You have a great idea and want to start a business. But do you have what it takes to make it a success? Every year, more new small businesses fail than succeed. But that shouldn’t stop you — test your idea and yourself by answering these questions.
Running your own business can mean long, unpredictable days, with little respite until you start to make a profit. Reaching that milestone can take years.
You’ll need to be:
If you’re thinking about going contracting, we have tips, tools and resources that can help.
There can be big differences between a good idea and an idea that will be a commercial success. Often the most successful ideas are the simple ones, like identifying a gap in the market that can be filled with a new product or service, or adapting and improving an existing business idea.
Taking time to evaluate your idea before you leave your job, borrow money and put your family life on the line is crucial.
Is your idea for a business going to solve a problem — or tap into an unfilled need — for the public or other businesses?
If your answer is no, scrap it and start again.
If your answer is yes, think about the scale of this problem or need. If it’s minor, you going to struggle to make sales. You need to solve what’s giving people a major headache, or provide something they can’t get elsewhere.
This is a key aspect of business planning. It’s a good idea to draw up a basic business plan — even just a one-pager — to help test whether you have a sound idea.
Before launching tech company Common Ledger, Carlos Chambers and his team had an idea for software to streamline the information accountants received from their clients’ different programs. They spent six months speaking to accountants in New Zealand and Australia to understand their potential market and refine their product.
“We learned there was this really deep problem that accountants around the world were facing. That’s what we were looking for — huge problem and huge opportunity and a huge way to really help this industry move forward.”
The next step was to develop an 18-month plan and a three-to-five-year strategy to turn their start-up into a fully fledged company. They have since raised more than $1m and launched in both countries.
“We’re close to our targets on our initial forecasts. We’ve brought on the right board. We’ve hired the right team members. All these things are probably the result of thorough planning. We would never have been able to usefully create our strategy if we hadn’t done that first six months of research.”
Unless you’re going to sell something no one has thought of before, you’ll be competing against other businesses. Your products or services must stand out from the rest.
It’s worth creating personas — fictionalised profiles of the people you most want to sell to — as you shape up your idea. Think about where you can find them, what they value, what they’re worried about, and what they need.
You need to work out what your competitors charge for the same or similar products or services, and how much customers are prepared to pay for your product or service – you can do this by asking a sample group of your potential customers. You should also check if there are industry-standard prices for your type of service or product.
Think about the optics of your pricing too – if you charge less than your competitors could your product or service be seen as inferior? If you charge more, can you justify this by offering better quality products, or superior service?
You need to know how much you’ll have to earn to cover the cost of sales and your monthly overheads. You also need realistic estimates of future income and costs to work out when you’ll be in profit. If the numbers show you won’t make profits for some time — even years — do you have funds to carry you through?
Some markets are more crowded and harder to break into than others. For example, if your area is flooded with cafes, what makes you think yours will be a success?