When you are coming up with ideas for a small business, often your mind can go wild with business concepts, but the key is to come up with an idea that has a profit center and a niche target customer because you need to turn that idea into a sustainable business. In my bestselling book, Become Your Own Boss in 12 Months, I lay out my Emerson Planning System which walks you through life planning, financial planning, your business concept, your marketing plan, your business plan and launching your business, but evaluating your business idea really all comes down to a few basic realities. Here are 5 questions every business owner should ask themselves before going into business.
How much does it cost to make your product or deliver your professional service? There is a simple way to calculate your entire costs associated with your product or service. Look at your hard costs including labor, materials, packaging, and shipping. There are soft costs too such as marketing and business support services such as accounting and legal expenses.
How much do you sell it for? Once you know your hard costs, you must then figure out if there’s is any or enough profit margin in it. Look at the competition, and pull industry data to determine whether your cost plus a healthy profit margin is reasonable in the marketplace. Remember, it’s not what you make it’s what you keep that matters.
Can your business be easily copied? If you are creating a business that is not terribly unique you could be in trouble. What is your secret sauce that only you bring to your business? If your business can be easily duplicated by bigger competitors, that is a sign that you might need to go back and come up with a unique twist. If you are just selling imported goods, anyone can do that. Be sure that you can survive in business beyond one year.
Does your marketing make sense? Do you have a specific target customer for your product? Do you have a helpful website and good shopping cart experience? Does the name of your business tell you anything about what you do? Is your packaging unattractive? Do you have a monthly marketing budget? Are you measuring your marketing activities? Simple things like making sure the name of your company is easy to read can make a big difference.
Can you sell yourself? In business you are selling yourself as much as you are selling your product or service. You must carry the confidence to make people believe in you. If you’re trying to sell your services to an investor or a big client, you’d better be ready to answer any questions about your product or industry. First impressions are everything in business.
If you can answer these questions, your new business is on the right track.