Is Your Business Worth Investing In?

The effect of the recession

The recession has changed the competitive climate for most every type of business and it will likely remain changed for some time. No longer is it enough to simply find a growing market, hang out your shingle, and manage the business you start into success. In today’s economy, a business grows only by finding and serving customers with money to spend. But, these customers have become scarce and are much sought after by the competition. So, to acquire customers for your business, more and more, you must steal them from the competition.

Find a business idea with profit potential

To acquire customers in today’s economy, you must start with a business idea that has profit potential. And, to find that kind of idea, you must answer the following questions in the affirmative with confidence.

  1. Have you identified a substantial number of customers with a compelling need? And, are these customers willing to spend money on the package of goods and services that your business intends to sell to them to satisfy that need?
  2. Will these customers prefer the package of goods and services offered by your business to those offered by the competition?
  3. Will your business be able to create and market this package of goods and services at a profit?

Fortunately, the Internet has brought free and easily accessed resources to help you answer these questions. It then becomes a matter of systematically using these resources to analyze your industry, the competition, and your customer in order to determine whether or not your idea for a business has profit potential and is therefore worth investing in.

Evaluate your business idea

In order to assess the profit potential of your business idea; you must complete the three stages of a business concept evaluation. Each stage requires you to complete some common sense research and analysis in order to answer the above three questions and determine if your idea has profit potential and is worth pursuing. A brief description of each stage follows.

  • STAGE 1: Find the sales potential of the idea This stage has you take a look at your industry and identify challenges and opportunities. It also has you narrow your focus on a defined market area and target customer group.
  • STAGE 2: Verify your competitive strength In this stage, you will research and analyze the competitive climate for your business as well as your target customer, particularly what motivates them to purchase. You then use the results of your analysis to design an offer (a package of goods and services) that will appeal to these customers more than the goods and services sold by the competition. This stage ends by having you determine your initial promotional strategy and estimate sales based on the results of a market test.
  • STAGE 3: Evaluate the profit potential of your business idea In the final stage, you will identify a strategy for pursuing your idea for a business and estimate the expenses associated with implementing that strategy. This should give you confidence in your estimate of the profits your business will generate. It will also allow you to analyze the effect on profits of different assumptions used in making your calculations, (especially those concerning market conditions), and determine break-even points.

It is work! But, it’s worth it!

Whereas working your way through these stages might at first seem like a big investment of your time, ignoring the profit potential of your business idea can cost you much more in terms of time and money. It doesn’t make sense to plan your business unless you know it is based on an idea that shows a promise of profits. It makes even less sense to start it without an evaluation. So, unless you have time and money to throw away, it makes sense to evaluate the profit potential of your idea FIRST!