You've come up with what you think is a great idea for a new business, but is your business idea viable? Common wisdom is that the best way to find out is to work through a business plan, which because of all the research involved, can be a long drawn out process.
But don't despair. Maybe you don't need to write a complete business plan. If the main reason you want to create a business plan at this point is to see whether or not a proposed business idea can be turned into a viable business, you don't need to go through all the work of producing a full-scale version. Instead, use this quick-start business plan. It will work for you whether you’re starting a business from scratch or thinking of buying an existing business. Just answer these five questions to the best of your ability and you’ll know if your business idea is worth pursuing.
Quick-Start Business Plan Questions
1. Is there a market for it?
Many people want to start businesses selling products or providing services just because they always wanted to do that. But rule one of starting a business is that other people have to want to buy the product or service involved. Otherwise, you’re trying to sell ice cream cones on a cold day – there’s no point in going any farther with this business plan.
Test your business idea by starting out small (such as trying to sell your products on eBay, Etsy or at local markets/fairs) and doing some market research. Keep notes. If the results aren’t good, move on to another business idea.
Buying a business: You have a leg up here if you’re buying an established business with a proven market. The trick is ascertaining the truth of the information you’re being given.
2. What’s the profit potential of this business?
In other words, is there any money in it - or at least enough money to make it worth your while? You may have a flaming desire to crochet tablecloths, but if no one wants to buy the items you produce, there’s no profit in it.
Likewise, if the process is so time-consuming that you can only produce one a month, you’re not going to see enough of a profit to even make this a viable part-time business. Your business plan for this business idea ends right here.
Buying a business: Check the financials. How much money has this business made in the past? What are the projections for future income?
3. Is the market saturated?
There may be a market for the product or service you have in mind for your business plan, and plenty of potential profit – for those who are already doing it. Sometimes there’s just too much competition for any new business in the same business to prosper.
For instance, at one point my husband and I were thinking of starting a used bookstore in our small town. There already was one and just as we were in the process of putting our business plan together, another one opened. Looking at the potential size of our market, we shut our business plan down, figuring that there’d be no market space for a third used bookstore locally. (Later, a third such bookstore did open – but closed within six months.)
Study the competition carefully in light of your ideas for your new business. What exactly do they offer and what will you offer? How will you differentiate your products and/or services from theirs? How much of the market will you be able to get?
Buying a business: Just because a business has been profitable in the past is no guarantee that that business will continue to be profitable. Study the competition carefully. It may be that changes in market share or the difficulties of competing are why the owner wants to sell the business.
4. What are the obstacles to my business plan and are they surmountable?
Sometimes you have a business idea that seems sure-fire. You know there’s a market for it, you know you’ve got the edge on the competition and you know it will be a money maker – but there are showstopper problems that you just can’t get around.
You might, for instance, want to start a limo service, only to discover that you can’t get the licensing you need. Or want to improve an existing resort only to find that the necessary zoning change is impossible. Or want to start a home-based business in your residence only to discover that home-based businesses are forbidden in your neighborhood. See:
- The Best Home Business Opportunities
- Starting a Business Out of Your Home
- How to Start a Home-Based Business That Will Succeed
Take the time to fully investigate all the municipal, provincial and federal bylaws, regulations and laws that will affect your business plan. In some places, you can surmount various obstacles if you know the right people. But it may be that you just can’t do what you want to do where you are. At this point, you have the choice of abandoning your business plan, shelving it until a more favorable climate develops, or finding another more amenable place to do it.
Buying a business: Legal issues (of one kind or another) are a common reason for trying to sell a business. Make sure you do a search to see if there are any outstanding or past court cases involving the business you’re thinking of buying.
5. Do I have what I need to see this through?
Starting a business is grueling. I can’t say it any plainer. You will probably work more hours than you ever have before and may have to keep doing it for longer than you thought possible – even if you buy an existing business. If you’re not prepared to make the personal commitment your business plan would take, or aren’t physically up to the challenge, shelve your business plan for the moment.
Cash flow is also an issue for many who start businesses. You need to have in hand not only the money to start your business, but the money to support yourself until your business takes off. While some deal with this issue by starting part-time businesses, working while starting a business can really test your endurance.
If money is the only need you’re missing, then it’s just a matter of finding the money you need. 8 Sources of Business Start Up Money tells you where to look.
If you’ve gotten all the way through question five of this quick-start business plan, congratulations! You’ve got a viable business idea!
Where to from here? If you envision your business as a part-time venture and it doesn’t take an investment of funds above your comfort level, you might decide to plunge in, start the business, and see how it goes.
If you plan for this business to be a full-time venture or it requires funding, then you should work through a complete business plan. The Business Plan Outline will guide you through the process. The time and effort you spend working through a business plan will greatly increase your chances of starting a successful business.