EVALUATING YOUR IDEAS
It is often difficult to figure out how to research your idea,
especially if you have never been in business for yourself. You will
need decide if your idea has profit potential.
Use the following twenty steps as a guide to help
you determine if your idea is worthwhile.
- Create a profile of your paying customer.
- List and describe the features/benefits of your
product or service.
- Define the main geographic area you intend to
sell to during your first year.
- What competitors are selling to this geographic
area?
- What price do these competitors charge?
- Estimate what price you can charge, yet still
remain competitive.
- Why would your customers buy from you instead of
your competition?
- List and briefly describe trends in your market
or industry.
- What is the growth potential of the market?
- How are you going to let your customer know you
exist?
- Estimate Sales for the first year.
- List any government approvals necessary to
launch your idea.
- Briefly describe your manufacturing or
purchasing process.
- Briefly describe your fulfillment process.
- Estimate the capacity of your operation in the
first year.
- Make a list your potential suppliers
- Make a list of the resources you will require to
start your business.
- Determine what resources you will finance, lease
or rent.
- List your financial strengths and weaknesses.
(Return to the top of this page)
Your customers might be
consumers or retail stores, wholesalers or manufacturers, government
or other institutions. List as many points as you can about who you
think will buy your product. If you are selling to a consumer
market, try collecting magazine pictures of what you think your
customer looks like. List their age, gender, marital status, income
and try to describe their lifestyle.
If you expect to sell to another business or organization,
estimate what industries they are in, what kind of company, how long
they have been in business, how many employees, their annual sales,
what department would be interested in your offer, who their
customers are and anything else you can identify.
(Return to the Top of the Page)
Defining the features of your idea and determine what these
features do for your customer. You will create a list of the selling
points that you can use in your advertising, your brochures, and in
your sales presentation. This will help you establish why your
customer might buy your product or
service.
(Return to the Top of the Page)
Are you selling to your neighborhood? Your community? Canada? The
United States? By defining where you
are going to sell in your first year you immediately put
yourself in focus. You will likely be able to figure out how many
potential customers are located in this area. If you are selling to
a large geographic area, you will probably need a good deal of
money, marketing and resources. Defining this area makes it much
easier to figure out what your needs are going to be.
(Return to the Top of the Page)
Once you determine who and where your customers are, you must
determine whom you have to share them with. Find out if similar
products are carried in retail outlets, similar companies advertise
in the yellow pages or are listed in industry directories.
(Return to the Top of the Page)
Establish what your competitors
charge and list selling points of their product or service. Try to
find the industries wholesale and retail prices.
(Return to the Top of the Page)
Determining how competitive you can be is a big step toward how
feasible your idea is. If your product is superior to your
competition and your market is not very
price sensitive then you may be able to charge considerably more
than your competition. If you are selling to retailers or
wholesalers, you will have to leave enough room for others to mark
your products up .
(Return to the Top of the Page)
What is unique about your offer that would benefit your customer?
There may be something about your product, your price, the
friendliness and speed of your service, your hours of operation,
your level of quality, the skills of your employees or other aspect
of your business.
(Return to the Top of the Page)
Knowing trends in your market or industry will help you determine
where it's going and how your business can take advantage. Check
business and industry/trade magazines for recent articles. Some
libraries have a "business periodicals index" to help you find these
articles.
(Return to the Top of the Page)
Is your industry or market growing or
declining? Are trends or
fads new, peaking or declining?
Generally, you will be more successful being part of a growing
market. Check business and industry/trade magazines for recent
articles.
(Return to the Top of the Page)
So now you know who your customer is, where they are and why they
will buy your product. How are you going to communicate your offer
to them? Will you rely on having a good location? Will you use
advertising? Sales calls? Direct marketing? Yellow pages? You may
find it helpful to examine the Business
Promotion Idea List.
(Return to the Top of the Page)
Base your estimates on the size of your market, level of
competition, your price, your plans for promotion and trends in your
industry. Create a pessimistic, an optimistic, and a middle of the
road forecast.
(Return to the Top of the Page)
There may be some extensive or expensive regulations involved
with your type of business. Your local can assist you with
determining local regulations affecting your business.
(Return to the Top of the Page)
State how you will make or acquire the goods you plan to sell.
Use your sales forecast to help you plan this part of your
operation. Think about potential growth in future years.
(Return to the Top of the Page)
How does your customer get their order and how do you get paid.
(Return to the Top of the Page)
How big will your operation be? What is the limit of what you can
produce, stock, service and sell. Can you meet your sales forecasts?
Have you taken future growth into consideration?
(Return to the Top of the Page)
Your concept may rely heavily on the reliability of your raw
material suppliers and/or your subcontractors. How dependent will
you be? Figure out who your suppliers will likely be and try to find
back-up suppliers.
(Return to the Top of the Page)
List the employees, floor space,
leasehold improvements, equipment, vehicles,
inventory, supplies and services
you will require to open your business. Estimate the costs of each
item on your list. You will need this list to determine your start
up costs.
(Return to the Top of the Page)
You will probably not pay for large purchases outright but will
instead lease, rent or finance these items. You will need to
estimate your monthly payments to help you prepare a cash flow
worksheet.
(Return to the Top of the Page)
How much of your own money do you have for this business? What
assets can you use as collateral to secure a loan? Do you already
own the vehicles, computer equipment or tools needed to start your
business? Do you have family, friends or others who are prepared to
invest in your business? Do you have a strong personal credit
rating?
(Return to the Top of the Page)
Small Bizz Workshop
Starting with a good Idea
Exploring Business Opportunities
Forty Concepts for a Small Business
Evaluating Your Ideas
Protecting Your Idea
|
