Business ideas must satisfy a wide range of criteria to be tenable. Many businesses fail soon after start-up because the idea – the impetus – is not commercially viable and cannot sustain a profit-making enterprise.
What is a business idea?
Broken down, a business idea is the reason for setting up a firm. It drives everything about the company, from what products and services are offered to how these products are marketed. This idea doesn’t need to be unique, but it must have the potential to capture part of its target market. Put another way, it must offer something different from companies already working in the marketplace otherwise their credentials and head start will make it practically impossible for you to compete.
Types of potential business idea:
A gap in the market
New product, service or invention
Innovative solution to an every day problem
An interest or hobby that can be monetised
Utilised skills you’ve learned in your career
Enough of a market
There needs to be sufficient demand for your product or services or you won’t be able to generate any profit. If the market is growing then this is even better as investors are more likely to contribute and there’s more chance of your business growing in the future. Your market must also be sustainable; do not piggyback on trends as these wax and wane regularly, potentially leaving your business with no customers. Market research is essential to check if your business idea is viable; your market should not be devoid of players but neither should it be saturated. Read our guide to conducting market research for more information.
Able to generate a profit
Business idea must not only sound good; they must be commercially viable. Unless you can prove your idea can generate serious profit, it’s unlikely investors will back you. This is where research is essential; you need to find out how much it’ll cost to make your product and how much you’ll sell it for, factoring it essential costs such as salaries, manufacturing costs, expenses and raw materials. If your idea can’t turn a profit then you either need to pick another idea or find out why it won’t be profitable and take steps to monetise it. Speaking to an experienced businessperson may help.
Potential for further growth
The best businesses don’t only turn a profit but also show potential for further growth, whether this manifests as an expanded product range or activity in new markets. This is why operating in an expanding sector is preferable as you’ll be more able to take advantage of emerging marketing avenues and ensure your reach is always maximised. The web is another very important topic; if you can’t leverage the Internet to increase sales and expand your customer base then you may have problems in the future.
Serves a purpose
Products must solve a problem or serve a purpose or there’s unlikely to be any demand. Customers must feel there is long-term value in your products or will be unlikely to buy from you. Also, this value must be clear – murky benefits will be difficult to sell. Unless you can quickly and clearly prove your products not only solve a problem, but also do so more efficiently than products supplied by your competitors, you’ll have a hard time selling your services.
Your business idea must work within the constraints of a start-up business. Conceptually, ideas may look like money-makers but unless they’re able to be made and sold profitably and linearly then it will be next to impossible to commercialise the idea. Likewise, inventions may require such large amounts of start-up capital to render them untenable. If your business idea focuses on a product, speak extensively to manufacturers before starting-up to ensure you can get the product produced cheaply enough in the early stages. If you can’t, it’s time to have a rethink.