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  • Is my idea viable
    Can my business idea succeed? Maybe you’ve come up with an amazing business idea. Sadly, nearly half of all businesses fail within the first two years. Even if you have a winning product or service, success depends on getting the pricing and marketing right, not to mention the timing of bringing the product to market, having the funding to back up the venture, and the talent (or staff) to provide the product or service you’re proposing to sell. Finally, having customers willing to pay for the product or service is the central part of the equation many would-be entrepreneurs underestimate or ignore. Discovering whether your idea is viable is a critical first step in business planning. A little pre-planning and research can not only save you the frustration of trying to market a product or service ineffectively, it also lays the foundations of knowledge you’ll need when you begin to compile your business plan. Are you a business person? The first question to ask yourself before diving head-first into a start-up is, do you have the attitude, the skills, and the motivation to succeed as an entrepreneur? Are you able to forgo vacations, extravagant spending and having spare time for personal pursuits, during the time it will take to get your business up and running? Are you willing to stick with a business that might not succeed right away? Are you responsible about paying bills on time and realistic when it comes to budgeting? Will you keep going when the going gets tough, or throw your hands up and walk away? Remember, running a business is about endurance and determination, and also about knowing when to fold your tent and close up shop. Realism and confidence are both important. Do you have what it takes? Do I have a product or service that will sell? Market research is the process of determining first if there is a market for your product or service, and second, if the market will support your business – in other words if you can make enough money to pay for creating your product or supplying your service, and also make a profit. It is essential to determine whether enough people are interested in your product or service to make it worth offering, and what they would be willing to pay. When creating a business plan to present to an investor, like the bank, you’ll need to provide solid information about who your target audience will be, and their interest in your product or service, so don’t skimp on this step. Creating a successful business will mean understanding who your customers are, how large a group they are, what drives their purchasing decisions, how much they have to spend and where they typically shop. You will also need to understand whether and how often they would purchase your product or service, and why they would choose you over your competition. Begin with research It is important to gather two types of facts about the market. Quantitative information includes how many people fall into the categories you’re targeting, like single mums or university students. Gather data on how much disposable income they have on average, and how likely they are to use your product based on their needs and spending habits. Qualitative information is the gathering of opinions and attitudes, as through surveys. Data is either primary - information you gather yourself by having people complete questionnaires, for example, or secondary, gathered by analysing published data from reliable sources. This is your chance to connect with potential customers and gain a deeper understanding of their needs. It is also important to gather information on your competition. Understanding their technology, approach to marketing and distribution, customer service and product, will help you discover ways of doing things better, so that your company can stand out from the crowd, as better at meeting customer’s needs. Information can be gathered directly through telephone or mail surveys, going door-to-door, using social media or e-mail campaigns, and by recruiting focus groups. Secondary information is available from trade magazines, government publications and other online and print sources. Often information is available with a simple phone call. What will your business look like? So you have an excellent product or service, a strong market, customers hungry for what you are offering, and funding. Now you need to decide what sort of business you plan to run. Will your company be a bricks-and-mortar shop, or will you operate through a website? If you’re planning to sell online, will you create an independent website for your sales, or will you use an existing platform like e-bay’s stores feature? You have a great product or service - now you need to establish how you plan to connect with your customers. You need a business model. For services, there are several models to consider. You may offer a tiered cost plan, a one-time set fee, or a monthly subscription, depending on what service you’re offering and how your customers will use it. Products are a little more straightforward - most products are sold with a set price-tag, but is it possible to offer various versions of your product? Or perhaps you can package your product with a few accessories or desirable options to create a premium tier. Research is the key to creating a business model. Understand what your customers are willing to pay for and how much they are willing to pay. Will you be able to charge enough to cover your costs and turn a reasonable profit? Can the market handle another company? There’s an old saying: “there’s nothing new under the sun”. No matter how original your idea may seem, chances are someone is already providing a product or service that fits into the same niche as yours. It’s important to create a distinct, unique brand that offers something a little different from what’s already on the market. It’s also important to be realistic about your ability to make a place for a new company in a very competitive market. You will need a SWOT analysis. Take a step back and realistically analyse your strengths, weaknesses, opportunities and possible threats. - Strengths might include the ability to offer superior customer service in a market where demand is greater than supply. - A weakness might be that as a start-up, you have a very small staff and might have trouble keeping up with the market demands. - An opportunity might mean buying a larger shopfront if all goes well in the first year. - A threat might be the chance of a better-established competitor with deep pockets offering a large discount to lure customers back and undercut your business. Be sure to cover yourself in terms of trademark and copyright. Register your own intellectual property, and be sure to run a careful search through the Intellectual Property Office to be sure you’re not infringing on anyone else’s rights. A lawsuit will scuttle your business faster than any market-based threat. Where’s the money coming from? As a rule of thumb, consider the cost of starting a business, then double it, and that’s how much you’ll actually need. While doubling your initial estimate may be a bit extreme, it is important to consider the possibility that your business may be a little slow to get started. How will you support yourself in the meantime? Will you be able to pay the bills generated by the business during the time between start up and when your sales generate enough money to cover your costs? Create a realistic forecast which includes how much you expect to sell each month, at what price, and what your costs will be. Don’t forget to include materials, labour, rent for a premises or the cost of maintaining a website; marketing, insurance and incidentals like postage and office supplies. Be realistic not only about the costs, but about your potential for initial sales. Ideally, you should have a few months' costs tucked away in the bank as a cushion during that critical first year. If you are using bank loans to fund your business venture, of course consider them in your analysis. Be sure to have an exit strategy - if the business falls through, how will you pay off any debts accumulated? No business owner plans to fail, but with the statistics stacked against you, it’s critical to be prepared.
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