Starting a Business

dwilliams · 04-09-2007, 04:40 PM

Is your Business Idea Feasible?
The great majority of new businesses fail in the first few years. As you look at the feasibility of your business idea, think of it as planning against a business failure. The old saying “Failing to plan is planning to fail” is certainly true. You should evaluate your business idea with the following checklist to determine its potential.

1. Personal Attributes? Do you have the personality, experience to be an entrepreneur? See “Are You an Entrepreneur?” Are you ready to work the long hours? Do you have staying power?

Are you a self starter?
Are you good at planning?
Are you good at making decisions?
Can you "stick with it"?
Are you a hard worker?

2. Describe Your Business? Take some time and write down answers to describe your idea. These are the essential elements of your business plan.

Clearly describe your products / services
Who will use your product /service?
Who will make the decision to buy your product / service
Why would they buy your product / service and not your competitor’s?
List your competitors.
List your suppliers.
What resources will you need? (Employees, equipment, buildings)
How will you advertise?

3. Do you understand your market? You need to understand where the market for your product or services is headed. Your market may be nationwide or it may be local. If yours is an Internet business, it may be world-wide.

How big is your market?
Is your market growing or shrinking? By how much?
Who is your largest competitor?
What has made them successful?
What trends are happening in technology?

4. Is There a Market Opportunity? You need to look at if there is an “unsatisfied need” for your product or service. You should have a clear yes to at least one of the following.

Will your business satisfy an un-met need?
Does demand for your product / service exceed supply?
Does your product or service have some significant advantage?

5. Critical Issues. If you answer yes to any of the following, your business may be in trouble from the start. These issues need to be resolved before you move ahead.

Will you have any shortages or restrictions from your suppliers?
Are extensive capital investments or capital equipment required?
Are you having problems securing enough capital for start-up?
Are there barriers to effective marketing?

6. How much do you need to earn? As you start up your new venture, you need to make sure that you will have enough reserves and or income to meet your basic needs. Many times first year sales are below expectation, will you have enough money to survive?

How much do you desire to earn?
Are you prepared to earn less in the first 3 years?
What is the minimum you require to earn?
Do you have a back-up source of money just in case?
How much could you earn working for someone else?

7. Set a Budget. You need to set a financial plan for your business. Project out your profit and losses by month for the first 2-3 years. For more information look at Cash Flow and Funding.

Figure out what your sales will be by month.
How much will direct product costs be? (raw materials, labor, outside services)
Do you know what your expenses will be for: rent, advertising, utilities, phone, auto, etc.?
Do you know your selling expenses?
How much cash will you require?

By looking at the key factors for business success, you can greatly improve your “odds” of not only “surviving” but prospering in your business. It is much better to plan and question every element of your business idea before you put down your hard earned money and move ahead.