers.
You’ve got a new business with a great innovative concept. Get the word out, and your customers will come. Send out a well-written press release detailing your new business and what makes it special. The media is always looking for stories on hot new businesses and trends — Why not let it be about yours?
Budget an affordable amount for advertising. This may include advertising on social media, in local newspapers and business directories.
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About the author:
Patricia Schaefer is a staff writer for Business Know-How.