Answer These 3 Questions Before Jumping Into Entrepreneurship
Entrepreneur's New Year’s Guide
Everyone has at least once in their life had a million-dollar idea. The tricky part is deciding if this idea actually has legs and could be a viable business.
As a small-business owner for a decade, I’ve identified three crucial questions to ask yourself to help decide whether or not the concept is worth pursuing.
These questions can help scope what I like to call “The Success Triangle,” an approach to help budding entrepreneurs decide whether to pull the trigger on that small business idea.
1. Concept: Is it a good idea? Let’s start with the obvious. Not every idea is a good one and just because your mom thinks it’s great doesn’t mean it is. Too many of us suffer from the “if we build it, they will come” mentality which can be equally tempting and dangerous. Just because you are obsessed with your dogs and think the world is clamoring for the introduction of canine teeth whitening pens doesn’t mean it will be a hit. It’s easy for something to seem like a great idea initially but several key questions should be asked to help determine whether the idea is truly solid:
- Is there a need? How significant is the need?
- How much competition currently exists in this space?
- How large is your potential customer base?
- Do you have a unique ability to provide this product/service?
- Do you have experience/passion in this area?
- Are there trends in the marketplace/industry that might make my produce/service more or less attractive going forward?
2. Execution: How Well Can You Execute the Concept? While it’s great to have a solid business idea, it’s quite another thing to execute it well. Your idea about selling doggie teeth whitening might be a viable concept that the marketplace needs, but how well can you execute it? How do you manufacture the product? How well does it work? How easily is it applied? How do you market and deliver the product? These questions and others are critical issues to consider when contemplating how well your business idea scores on execution:
- How will you provide great customer service?
- What is the quality level of your product/service?
- How efficiently can you produce your product/service?
- What is your time to market?
- How is your product/service produced? Fulfilled?
- How easy/difficult is it to market the product?
Related: What Kind of Entrepreneur Are You?
3. Profitability: Is Your Business Model Profitable? Unless you’re starting a nonprofit, most entrepreneurs are hoping to be profitable. (If you’re not managing your profit levels, you won’t be around very long most likely.) As part of this analysis, it’s important to evaluate your overall business model. For your dog whitening product, you should consider your pricing structure? Are you selling whitening pens individually or in bulk? Are you only selling pens or also providing a whitening service? Where will you sell: online, through vets and spas or at retailers? Consider these questions to help evaluate your business model and profit potential:
- What is your cost structure? What are your expenses?
- How much does it “cost” to gain a client?
- What is the anticipated demand (quantified)?
- How will you sell? Online, brick and mortar, using party concept, through resellers?
- Are you focused on B2B or B2C selling?
- Are you selling to individuals or groups? Bulk or individual products?
- Are you using a franchise model?
- Are you selling products, services or both?
These questions aren’t a substitute for developing a thorough business plan, but they act as a simple guide to help the budding entrepreneur begin that critical vetting process.