Every new startup wants to know the answer to one question: Will my business idea work? While there is no hard and fast rule when it comes to whether a business will make it or if it will fail, there are a few ways to know if the idea has legs.
Here are five ways of telling if your idea is a good one.
1. You understand the competition
Every industry has its competition. Analysing the businesses in the space you wish to enter can help you develop a rounded vision for your business plan.
Think like Charlie Thuillier, one of the founders of British ice cream company Oppo Ice Cream. As Thuillier explains, if a competitor is doing something that is selling well, “work out a way to better it”.
Run a SWOT analysis of your key competitors, comparing strengths, weaknesses, opportunities and threats. Armed with that information, you can develop a product or service that goes above and beyond.
2. No one else is doing it, or doing it like you
Have you had that ‘penny-drop’ moment when thinking about a business idea and asked yourself, “Why doesn’t that exist yet?”
Your idea should solve a burning pain point for customers and stand out from the competition. You don’t have to try to reinvent the wheel, but your business idea should fill a gap or approach a problem in a new way.
3. Customers like the idea
Getting input from potential customers who can objectively review your business idea is absolutely necessary for it to work.
Sydney based car-sharing company, GoGet, started out at Newtown markets in 2002. Two friends had a fresh idea that would disrupt the Australian car hiring industry. They borrowed a car for the day and asked local residents at the markets if they would give up traditional car ownership for access to a fleet of cars.
The idea was a huge success with the community and the business owners had the customer insight to transition the idea into a successful service offering.
4. The price is right
Pricing your business idea is hugely important – the idea will work if the numbers add up. Consider a few key points when working out your pricing strategy:
- The cost to the business to provide the product or service.
- The amount customers are willing to pay.
- The lifecycle of your business idea.
- Demand for the product or service.
- Competitor price points.
Build on the pricing strategy by calculating your business breakeven point, a calculation of the number of sales needed before the costs are covered, and the business starts to profit. Business Victoria has done the hard work for you, with formulas to work it out.
5. You’re committed
As a business owner you are going to face challenges and roadblocks on your journey. All entrepreneurs fail at some point. Those hurdles are not easy to overcome, but if you are enthusiastic and committed to your business then you will be able to focus on the end goal.
When you live and breathe your business, you are empowered to make it work – challenges will become opportunities.
Are you considering starting your own business? Find out more about how Rare Birds can help turn your idea into a fully-fledged business venture.