So you think you’ve got a great new business idea and you can’t wait to get started. While being passionate about your latest concept is important, you must determine whether or not it’s truly a great idea that can fuel and drive a successful business plan. There are many variables to consider when determining how viable your proposal really is. To get you started in the right direction, we’ve come up with a few essential questions to ask yourself in order to determine whether or not your business idea stands a chance for success.
Is your business idea able to make money?
Having a great business idea doesn’t necessarily guarantee success. Before you quit your day job and spend your life savings, you first need to establish whether or not the project is likely to earn money. Whatever type of business plan you have, you’ll need customers. Paying customers support a clear vision and determine which ones have the greatest chance for success.
Will Schroter, co-founder and CEO of Fundable claims, “An idea is just an idea until you have a paying customer attached to it,” He added, “Anyone can discredit a simple idea, but no one can discredit paying customers.”
Many individuals are eagerly searching for unique and innovative ideas to launch, but not all of them go on to form profitable businesses. It can be challenging to convert a brilliant idea into a successful operation if it’s not financially feasible from the start.
Does your idea solve a problem or fill a need?
According to Michael Dell, founder, chairman, and CEO of Dell Technologies, the best business ventures solve a problem in some way. “Every breakthrough business idea begins with solving a common problem. The bigger the problem, the bigger the opportunity,” he said.
People spend money because they need to solve a problem. Think about it, when you’re hungry, you buy food. When you have nothing to wear, you buy clothes. When you are sick, you go to the doctor and buy medication. Businesses survive by offering solutions to peoples’ problems. To be profitable, your business needs to solve a problem.
How will you competitively price your product or service?
To create a successful business, you need to invest money. Not only that, you need to spend resources on advertising, pay employee salaries, and much more. The final stage is selling your product or service to a customer for a price. Once you begin selling, you need to compare how much money and effort you invested and how big the profit was. Are you making or losing money?
Many companies struggle to reduce profit loss or cut down on overall expenses. If the price of your product or service is too low compared to the production cost, you will lose money. If it’s too high, people won’t want to buy it, so again you lose profit. If you realize that you can’t lower production costs, you need to develop a different strategy or change your idea.
Warren Buffett, business magnate and CEO of Berkshire Hathaway says, “The single most important decision in evaluating a business is pricing power… If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”
A great business idea is the foundation on which you can build a successful operation. The bottom line: successful businesses make money, solve problems, and have practical markets and thoughtful price points. If those three things apply to your business idea, you just might have a future successful business on your hands. For a deeper dive into testing your business idea for viability, there are many qualified resources available. We recommend checking out the #BusinessTO YouTube Channel to help you with your business idea in greater detail.
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