Is Your Home Business Idea a Good One?
How to do a simple business feasibility study.
Want to know whether or not your business idea is a good one? A simple business feasibility study can help. A feasibility study looks at whether or not your home business idea can make money.
There are three conditions which can determine whether or not you will have a successful home business.
1) Is there a market for your product? Are there people who like what you want to offer?
2) Can you actually make money?
Is the market willing and able to pay for what you offer?
3) How many competitors will you have? Can you set yourself apart from others who are offering the same or similar product or service?
If you want to know what makes a successful home business and whether or not yours is poised to become one, carefully consider these questions. This simple business feasibility study could save you from sinking too much time and money into a lousy home business idea.
Before you get started, you should have your home business idea mapped out. What are you going to offer and how are you going to offer it? What will it cost to start and manage your business? How will money be earned, and how much will you need to charge? Once you have your idea formed, you can proceed to determine if it's viable.
1) Does Someone Want To Buy What You Are Selling?
In the end, your home business' success will be determined by whether or not there are people who want to buy what you are selling.
Is there a market for your product? You'll have a tough time selling wool sweaters to Phoenix residents in the summertime. Basically, you want your product offering to satisfy an unmet need for your potential customer.
Another thing to consider as you review your product offering is whether your product or service has something that will encourage a customer to return.
There is an old marketing adage that states, “it costs 10 times more money to get a new customer than to retain an existing one.” It is a great idea to find ways to continually drive your existing customers back to you for service updates, refills, the newest products…etc.
2) Can You Make Money?
There maybe be many people who want what you're offering, but your business isn't a good idea unless they're willing and able to pay for it. Many families would like to have errand services or a housekeeper, but not many can or want to spend the money on it.
Once you've determined there is a paying market, you need to figure out what they're willing to pay and if it's enough. To start, you need to calculate the cost of providing your product or service (supplies and overhead expenses), as well as the value of your time and the profit you want to earn to determine what you need to charge to make money. Next, you need to find out if that's a price customers and clients are willing to pay.
You may find that initially, the numbers don't work out, but if you are willing to evaluate where the problems are and make the needed changes to your business, many times you can figure out a business model that will work.
3) How Much Competition Will You Have?
Competition isn't bad. In fact, it's a good thing because it is an indication that there is a buying market and money to be made. But, if there is a lot of competition, you'll have to fight your way in to compete. In essence, you'll have to figure out how to lure people who are already buying from one place to your business.
To attract customers and clients in a crowded market you'll need to determine your competitive advantage, how you're different and can better meet the market's needs from your competition. This starts with doing market research to understand what people want or need, and then determining your unique selling proposition (USP), or how you can best meet the market's need.
then identifying either a specific segment of the market to target, or how your product or service better meets the needs the market.
There are a variety of ways you can set yourself apart from the competition. You can offer a better price, a higher level of service, faster service, more options or less options (for easier choice), or target a specific segment of the market. For example, most people need cars, but features and pricing set a Honda apart from a Porsche. Both can get people from place A to place B, but each offers unique advantages (and disadvantages). Honda's are affordable and reliable. While a Porsche can be affordable, fun, and a status symbol, they're more expensive.
You have a basic overview to do your own feasibility study to determine if your home business ideas is a good one. If you need more details, you can create a formal feasibility study.
This article is part of a 10-Step Guide on How to Start a Home Business.