In response, I usually refer people to the Business Ideas and Business Opportunities pages on my website, http://smebusinesslink.com. Here are four tips that can contribute to business success.
Does it meet a real customer want or need?A new product or service idea may sound brilliant to you, but will customers want it? That makes the difference between a good and a bad idea. If no-one wants the product then your business idea is doomed from the start.
Good business ideas meet customers’ real wants and needs. A product that solves a problem, or brings convenience to people, or helps them save money, makes a good business idea. Especially in this depressed economy, customers will spend their money on the most pressing needs before indulging in unnecessary luxuries.
Do your research in order to ascertain the demand for your product or service. It’s best to know the real demand before you invest your precious time and resources on an idea.
Will it attract enough customers?Every business has a minimum level of activity below which, it is not viable. This level is called the break-even point. It’s the level at which your gross profit covers your fixed costs.
For example, say you are selling chickens and making a gross profit of US$2 per bird. If your fixed costs amount to US$300, you will need to sell at least 150 chickens in order to break even.
Now the question becomes, are there enough customers in my market willing and able to buy at least 150 chickens at my desired price each month? A good business idea is one where the market for the product or service is big and growing.
Is it unique?An idea for a product or service that is too easy to make is not very good. If too many people start making or selling a product, it becomes a commodity.
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The law of supply and demand then comes into play and starts pushing prices down, thus reducing profits for everyone. A good idea has an innovative or unique twist to it, whether in the way a product is manufactured, packaged or delivered.
Business ideas come from everywhere. They can come from observing other people — what they like and what they need — that is not currently being addressed in the marketplace.
Some business ideas are born out of frustration after not finding a suitable solution to a particular problem. Even if a solution exists, it may not do the job well enough, and there are opportunities to improve the products or services.
Is it financially viable?Financial viability refers to two aspects. First, can the idea be implemented with your currently available resources? To me, an idea that requires a million dollars to start is not viable, because I don’t have the million dollars. If I can access a million dollars from an investor, maybe I could consider the idea. It is important to first workout the total outlay required to implement the idea to see if it is within your reach.
The second aspect of financial viability refers to the ability of the business to generate the required levels of profits to make it worthwhile. You should have a minimum profit target. As Steve Covey said, “Begin with the end in mind” (7 Habits of Highly Effective People).
What is the minimum profit you want to make in the business in a year? If the business won’t generate the desired profit levels, you might as well try something different. An unprofitable business will not last for long; so don’t waste your time with an idea that is not financially viable.
There are some weird ideas that have been turned into viable businesses. An American entrepreneur, Matthew Osborne, founded Pooper-Scooper after learning that there were over 100 000 dogs within 15 miles of his home.
His business is to scoop dog poo and dispose of it. His company generates annual revenues in the millions and he is now a millionaire. Wish you the best in your business.
No magic formula for business success
One gentleman, after looking at the website, responded saying most of the ideas there don’t work. He said he had already tried a few of them before and they had all failed.
When I explained to him that there are many entrepreneurs who have turned those ideas into successful businesses, he wanted to know their secret. There is no magic formula when it comes to business success; it’s impossible to tell which idea will succeed and which one won’t.
But there are some basic pointers that you can use to determine the likelihood of an idea succeeding into a viable and profitable business.
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Phillip Chichoni is a strate-gic business planning and financial management consultant who works with SMEs and entrepreneurs.
You may contact him by email [email protected]
