Business Tips - Defining your business idea
Having that Eureka moment when you cook up a great new business idea is a great moment. You’ll be full of ambition and eager to begin building your start-up. But once you've had that initial rough idea, how do you assess and plan out your business idea to make sure that it has legs?
For a start-up, the key thing is to define what your idea brings to the marketplace. This way, you know WHY you’re starting this venture and – crucially – whether it’s a viable business model.
Research the existing market and do your homework
A first vital step is to clarify the business purpose of your idea. What does it do, how does it cater to an existing or future need in the marketplace and who will your customers be?
Think about what your product or service delivers to the end customer, and why this customer should part with their hard-earned cash to purchase your offering. Design your product/service so that it caters to a customer need that you’ve identified, and make sure your business offers the best solution to that need. In a crowded marketplace, you’ll need to stand out.
Check out the competition
Once you know you know the aim of the new business, it’s sensible to start researching your competitors in this space and how your idea compares.
If you’re bringing a brand new innovation to market, you may well be the first entrant in the market. But for most business ideas, there’s likely to be another competitor out there – and they’ll be eager to take your market share. Research your closest competitors and look closely at their products, services, prices, and their approach to marketing and customer service.
Do the numbers add up?
Getting a great understanding of your financial model is critical to your success. Ultimately, if your idea can’t generate revenue, cashflow and profit, it won’t sustain a real-world business.
A good starting point is to work out your initial costs. Add up your estimated costs for producing your new product or delivering your service. Include all your raw materials, your overheads, your labour costs, and your delivery expenses etc.
Then think about the margin (profit) you need to make per unit, and the price you’ll charge to the customer. If you can make enough sales at the right profit margin, will you break even? And will you make a profit?
Write a rough business plan
Every start-up needs a business plan behind it. This will be the route map that defines your journey, sets out the key targets and drives the course of the first year or two of the company.
Important items to include in your plan include:
A clear outline of your product/service and what it aims to do
A definition of your key customer and how you’ll meet their needs
An overview of the market – including a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)
A summary of your sales, marketing, and business operations
Your key objectives for the first year – and how you’ll achieve them
Your predicted financial return – and how you’ll generate these profits
A breakdown of the initial funding you’ll require
Timescales for each element – so you can track your progress
As the old saying goes, ‘Fail to plan, plan to fail’. So, putting time and effort into a well-thought-out business plan could well be the answer to your future prosperity.
If you’re at the early stages of planning out your business idea, please do get in touch. We can help you test the viability of your business model and start the planning process.
Talk to us about your start-up plans.
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