How Do You Know if Your Business Idea Will Be Profitable?
There’s never been a better time for the entrepreneur.
With the internet connecting people across the globe, you can easily reach an enormous market from wherever you happen to live. This means marketing opportunities are everywhere.
Additionally, with the pandemic forcing so many to work remotely, we’ve discovered you can do pretty much any job from the comfort of your living room. Work from home has become the new normal.
This means you can launch a perfectly professional and reputable business without needing to rent out a physical office or storefront. There’s less overhead involved, meaning less barrier to entry into the market.
All that being, many people are turning their focus towards starting their own small businesses. They see the opportunity for freedom and flexibility and want to take advantage of it.
The first step in doing so is coming up with a business idea.
But how do you know when your idea is a good one? How can you tell when your business idea is worth investing your time and energy into?
This article provides a simple, step-by-step method you can use to vet your business ideas and settle on the best ones.
Step 1: Identify the Problem You’re Solving
Often times when you form a business idea, it’s in response to a problem you experience.
You may face some inconvenience throughout your day and think “why isn’t there a product on the market that keeps me from having to deal with this?”
You then start to picture a product or service that would alleviate the burden of whatever it is you’re experiencing. This is a great way to come up with business ideas.
Unfortunately, many people don’t take the time to actually identify the issue. They press on with a vague idea of what their business does but don’t actually pin down the specifics.
While this may seem innocuous, it can be a recipe for disaster.
Vagueness is the enemy of a good business idea.
Good marketing centers on positioning a product or service as precisely targeted. You can’t tell if your product or service can be effectively marketed if you don’t know exactly what it solves.
That’s why it’s so important to identify the issue on the front end. This is the only way to further analyze your business idea’s viability. Without knowing exactly what it solves, you won’t be able to assess how well it can be marketed.
If you can identify a specific issue your business is addressing, you’ve got the green light to move to the next step. If not, you should either specify the idea further or consider a different business venture.
Step 2: Identify Your Market
If you’ve got an idea that genuinely solves a problem or lack, your next step is to consider the market.
Who would this business target? How many people face the same issue?
You may find that your idea passes the first step, but that the problem is simply too specific to have enough appeal for a viable business.
On the flip side, if your business idea would apply to pretty much everyone, this may be a sign you need to get more specific.
While wide appeal is great, it also means it’s difficult to niche your product or service. You wind up having to market using generic marketing that appeals to everyone, meaning you miss out on the deeper personal elements that make people want to buy.
If this is the case, you don’t need to abandon the idea. Instead, consider narrowing your focus to a certain segment of the market. This will allow you to market yourself using more personalized elements and ultimately be successful.
Step 3: Examine Current Market Offerings
The final step is to consider the products and services already on the market.
You may have a fantastic idea that passes both of the prior steps, but if there is already a business providing something similar to the same segment of the market, launching a competing business can be an uphill battle.
That doesn’t mean you should never do it though. Almost every good idea has been created in some capacity, but that doesn’t mean you can’t do it better.
However, if there’s a business that is pretty much identical to your idea that is already well established, it’s going to be hard to catch up to them. They’ll likely hold the segment of the market already, making it difficult for you to penetrate and become profitable.
Honestly evaluate the competition prior to launching your business. While it may be disheartening to realize your brilliant idea has already been done, it’s much better than launching a business only to have it fail.
Remember, there’s always another idea around the corner.
If you’re looking to start a business, take the time to thoroughly evaluate your ideas.
Consider the problem you’re solving, the size of the market, and the current market competition before investing your time and energy into building a business. This will ensure you settle on a strong business idea, helping you launch, grow, and succeed.