You have a business idea but you not quite sure if you should start a business. Evaluating and carefully assessing your business idea could determine the failure or success of your new venture.
Here Are 5 Tips You Can Use To Evaluate Your Business Idea:
1) Intellectual Property
A unique product or process, you should consider trademark or patenting. This will provide legal protection of your product prototype. While you can do this online, it may be best to discuss with a patent attorney. Companies and Intellectual Property Commission (CIPC) provide online information checkout, www.cipc.co.za
2) Know Your Numbers – What Are The Start Up Costs
The cost of testing your business idea will help you understand the investment required on a small scale. Take time to include all the costs associated with your business idea; data, travelling, airtime, cost per product, cost per service, time (consider yourself a consultant for your business what rate would you charge per hour?). The question you must answer is, “How much will it cost you to start this business?”. Depending on the type of business this may include equipment, laptops, desktops, mobile phones, internet connectivity, vehicles etc
3) Research Your Market And Responses To Your Products & Services
While most start-ups consider the research part less important it is actually during this phase where you find accurate information. Research can be a gratifying process if done using approaches which you find enjoyable.
Firstly, check out your competitors’ online, visit stores offering your services, and try to identify the market leaders in your industry. Secondly, ask questions, how they started, can you meet the owner, order and test the products and services of your competitors. Economic indicators provide information related to industry specific sector performance. This information can be useful to assess whether there will be a future need for your products and services. Local business chambers provide information to business regarding the market. Local municipalities have access to statistics related to business, population and LSM levels in most cases this information is freely available at Local Economic Development Offices. Finally, the internet provides a wealth of information from a global and local perspective and can provide information which is not always easily accessible. Now that you have the information it is time to test your idea in the market.
4) Test Your Business Idea
By this stage you should have reliable information about the strengths and weaknesses of your business idea. Always test your business idea on a small scale (lean start-up), you will have feedback which will help you refine or make changes prior to investing, loaning or formally entering the market.
Now start selling your products and services on a small scale to test who is willing to buy and how much they are willing to pay. Avoid selling to friends and family, try selling your products and services to potential clients you have identified during your research.
During this stage it is important to keep notes of your clients and the feedback you receive about your products and services. Request feedback from your clients about your products and services. Have you received orders, letters of intent, and sales contracts? Keep a close eye on your business finances by checking your bank account and cash flow. Know your numbers!!!!!! What was your profit margins and investment costs, have you made profit????????
An example: My business idea is manufacturing and selling mobile phone covers. I invest in the equipment and start manufacturing, once complete I go to various stores and individual clients to sell. During this stage I receive requests for different colours and designs of the mobile phone covers. This means the stock which I have may not sell although I have invested money and time. In this case I should have outsourced the manufacturing and tested the market first. This approach would have saved costs and allowed time for accurate research.
5) Back To The Drawing Board
Now you have real life experience of your business and what needs to be changed, improved or included in your products and services. Most importantly you tested your idea on a small scale which did not require huge investment. Assessing the profitability or potential profitability after testing your business idea will help you make a decision. Evaluate your projected startup costs and compare to actual costs, do a cash flow projection for 12months to help you understand the business income and expenses. Should you plan to proceed, the next step would be, choosing a name for your business, registering your business, opening a business account & finding support to help you grow the business. (Free 12 month cash flow template for download on www.j29.co.za resources page)