Evaluate a Business Idea

How to Evaluate a Business Idea Before Taking the Plunge.

So, you've spent months or maybe even years searching for the perfect small business idea (read more below), and now you think you've found it. You're ready to dive right in, quit your job, and dedicate yourself to starting your own business.

Before you make any life-altering changes that can't easily be undone, take some time to first evaluate your business idea to see if it has the legs you hope it does. The very first step of the process is to do some research and analysis to dig into the potential of your idea. Here are a few ways to get you started.

Identify a Target Market

The most important step of qualifying a business idea is determining who will be buying your product or service. You need to create a picture of your ideal customer. Consider factors such as age, gender, education level, income, and location. The more you can narrow down the picture of your ideal customer the better. You won't be able to figure out if there is a market for your product or service until you have a very clear idea of who are selling it to.

Then, you need to conduct a market analysis — research to determine how big the market is, how saturated it is and if there is room for you to add your product or service to the mix. This guide to conducting marketing research is a great place to start.

It can also be helpful to create a test segment of your target market and conduct a focus group or a survey to find out who they really are. Then, you can decide if it makes sense to launch your business to a segment of your market to gauge response before committing fully to your business idea.

Know What Makes Your Product/Service Different

During your research, you will probably discover that there are other businesses already offering the same or similar products and services to your target market. This doesn't necessarily mean you won't be successful if you launch your business, but it certainly means you need to identify what makes your products and services different from the competition. You can do this by creating a unique selling proposition (USP).

A USP identifies what makes your business different, and why your target clients should choose you over the competition. Your USP can be a very effective tool that helps you define your brand and make your business memorable. This guide to writing a USP will help you get started.

Research the Competition

Just as you need to know who your ideal customer is, you also need to know who else us out there marketing to them. This is why it's really important to get an idea of who your competitors are before you move ahead with your business idea.

Two excellent tools for researching your competition are a competitive analysis and a SWOT analysis.

Conduct a Financial Feasibility Analysis

Another very important factor that plays into the validity of a small business idea is money. What will it cost to get your business off the ground? Where will that capital come from? What are your start-up and ongoing expenses? What is your earning potential once you're up and running? How will you bridge the financial gap between the start-up process and profitability?

This guide to conducting a financial analysis will help you get started gathering financial data. You will want to make sure you consider all potential capital sources, while you think about how you can bootstrap and limit the investment needed up front.

This may all seem like a lot of work, but you will be glad you did it. If you determine that your business idea isn't going to work, you may be disappointed but you will avoid wasting time and money on a likely failure. If it looks like your small business idea has potential once you've done your research, you will have a running start for the next step of the business start-up process — creating a business plan.

 

1. Coming up with a business idea is the first step in starting a business. But how do you come up with a business idea that is right for you?

 

Small Business Ideas for Aspiring Entrepreneurs

If you are looking for a small business idea (or even a micro business) to kickstart your path to entrepreneurship, you are in the right place. This list of 101 small business ideas includes everything from personal services, to retail opportunities, to environmental services, to pet-related ideas, to technology businesses. Use this list to identify the business idea that is perfect for your situation.

 

1. Air Duct Cleaner
2. Antique Furniture Sales
3. App Developer
4. Appliance Repair Technician
5. Aquarium Maintenance
6. Basement Remodeler
7. Blog Consultant
8. Bookkeeper
9. Business Consultant
10. Candle Maker
11. Candy Maker
12. Carpenter
13. Catering Service
14. Childproofing Expert
15. Cloth Diaper Service
16. Composting
17. Computer Repair and Maintenance
18. Computer Trainer
19. Construction Cleanup
20. Customer Service Professional
21. Data Entry Service
22. Desktop Publishing
23. Direct Mail Marketing Service
24. Disaster Planning and Prevention Service
25. Dog Trainer
26. Dog Treat Baker
27. Dog Waste Remover (Pooper Scooper)
28. Doula
29. eBay Consultant
30. eBay Seller
31. Florist
32. Freelance Writer
33. Furniture Mover
34. Gardener
35. Genealogist
36. Grant Writer
37. Green Cleaner
38. Green Consultant
39. Gutter Cleaner
40. Hair Salon Owner
41. Handmade Crafter
42. Handyman

