Testing the Idea
Before securing financing or infrastructure, a business idea should be subjected to careful examination and viability assessment. Among the various evaluations that serve to illustrate the strengths and weaknesses of the concept are the following:
* Market Research: Clearly the most important aspect of any business idea is determining if there is a viable market for the product or service. A significant portion of business failures could be avoided by engaging in honest, thorough research relating to market potential.
An important part of assessing a market is a candid evaluation of the level of customer acceptance to the idea. This is particularly important when engaging in the launch of a product that has no established customer base. Beta testing and customer surveys can help establish the size of a market prior to making a major investment.
It is also helpful to assess the state of the market in terms of potential demand and whether it is growing or shrinking depending on area demographics.
* Develop a Business Plan: Even in the infancy stage of a business concept, formulating a business plan will illustrate the strengths and expose the weaknesses in the idea. In particular, identifying markets and developing funding requirements will provide a blueprint for the additional quantifiable research that will be necessary to validate the concept.
* Consult Professionals: Any successful business idea can benefit from the insight of professionals both inside and outside the industry. Learning from others with prior experience of a similar nature can help avoid obstacles and provide shortcuts to success. This group would include SBA consultants, those in the banking industry, trade association members and consultants among others.
* Determine Profit Margins: Robust sales are meaningless without the ability to generate a profit sufficient to cover overhead while providing a reasonable return on investment for the owner. Finding the appropriate price point for the product or service is critical in determining profit margins.