We've written an expanded version of this popular article. Stay here for a quick read or visit our guide - How to Choose a Business Idea - for more in-depth information.
1. Is there a market for my business idea?
Very thorough market research is an absolute must for new business ideas. If there's not enough demand for your product, your business will never take off.
Plus, it is really important to understand your customer before trying to sell to them. Writing a customer persona can help visualise and focus on your clients.
Don't forget, you are more likely to get your great business idea off the ground if it has a sound set of USPs - Unique Selling Points. This differentiates you from competitors and makes your product more desirable. Competitor research can help you understand the market better.
It is important to do thorough market research
Understanding your market is key to success
Competitor research helps you understand who you're up against
2. Does my business idea make life easier or solve a problem?
Every product serves a purpose - successful businesses are rarely built on novelty value. It could save people time, make a much-used process easier, or provide them with a new luxury. It's crucial to be clear about how your product helps people, solves a specific problem or fills a gap in the market. Again, market research will help. If your business has an outstanding purpose that helps people then why not form a CIC - a community interest company?
Know what purpose your product serves
Make sure this is in response to a market gap
3. Is my business idea viable?
You need to be realistic. There's nothing wrong with being imaginative and brainstorming. But your business will only work if your product is technologically possible and manufacturing costs are feasible. You'll also need to think about the number of staff you'll need; whether you require premises...etc.
Unless you have lots of your own money to pour in, you need a business that can operate cheaply to begin with and doesn't require dozens of staff. Or you'll need to think about business finance and options for funding a new business. It is a good idea to write a business plan to help you think through the logistics of what you're considering.
Be realistic about what you can achieve with what you've got
Low starting costs and fewer staff are more likely to work
Business finance options can give you startup money, but you'll need a business plan
4. Can my business idea make money?
Work out how you'd make your product and how much you'd sell your product and/or service for. You need enough profit left over to sustain a business. Factor in employees' salaries, expenses, administration costs, labour, transport and material costs. The smaller your profit margin, the more demand you need to make up for it. Talk to manufacturers to find out about costs. Growing markets are going to appeal more to investors and provide better business opportunities.
Work out all costs
Compare with the estimated sale price
Smaller profit margin needs higher demand
5. Has my business idea got room for growth?
There are four main strategies to achieve business growth:
Put simply, that means sell more to existing customers, start selling to new customers, or develop new products.
New technology provides enhanced opportunities to do this by automating processes and reaching people around the world.
It's best if plans for growth correspond with how the market you're working in looks set to develop over the next few years. Operating in an expanding sector is a much better guarantee for growth potential.
Avoid markets based on trends - you don't want your idea to become passé after a year or two.
Make a note of expanding sectors, more products and potential locations
Look at how your market will develop
Growth markets preferable