We enjoy discussing how to choose a great business idea because it is one of the most exciting and crucial aspects of beginning a company. However, coming up with a brilliant idea is only the first stage; it’s vital that you properly investigate the idea that will become your future source of income. Most business owners soon understand that it’s not only the person operating the company, the marketing, or the technology that makes the difference, it’s also about the company’s idea quality and profitability.
When you start a business, you must approach the concept or opportunity from a different perspective than you might expect. The majority of people make poor business decisions based on one of two personal biases:
1 – They’re familiar with the industry. A hairdresser opens a salon, a lawyer opens a law firm, and so on. In general, this can be a tremendous blunder. They’re focused on the task, not the company. Just because you can cook well doesn’t guarantee you can run a restaurant. What’s more, it doesn’t necessarily imply that a restaurant would be successful in your area.
2 – They’ve fallen in love with a product or service. Again, just because you like something doesn’t imply you’ll be able to make money from it. This is especially true for new business owners. It’s difficult enough to learn how to operate a business; you don’t need to make it any more difficult by doing something you enjoy rather than something people enjoy paying you a high profit for.
How can you be certain that your intriguing idea is also something from which you can profit? There are three important factors to consider:
1 – Check to see if the product or service is a repeat purchase. This is by far one of the most important factors in achieving long-term business success. You have a product or service that people will continue to buy.
2 – Make sure you have a high profit margin. There are very few companies that can compete on a “we are cheaper” marketing platform for the long term. In any new business, you should keep an eye on your cash flow—and if you’re trying to work with low profit margins and make volume gains, you’ll need a lot of working capital to get you through the lean times.
3 – Create a strong support team because a good idea alone will not suffice. The idea is most important, but a great idea requires a great team of people to give it wings.
Next up … How to Start a Business: A Step-by-Step Guide Part 2 – The Business Plan