Before you start your small business make sure to evaluate your idea to make sure it will be successful.
Identify A Target Market
To evaluate your business idea you first need to figure out who your target market is. Who will purchase your service or products? Until you understand the audience for your products or services you won’t be able to determine if your business will be profitable.
Create a target market profile by making a list of important factors for your target market. Combine your personal observations, market research, interviews with potential customers, and feedback from colleagues and mentors to create your list.
The more accurate your list is, the more easily you’ll be able to anticipate what your ideal customer needs and better serve them.
Consider the following when constructing your target market profile:
- Age
- Location
- How many people need your products/services
- Gender
- What your target market’s spending habits are
- Occupation
- Marital Status
- Number of Children
- Income
- Ethnicity
Research The Competition
Your business is likely offering products and services which are similar to other businesses. This doesn’t mean your business won’t be successful. In fact, knowing that there’s already a market for your products and services can help you establish that there are already people who want what your business will offer. It can also allow you the opportunity to see if there are any gaps in the market that your competitors aren’t serving.
To evaluate your competition look at:
- Who are your main competitors?
- What products and services do they sell?
- What is their target market?
- What do your competitors charge?
- What is their brand like?
- How many people are selling something similar?
- How big is the market?
Understand whether you’re facing direct competition that matches your products and services exactly or indirect competition with slightly different clients and products and services. Or whether you’re offering the same customers a different product, which is substitute competition.
Then understand what your competitive advantage is and what sets you apart. What’s the strength of your business? What makes you distinctive? Knowing what your competitive advantage is will help your business stand out.
Conduct A Market Analysis
To conduct a market analysis you need to talk to people who fit your target market and see whether or not there’s a market for your services.
Consider gathering people who are in your target market and survey them or conduct a focus group. This will help you determine if you can stay focused on the target market you chose or whether you need to niche down to a smaller segment of the market. Niching down can make your products and services more attractive to a smaller group of people which can be highly effective if the market is saturated.
Financial Feasibility Analysis
Understand what the finances are for your business. This means understanding your start-up costs, where your start-up money will come from, what the ongoing expenses are for your business, the earning potential is for your business to keep going.
When you understand these questions in depth you’ll be able to see if your business will be financially viable.
If your business passes all of the viability tests above you’ll be able to confidentially move forward with your business.
Download the Free Business Toolkit and get guidance on figuring out your start-up cost analysis and determine how much money you’ll need to borrow to get started. And if you’d like step-by-step guidance on everything you need to know to start your business download the Ultimate Guide to Starting an Australian Business ebook for free.