According to the Small Business Administration, 600,000 new businesses open each year. Unfortunately, around 90% of new enterprises will fail and 10% won’t survive their first year.
In many of these failure cases, the founders did not adequately determine whether their business idea has merit and can turn into a viable, profitable business. It takes more than a creative idea and a dream for a business to succeed. Along with the entrepreneur having the right business foundational blocks in place and access to sufficient capital, the business needs to have the capacity to earn a profit.
Here are a few ways to determine whether your next business concept will succeed or fail:
Does your product or service solve a problem for a sufficient number of people?
Ensuring that your business will address the needs of a large enough audience helps to gauge sufficient revenue opportunities. While it’s important to have a well-defined, target audience for your product and service, you need to ensure there’s a sufficient number of individuals or businesses who will buy what you’re selling to reach sales goals and be profitable.
Will your audience be willing to pay for your product or service? Is it already available for free?
If your product or service is already available at a low cost or free from other sources, you’ll want to ensure your company is offering unique selling points that cannot be found down the street. Having the right price point is critical.
Do you Stand Out from Your Competitors?
You’ll want to conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) among your potential competitors. If your product or service idea is very similar to what’s already available in the market, you’ll want to refine and enhance your concept so that you’ll stand out from the rest.
Develop your financial forecasts with at least basic information including your costs, what you’ll need to earn to stay in business and earn a profit. In the beginning, you’ll work with estimates, but you will gain a better sense of whether the numbers work before you finalize your product or service plans.
There are multiple items to consider when determining whether your ideas will turn into a profitable and lasting business opportunity. The Institute for Entrepreneurial Leadership offers multiple resources to help you get started. We offer a free “Write Your Business Plan in 14 Days” virtual program as well as 1:1 review sessions covering business topics such as financial projections and digital marketing through our partnership with Verizon Small Business Digital Ready. Learn more at weareifel.org or fill out IFEL's interest form today.