Before quitting your 9-to-5 for a life as a small-business owner, you must first determine whether your business concept is a moneymaker or a money dump.
According to Census Bureau data, business applications have been rapidly increasing in 2023, with over 451,000 filed this month alone. With small enterprises accounting for the majority of this figure, you may be one of the thousands of Americans considering starting your own small business.
Starting a business, on the other hand, does not ensure success. According to Small Business Administration data from 1994 to 2023, approximately one in every three new enterprises would fail during the first two years. Before you start investigating venues and seeking for finance, do some preliminary research and calculations to determine the viability of your small-business plan.
Is your concept a solution to a problem?
Successful businesses assist customers in resolving difficulties. First, decide what and how your company will handle an issue. Framing your idea in this manner can assist you in identifying your target consumer as well as explaining your business to others.
You may create a profile of your target consumer based on the problem you’re solving. This would include their problems, hobbies, and demographic information such as age, gender, location, and income levels. While investigating, take notes on the size of the group and their purchasing habits so that you may utilise them in your income projections later.
You may directly solicit feedback from your target customers after you know who they are and what problem you are solving for them. When they have a brilliant concept, many individuals don’t communicate to potential consumers, says Al Everett, a certified mentor with SCORE, a non-profit that gives free resources to small-business owners. “Talk to people in your family or people you have a lot of respect for about how they buy,” he suggests.
Does your concept stand out from the crowd?
You must also understand who your competitors are and how your company differs from others in the industry. When I meet with entrepreneurs, I attempt to convince them to conduct a SWOT analysis of the competition’s strengths, weaknesses, opportunities, and threats. Everett suggests that they must also do this for themselves.
In addition to researching your competitors, Everett suggests speaking with them directly and even purchasing their products to see how they compare to yours.
Find out where potential clients and your network presently shop, what they like and hate about those establishments, and whether they’d explore alternatives when collecting input. Their candid replies might indicate whether your proposal has a market place.
Have you done the math?
It’s time to do the math to determine how much money your company may make. Begin by estimating your monthly revenue and costs. Estimate your monthly sales and multiply it by the selling price of your product or service to obtain your predicted monthly revenue. If you’re unsure about how to price your goods, copying a competitor’s pricing might be useful.
Next, add up all of your monthly costs. This covers both direct costs linked to the product or service your company will deliver — such as supplies, inventory, packing, shipping, and labour — as well as indirect costs such as rent, utilities, equipment, marketing, licences, insurance, and fees. Vanessa Uteau, owner of Pazza Market & Cucina in San Diego, recommends considering all of your costs. All of your permits, fees, bank fees, and company expenses combined.
Subtract your entire costs from your total revenue to get an idea of your monthly profit or loss. The greater the level of information in these estimations, the more accurate the computations.
You might want to explore making a few new estimations depending on changes to your income and spending assumptions. Selling your goods at a greater price, for example, would improve your monthly income figure. Alternatively, instead of leasing office space, you might cut monthly expenditures by operating your business remotely.
The next stage is to create a business strategy.
If you still believe your concept is lucrative, the next stage in your journey is to prepare a business plan. You’ve already completed some of the necessary research for a business plan, such as investigating the market and your competitors, defining your typical consumer, and creating basic financial predictions.
It may also be time to seek assistance, particularly if you lack a business experience or have never ran a small business before. SCORE business mentors, Small Business Development Centres, and organisations for veteran, women, and minority company owners can all provide free assistance when beginning a small business.
In conclusion, the journey of turning a small-business idea into a profitable venture requires careful evaluation, thorough research, and strategic planning. While the path to achievement may be difficult, the potential benefits make it worthwhile. By following a systematic approach and considering key factors, entrepreneurs can increase their chances of creating a thriving and profitable business.
The process begins with identifying a viable small-business idea that aligns with personal skills, interests, and market demand. Conducting comprehensive market research enables entrepreneurs to gain insights into consumer behavior, competition, and potential profitability. With this information, companies may create a sound business plan including their objectives, target market, marketing strategy, and financial predictions. It is crucial to test and validate the idea through minimum viable product testing and obtaining feedback from potential customers. This iterative process helps refine the concept and ensures it meets market needs.
Financial considerations play a vital role in determining the feasibility of a small-business idea. Estimating startup costs, projecting revenue streams, and assessing profit margins help entrepreneurs understand the financial viability and potential return on investment. Mitigating risks and challenges is another crucial aspect of building a successful business. By identifying potential obstacles and developing contingency plans, entrepreneurs can navigate uncertainties and adapt to changing market conditions.
Seeking expert advice and mentorship can significantly contribute to the success of a small business. Engaging with industry experts, joining entrepreneurial communities, and seeking mentorship from experienced business owners provide valuable insights and guidance. Learning from others’ experiences can help entrepreneurs avoid common pitfalls and make informed decisions.
While there are no guarantees in the world of small-business entrepreneurship, a well-researched and carefully planned idea stands a greater chance of success. It is essential to approach the process with an open mind, perseverance, and a willingness to adapt. With dedication, hard work, and a strong foundation, entrepreneurs can transform their small-business ideas into profitable ventures that not only generate revenue but also make a positive impact on the lives of customers and the community. Remember, the potential to turn your small-business idea into a profitable reality lies within your hands—embrace the journey and unlock your entrepreneurial potential.
