You’ve got a few ideas about starting a business, but you don’t have any experience as an entrepreneur, and you’re not sure whether your plans are enough for a successful company. To find out whether your business idea is sustainable, ask yourself these questions before applying for loans or contacting investors.
The most important question is also the most basic: what are you selling to your customers? Perhaps you’ve got products to sell, whether you’re a graphic designer with some killer t-shirt ideas or a soap manufacturer with a new recipe for beard oil. On the other hand, you could also sell tutoring, business consultations, and lifestyle advice. Articulating exactly what products or services you’re going to provide is crucial to developing the rest of your business plan.
Once you’ve got your product or service idea, you must determine why people need your goods. If you can’t explain why your business fixes a problem or meets a need within your customer base, you probably don’t have a good idea. Also, your potential investors are guaranteed to ask you this question at your first meeting, so don’t stall on your answer. Possible responses include that your competitors’ products aren’t good enough or reliable enough or that your target market needs entertainment. Your market’s needs can be as creative as you want, but ensure that your identified issue is backed up by data.
Use a quick online search to estimate the cost of production for any items you’re going to manufacture. For example, if you’re selling greeting cards, you must calculate the cost of paper, paint, stamps, pencils, and other supplies. Then, figure out how long it takes you to make enough items to sell. For greeting cards, this would be between five and twenty cards. Add the price of supplies to the cost of your labor to determine how much each batch costs. When you’re setting proposed prices, they need to be more than this figure, or you won’t break even.
After estimating your products’ prices, determine whether you can afford to hire employees or partners. When you work with other people, you can work more quickly, either sharing the workload or having one person complete the manufacturing while the other handles sales and shipping. On the other hand, you have to give your employees a fair share of the profits. Based on how excited your target market will be about your products, create a plan that outlines how many employees you’re going to hire and how you will pay them.
Most loan and tax paperwork request your business’s name, and your investors want to hear that you’ve thought about this critical part of your business. Your name tells your customers what you sell, but it also tells them a little about your brand identity. When you make a joke or use a pun in your title, you show that you have a sense of humor. When you include your town’s name, you demonstrate that you’re rooted in your community. When you include you and your partner’s name, you show that you’re personally invested in your company and that it’s a team effort. If you’re stuck on name ideas, play with a random name generator until you find one that makes you smile.
If you can answer these four critical questions, that’s a good idea that you’ve thought about your business enough to make it a reality. Write down your answers, and then start looking for funding opportunities.