Hauling Services

Holiday Decorator

Home-Based Child Care Provider

Home Stager

Home Theater Designer

Home Weatherization Professional

House Painter

Ice Cream Shop Business

Image Consultant

Ink and Toner Cartridge Refilling

Interior Designer

Internet Researcher

Jewelry Maker

Laundry Service

Life Coach

Locksmith

Marketing Copywriter

Massage Therapist

  Medical Transcriptionist

1. Motivational Speaker
2. Nutritionist
3. Organic Hair Care Products Seller
4. Organic Lawn Care Provider
5. Party Planner
6. Personal Chef
7. Personal Concierge
8. Personal Trainer
9. Pest Control Professional
10. Pet Couture Designer/Seller
11. Pet Groomer
12. Pet Sitter
13. Photo Restoration Service
14. Photographer
15. Pizza Parlor
16. Pool Cleaning and Maintenance Provider
17. Private Tutor
18. Professional Organizer
19. Project Manager
20. Proofreader
21. Public Relations Agency
22. Resume Writer
23. Sales Consultant
24. Scrapbooker for Hire
25. Senior Care Provider
26. SEO Consultant

1.  

1. Snow and Ice Removal Service
2. Soap Maker
3. Social Media Consultant
4. Speech Writer
5. Tax Accountant
6. Translation Service Provider
7. Tree Farmer
8. Video Producer
9. Virtual Assistant
10. Virtual Call Center
11. Voice-Over Professional
12. Web Designer
13. Wedding Planner
14. Yoga Instructor

1.  

1. Now that you have a few business ideas in mind, you've completed the first step of starting a business: you're inspired! It's time to take the next step, and evaluate the business ideas that made it to the top of your list. Doing this research at the beginning of the process is vital to avoid wasting time and money on a business idea that flops.

1. Once you have confirmed there is a market for your business idea, it's time to jump in on the small business startup process, and you'll be on your way to starting a new business in no time. 

How to Write the Market Analysis Section of a Business Plan

What to Include in the Market Analysis Section of a Business Plan

The market analysis section of your business plan comes after the products and services section and should provide a detailed overview of the industry you intend to sell your product or service in, including statistics to support your claims.

In general, the market analysis section should include information about the industry, your target market, your competition and how you intend to make a place for your own product and service. Extensive data for this section should be added to the end of the business plan as appendices, with only the most important statistics included in the market analysis section itself.

 What Does a Market Analysis Section in a Business Plan Include?

The market analysis section of your small business plan should include the following parts:

• Industry Description and Outlook: Detailed statistics that define the industry including size, growth rate, trends, and outlook.
• Target Market: Who is your ideal client/customer? This data should include demographics on the group you are targeting including age, gender, income level and lifestyle preferences. This section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market.
• Market Test Results: This is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix.

Lead Time: Lead time is the amount of time it takes for an order to be fulfilled once a customer makes a purchase. This is where you provide information on the research you've completed on how long it will take to handle individual orders and large volume purchases, if applicable.

• Competitive Analysis: Who is your competition? What are the strengths and weaknesses of the competition? What are the potential roadblocks preventing you from entering the market?

Tips for Writing a Market Analysis

Here is a collection of tips to help you write an effective and well-rounded market analysis for your small business plan.

1. Use the Internet

Since much of the market analysis section relies on raw data, the Internet is a great place to start. Demographic data can be gathered from the U.S. Census Bureau, a series of searches can uncover information on your competition, and you can conduct a portion of your market research online.

2. Be the Customer

One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?
 

3. Cut to the Chase

It can be helpful to your business plan audience if you include a summary of the market analysis section before diving into the details. This gives the reader an idea about what's to come and helps them zero in on the most important details quickly.

