Is my business idea good enough to pursue?
Entrepreneurs, students, and young professionals all face this question when contemplating a business idea. Some may be considering leaving behind a steady paycheck and work-life balance. Others may be escaping the hierarchy of corporate America or the perils of unemployment. Regardless, a startup is not all about wearing a pinstriped hoody. Building a business from the ground up is hard work.
Everyone has ideas, but it takes a certain skill set to analyze a potential opportunity, develop a plan, and successfully implement a long-term strategy. Establishing a business and effectively laying the groundwork for sustained growth is an incredibly rewarding experience.
Before taking the plunge I encourage you to envision your business as a success in 2, 5 and 10 years from now. What does your life look like? How much money are you making? Have you hired 4 employees or 500? Are you strictly domestic or have you extended your reach internationally? Completing this exercise will allow for you to clearly define benchmarks and establish processes for the short-term that ensure long-term success.
The following are five essential things to consider before pursuing your idea.
1. Personal Qualifications & Idea Viability
There has been much debate regarding how to validate your business concept. Idea formation techniques discuss actions one can take to brainstorm potential concepts. If you focus on solving a personal problem, you can find customers who have a similar pain-point. Once you have an idea, share it. The feedback you receive represents the results of free market research. It is ideal to have potential customers validate your idea before investing time or money.
Solving a personal problem with a pre-existing skill set is the perfect scenario. This allows you, as the entrepreneur, to be an established expert in the field. Gaining credibility lowers the barrier to entry and minimizes the chance of experiencing challenges when closing your first few partnership deals or sales.
2. Market Size & Competition
Contrary to popular belief, there is always more room for new entrants into a market. The key is to be able to clearly define a differentiating factor or to target a market niche. Creating a competitive landscape – and including all potential threats to your product or service – allows for you to visually determine your value add. Once you have identified your business’ differentiating factor, you should highlight it in all marketing and sales materials.
3. Pricing & Expenses
Cash flow is the heartbeat of all business. Understanding your pricing structure, margins, expenses, and sales pipeline is the only way to forecast your continued business health. First time entrepreneurs sometimes forget to include certain expenses when forecasting earnings. Overlooked categories include utilities, travel and fuel, time (including time spent researching your field), prospecting, and sales.
4. Product Positioning and Marketing
Clearly articulating your product or service will increase both inbound leads and conversation rates of sales. You can choose to position yourself based on price, customer service, technology, convenience, etc.
5. Lawyer & Accountant
Although expensive, hiring both a lawyer and accountant is necessary for proper business formation. Industry specific lawyers and accountants are familiar with the best type of legal entity to setup for your new venture, and they have experience formalizing contracts, complying with local and federal tax regulations, and ensuring your personal protection. While not a top priority for most first time business owners, it is an unfortunate necessity for both online technology startups and more traditional businesses (i.e. online terms of services and privacy statements & contracts, respectfully).
Starting your first business is a challenge, but its also an unforgettable journey. Enjoy it.
Keith Petri is currently the SVP of Business Development at eDealya, which empowers brands and agencies to better understand, engage, and target their customers. He previously owned CNSLT.us & founded iGottaGuide. Educated in business, economics, and studio art with a strong passion for marketing and technology, Keith is currently based in New York and enjoys connecting with like-minded entrepreneurs.
Image Credit: Shutterstock.com
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