Have you ever wondered how banks know if a business is going to “make it” or not? What are some of the things you need to focus on to create a business people would want to invest in?
Here is some guidance from our Risk Manager in London.
This article is a 8 min read.
If you’re thinking about starting your own business – perhaps because you want a second source of income, or no longer want to work as an employee, or you just have this brilliant new idea for a product or service that the market has not seen before – assessing whether your business idea will be a success is often an insurmountable hurdle you just can’t seem to get over.
If that’s you, then this blog entry is designed to help you vault that hurdle. Based upon thirty plus years of working in finance, these are the three simple ways you can assess whether your new business will be viable.
If your new business doesn’t meet a need in the market it is very unlikely to succeed, unless you are launching a product or service that simply has never been seen before.
A word of warning here: Don’t get discouraged. Need doesn’t necessarily equate to necessity.
Consider the following:
It’s true to say that car owners will always require the services of car mechanics because all cars at some point in time will require servicing or some form of repair. There is an inevitability that creates a necessity for this type of business to exist.
However, this is not the case with all businesses. Many businesses do succeed without this element of “necessity”.
A new business making unique bespoke costume jewellery for wearing with carnival costumes is not making a product that is necessary and there is certainly no guaranteed demand for this type of product. But a new business venture making this type of product may well succeed simply because purchasing and wearing the jewellery during carnival makes the customer feel good.
So, if you are making a product or providing a service that makes your intended customers feel good you are also meeting a need.
Meeting a need in the market is crucial, but if you can’t monetise the meeting of that need to create income for yourself, you won’t have a viable business.
Assessing whether people will pay for your product or service all boils down to conducting market research.
There are two steps you should always take when undertaking market research.
First, if you’re considering offering a product or service that already exists in the marketplace, then you should always check out what the competition is doing.
If competitors exist, ask yourself one simple question: Can you do what they are doing, and can you do it better and cheaper? Differentiating your product or service from others in the marketplace in a positive way will always be key.
By the way, don’t be discouraged if competitors exist in your intended marketplace. Having competitors is not necessarily a bad thing because the existence of competitors is a strong indicator that there is a need for the product or service that you intend to offer.
Second, if your business is offering something new and unique to the marketplace, consider performing market research. There is nothing wrong with actually asking people who you think might be your target market, whether they would be interested in your new product or service. Online surveys and questionnaires have made it easier than ever to conduct this type of market research.
The most successful businesses are those that have the ability to grow over time. If you are starting as a sole trader working on your own, this may mean hiring additional staff, opening new premises, purchasing additional fixed assets, and developing new product lines or services.
So, if you’re just starting out, assessing whether your new business has the potential to grow is a vital step because it allows you to establish future goals or milestones for the new business.
Vital questions can be answered such as: how many employees if any will I need, what assets will I need to purchase, what range of products or services will I need to offer, how will I get my product or service to market etc…
Sustainability is perhaps one of those modern “buzz words” but it is a vital factor that contributes significantly towards the success of a new business. If your intended product or service provides something new to the market, it will go a long way to driving your business forward and placing it on a sustainable footing.
Although I’ve already stated my three ways of knowing whether your new business will be a success, it would be remiss of me not to mention the following:
Hop on a no obligation phone-call (👉🏾right here!) with one of our Relationship Managers to find out what financial solutions would be perfect for you and your business.
