You may have a great idea for a
business but don’t understand if you can turn this into a business.
The first thing you must do is carry out some market research, while
you think your idea is great, you need to assess if other people
think the same.
Market research will vary depending on
the type of business you intend to open, but ultimately any market
research activities you undertake are to end up with the result of
giving you a clear answer to decide if you can make your idea turn
into a profitable business.
When you do market research you can
easily be side tracked by believing too strongly in your business
idea but you must carry out the research impartially,if you are to
make a meaningful decision.
Your market research will involve
analysing if there is competition within your proposed trading area,
analysing their skills and weaknesses so you can decide how you
intend to compete. Some of the questions you need to ask your self
Can you offer a better product or
service than your competition?
Can you offer better value than
Can you supply your product or
service on better terms than your competition?
Do you have a superior product or
service knowledge than your competition so you can give your
customers a better service?
When you have assessed the competition
and considered the questions above consider if the answers will give
your customers a reason to trade with your business.
The next part of your analysis would be
to perform a cash-flow forecast to analyse if the business can be
funded. The cash-flow forecast will identify how much money you need
to start the business, this can come from your own funds, loans or
supplier credit terms. You also need to calculate when costs will be
incurred and what value of sales are needed in order to get the
business to pay its costs then a profit. This Cash-flow forecast will
demonstrate to you when the business will hit its break even point
and when profit will start to be produced (if your assumptions and
calculations are correct). You will need to consider your contingency
plans as you may incur unexpected costs or lower sales than expected.
Please use this process to identify
potential pitfalls in your ideas, not just convince yourself that
your idea is brilliant. We need to be very objective at this stage
otherwise we could go blindly blundering into a badly planned and
misconceived business and risk our money and time unnecessarily.
The age old saying ‘If you fail to plan
the you plan to fail’ is very apt when it comes to business planning.