People who are self-employed generally like to stay that way. If they sell a business they quickly start another one, and successful owners seem to have a ‘knack’ for coming up with good ideas for new businesses. This ability is based largely on their experience and on a set of values or standards that should be applied to every business idea before going ahead with it. This system of evaluating business ideas applies to both products and services; we use the term ‘product’ to mean both. This simple system will help determine the viability of ideas and whether they’re right for you or if it would be better to invest your time and money in a different venture. These are the questions you need to ask.
Is there a need for it?
There has to be a demand for your proposed product or service, and you’ll only find this out by conducting some disciplined market research to give you an estimate of how strong it is. The basic rule is to fill an existing hole rather than try to create a demand for something. Consumer education about new products is expensive and best left up to bigger players in the market.
Is the need a long term one?
Product fads come and go. Remember hula hoops and pet rocks? Only by selling something with a long term demand can you be assured of creating a viable business. Cashing in on a fad or short term trend is expensive and can leave you with a warehouse full of products nobody wants.
Is your product yours alone?
To market successfully you have to show your prospective customers that you have what they want and that they should get it from you. This means being able to differentiate your product from your competitor’s and to prove that it’s better in terms of quality, function or value.
Does your product perform?
We live in a world of disposable products. Repairs are expensive so the goal is to produce a product that has a service lifetime that’s acceptable to its purchasers and meets their needs during that time. Products that don’t meet a real need or that don’t perform well will quickly be dumped in favour of those that do.
Do you know your competitors?
Before going ahead with any new product, service, idea or even a business, you need to have a clear picture of the strength and characteristics of the opposition you’ll encounter in that market. Business intelligence is a critical component of marketing; unless you are sure you can be a serious competitor in your field don’t make the mistake of trying to compete against better established and better funded competitors.
Is your pricing realistic?
Price your offerings realistically, at a level that your target will find acceptable and will also allow you to cover expenses and make a profit. Never enter a market with the strategy of being the cheapest. Your margins will be too small and one hiccup can put you out of business. It’s better to be competitive with functions like service and support than to compete on price.
Is it within your own capacity to do it?
A new product or business requires an investment of time, money and energy. All three are likely to be already employed in your present business activities, so be sure you’re not going to cause problems for yourself by extending into a new area. Stretching yourself or your finances too far can cause both the old and the new ventures to collapse.
Does it have growth potential?
Business growth is essential to success. If your new idea has a finite market or has no real potential for growth you’d be better off doing something else. A product with no growth potential can become a millstone if just one competitor enters the market with a pricing strategy that undercuts you.
What if it doesn’t work?
The best market research, product strategy and marketing plan still won’t guarantee success. One of your business models has to include a scenario of total failure, and you need to be certain that if this happens you’ll be able to survive the impact. Never bet all your money on one horse; if it loses, you do too.
Our Prime Business Advisors are great sounding boards to run over your new business ideas and help you evaluate this checklist. Touch base with one of the team today.