One of our listeners, David, e-mailed us because he has an idea for a business, but doesn’t know what to do next. He wants some direction to get started.
Congratulations, David! You have a good IDEA. Now you need to know if it’s a good opportunity. Answer these four questions:
#1 – Is there a market?
Are there enough buyers? Here are a few of the many ways to know:
- Check with relevant trade associations.
- Talk to business owners who won’t be your competitors.
- Conduct surveys – on the street, via phone, through e-mail.
Keep in mind that you’ll never know for sure – what people SAY they will do isn’t necessarily what they WILL do.
Some markets are too bigg. Others are too small. You want one that’s just right! Bigg markets attract bigg competitors. They’re tough to compete against. Small markets may not offer enough opportunity. You’ll waste resources for very little upside.
#2 – Is the market accessible?
Can you reach your prospects? The best idea in the world is no good if you can’t access your prospects. Here are few examples:
- Publications they regularly read
- Internet sites they visit frequently
- Search terms they use
- Specialty stores where they shop
#3 – Who’s your competition?
Prospective entrepreneurs often think that they won’t have any competition. Well, everybody has competition. If you think you don’t, think again.
A simple example
Let’s say you want to start a carpet cleaning business. Obviously, you can look online or in the phone book to identify your competitors.
But one competitor isn’t so obvious. A number of people go to the store, rent the equipment, and do it themselves. They are competitors, too.
Another thing to think about is substitutions. Every time one of your potential customers replaces their carpet with hardwood floors or tile, they don’t need you!
How bigg are your competitors? Ideally, the industry is highly fragmented with a lot of little companies. If it is dominated by one or two major players, you’ll need to compete around them.
#4 – Will it provide a sufficient return?
Estimate how much money you can make. Divide that by how much money it will take to start. That’s your return.
Where to find the numbers
Say you want to start a retail store. Here are four ways to get numbers:
#1 – Publications that gather industry data (available at your local library).
#2 – Public companies in a similar industry
#3 – Franchises with a related concept
#4 – Business owners in non-competing markets
Your return has to be enough, given all the other opportunities, to justify the investment. Otherwise, you won’t attract the capital you need.
Thanks, David for sharing your bigg challenge. We hope this helps you get started!
|What's your bigg challenge? E-mail us: email@example.com|
Our bigg quote today is by Tim Blixseth.
are without ideas. One without the other is worthless.”
You’ll discover new worlds if you explore your ideas, map your course, and then set sail!
Next time, we’ll discuss the most important person at whom you should laugh. Until then, here’s to your bigg success!