4. Conduct Thorough Market Research

Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Send out surveys, conduct focus groups, and ask for feedback when you have an opportunity. Then use the data gathered as supporting materials for your market analysis.

5. Use Visual Aids

Information that is highly number-driven, such as statistics and metrics included in the market analysis, is typically easier to grasp when it's presented visually. Use charts and graphs to illustrate the most important numbers.

 

6. Be Concise

In most cases, those reading your business plan already have some understanding of the market. Include the most important data and results in the market analysis section and move the support documentation and statistics to the appendix.

7. Relate Back to Your Business

All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market's needs, put the focus on how you are uniquely positioned to fulfill those needs.

Market Research Problems, Alternatives, and Questions

Step 1 - Articulate the research problem and objectives

Market research begins with a definition of the problem to be solved or the question to be answered. Typically, there are several alternative approaches that can be used to conduct the market research.

 

The Purpose of Step 1

The market research process consists of six discrete stages or steps. The task of the first stage of market research is to articulate the problem that the research will address. This includes defining the decision alternatives, and the research objectives. At first blush, this seems like an easy step. Aren't marketing problems easy to spot and easy to articulate? Beginning a research project falls into the category described as it looks easier than it is.

It is important not to define the market research problem too narrowly or too broadly. In the first instance, a market researcher may find that the actual problem has been missed because the focus was too narrow. Or even if the right research question has been addressed, other important variables may not have been considered, such as barriers to​ prevent copying by other competitors. In the second instance, too much information is likely to be collected - at considerable cost - and most of that data will never be used.

The information is simply not sufficiently germane to the problem.

 

 It is important to realize that it is not always possible to know the sweet spot in terms of scope until the data collection has begun or has been underway for a time. A change in the problem statement in qualitative research does not necessarily reflect poor planning. In fact, it may indicate new learning and the iterative nature of ​qualitative research.

Why a Problem Statement Is Useful

Writing a problem statement to guide the research is both practical and important. A problem statement clearly tells what is intended to be accomplished by the research, and so it is a very practical step with regard to obtaining resources to be used to conduct the research. Writing a problem statement is important because it points to how open or closed the research can be in its approach.

• Open research is associated with qualitative research approaches and closed research is associated with quantitative research approaches.
• Quantitative research seeks to identify the relations among a set of variables.
• Qualitative research aims to gain some understanding of a phenomenon.

A market research project attempts to fill some gap in the knowledge about a phenomenon. In conventional research, this task begins with a formal literature review. In market research, research questions tend to come from internal clients about how to achieve a certain marketing objective or another.

How Market Researchers Identify Meaningful Research Questions

One of the best ways to identify the knowledge gap is to jot down all the questions that the market researcher or others have with regard to the research topic or situation. When the stream of questions dries up to a trickle, it is time to look for categories under which the questions can be grouped. These become the sub-categories. Either before or after creating the subcategories, look for an overarching question. This overarching question will be the first draft of the problem statement or research question.

An important difference between conventional research and market research is that the later is decision driven. Backward-mapping from the business decisions can assist the business manager and the market researcher to be on the same page with regard to priorities and aims of the research. That said, it is not unusual for a market research project to be exploratory, descriptive, or causal rather than decision-mapped research.

• Exploratory market research seeks to provide insights into the nature of a marketing problem, come up with new ideas, or suggest a range of possible solutions to be considered. These, then, might drive the identification of the business decisions.
• Descriptive market research might attempt to determine the magnitude of a marketing variable.
• Some market research is experimental in form and aims to test a cause-and-effect relationship.

The Six Steps of Research

• Step 1 - Articulate the research problem and objectives
• Step 2 - Develop the overall research plan
• Step 3 – Collect the data or information
• Step 4 – Analyze the data or information
• Step 5 – Present or disseminate the findings
• Step 6 – Use the findings to make the decision