You have an idea. It doesn’t matter what it is or where it came from. With the right planning in place and execution, that single idea can give you an opportunity to build a profitable business.
More specifically, it is not the idea itself but the way you develop it that decides whether or not it becomes a profitable opportunity. The key is knowing how to flesh out that idea to determine if it has profit potential.
Know the Stats
According to the U.S. Small Business Administration, there are 30.2 million small businesses in the United States, and they employ 58.9 million people.
Every year about 543,000 new businesses are started. Many of them fail. To avoid that, you need to become profitable.
Profit happens only when other people see the value in your product or service and invest in it. How do you know if your business idea can be profitable?
Determine What Value Your Product/Service Offers
In nearly all situations, a product is only viable if it solves a problem or provides something a person needs or wants and cannot get anywhere else.
That sounds easy enough, but it’s important to define what this value actually is. What type of problem are you eliminating for the customer using your product or service? Your first step is to define this value.
Know Your Target Audience
Next, you need to consider who your target audience is. Your target audience helps you define if your product or service is viable. Consider these questions:
- Who specifically needs your product or service?
- What is their budget for something like you have to offer?
- Do they have access to another solution that is nearly as good as yours?
Outline the demographics of the most likely person to buy your product. As you work to develop it further, you’ll need to conduct market research to understand what your audience is likely to think of your product.
Right now, consider who they are, where they live, and what their budget is for what you have to offer.
Align Your Financial Goals
Profit is only possible if the fees you charge are higher than the cost to make or offer the product/service. For this reason, you need to create a financial model that helps you see profits and losses.
Here are some initial questions to ask yourself:
- How much will it cost to make this product or provide this service?
- How much will the market pay for your product/service? This is not just a guess of what you will charge but is based on how much other products and services like yours are selling for right now.
How Much Capital Do You Need?
I’m a big fan of starting out conservatively, testing the market and then seeing what works. This is a great way to then know where you need to dedicate your time, efforts, and money to move the needle.
For example, if you’re starting an online business, know that you can easily do that without a ton of capital up front. By harnessing the power of digital technologies, you may be able to get started with as little as $100.
Pushing for Growth
Growth is a major factor when it comes to entrepreneurial success. Once you thoroughly understand “who” you are targeting with your products/services, the next few steps to consider are the following:
- How will you reach them online? Know which social media sites they spend most of their time on. Doing so will allow you to then build out the right advertising plan to get your products/services in front of them.
- How can you build a website that will make your target audience see themselves as a part of your brand? Be visual, clear and succinct.
- Forecast your sales goals. This is a great way to help you start off with a benchmark so that you can focus your efforts on generating revenue to support growth initiatives.
Stuck? Consider Other Options
Many of the products/services built today are done so after trial and error. Often, the initial idea does not work. Or it may not provide the most viable solution. That’s okay—remember, it is only an idea. From this idea, though, you can form other opportunities. This is a pivot.
A pivot allows you to take the base idea you created and the information you’ve learned in the research phase and craft a new idea. Yes, you still need to go through all of the testing to determine how viable this new idea is. Being flexible with your methodologies but clear on your goals will help you position the right perspective to keep pushing forward.
Know that “overnight success” may take months to years to happen. Be patient with the process. In fact, fall in love with the process of failing, learning, and improving. The importance of taking the results from the action you take and finding a better working plan will only help you gain more clarity and ultimately, profitability.