Developing a Business Idea

If you decide to start a new business, you will need to spend time researching a business concept. One of the greatest things about being an entrepreneur is that you can work on something that interests you and that you are passionate about. Unfortunately, passion doesn’t always translate into profits.

Search, search, search! The more information you collect about the potential demand for your product or service, about your competitors, about the needs and wants of your potential customers, the greater the likelihood of achieving success.

Before starting a business, you need to evaluate your idea and determine what the possibilities are for making a profit from it. This document lists some things you should consider when evaluating your idea.

Is your idea really original?

You will need to do some research to find out if your idea is really original or if someone else has a similar product or service. Innovating in a new market, that is, doing something no one else is doing, can be more profitable than competing with a company that offers a similar product or service. A business specialist or mentor can help you evaluate or improve your original business idea.

Will people be willing to buy your good or service?

Great ideas can only translate into profitable business if people are willing to buy the product or service.

First, you need to determine the target audience for your product. Do you intend to sell to young people or to older people? Is your product primarily intended for women, men or both? Are you going to sell to people, other businesses or the government? What level of income should people have to be able to buy the product or service?
Once you know who you are going to sell to, you should consider doing market research to find out if your target customers would be interested in buying your product or service and how much they would be willing to pay for it.
If people are interested in your product or service, but aren’t willing to buy it, you can consider other business models. Companies, especially in the service sector, offer their services for free or at low cost, but are able to make a profit in other ways, such as through advertising.

Who are your clients?

Before you sell anything, you need to know who you are selling it to. If you don’t know who your target market is, you could be trying to satisfy the needs of too many different customers, which could lead to you offering a product no one wants or a service no one needs.

By conducting research, you can determine the age group, gender, lifestyle, and other demographic characteristics of people who have shown interest in your product or service. It is important to provide supporting statistics, analysis, figures and facts that can demonstrate to the reader that there is a demand for your product or service.

When you identify the general profile of your customers, you could describe them using the following elements:

  • age, usually determined according to age groups (20 to 35 years old)
  • sex
  • marital status
  • place of residence
  • household size and description
  • income, especially disposable income (money that can be spent)
  • level of education, usually the last level of schooling completed
  • the profession
  • interests, purchasing profile (what do your customers want?)
  • cultural, ethnic and racial origins

For example, a clothing manufacturer might consider many potential target markets: toddlers, athletes, or teens. By drawing a general picture of each of your potential markets, you can decide which are the most realistic, pose the least risk, or are most likely to allow a profit. Market research of the most likely target groups can also help you distinguish true target markets from more unlikely possibilities.

Once you have identified your target customers, you will want to know their needs and preferences. Here is some of the information you will want to know about your potential customers:

  • Do they have potential problems that your product or service could fix?
  • What are their needs and expectations for the product or service?
  • What categories of goods do they want?
  • How do they spend their money?
  • Where do they shop?
  • How do they make their spending decisions?


Note that if you want to determine the profile of your customers and understand their needs, you will need to do market research.

Will you be able to compete with the competition?

Once you have identified your customer base, you will need to know who else is selling similar products and where. Will you be competing with a company that has already marketed its product? If your idea is a consumer product, check to see if stores and catalogs carry it, or visit trade shows to find out what other products are available and which companies are marketing them. You need to determine why customers will buy from you rather than the competitor. Is your product superior or priced lower than that offered by other companies? The best way to find out is to conduct market research using available data or by conducting your own survey.

How will you distribute your product or service?

In order to distribute your product or service, you can either start your own business or seek out an existing business to purchase your product or idea. It might be easier to start your own business than trying to convince someone else to distribute your product or service. Many potential buyers are more willing to negotiate with a company as a supplier than to take over a product or invention from an independent person.

Promoting the idea

An idea or invention only pays off if you have customers to buy it. Have you considered how customers will know or find your product? Here are ways to market your product:

  • on the Internet by means of a website;
  • at trade shows and by professional associations;
  • through newspaper, radio or television advertising;
  • through the distribution of brochures.


Patents & intellectual property


You might want to protect your idea, invention or product from being copied by others. You need to know if the tangible result of your intellectual activity is eligible for intellectual property protection and how to obtain it

Local restrictions

Before moving forward with your business idea, you should find out if there are any regulations that might prohibit or restrict the sale of the proposed product or service, or the activities of your business.

Resources

Developing a solid business plan can be critical to the success of your business. A business plan will help you determine how much money you need to start your business. Also, a lender or investor will want to review it to determine your eligibility for financing. Your plan should give a clear outline of how you expect to earn and include an estimate of projected sales for the first year. Base your estimates on your market size, competitors, price, marketing plan and industry trends. Also specify in your plan expected expenses for things such as supplies, rent, salaries, and insurance.

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