This is a question that would-be entrepreneurs need to ask
themselves. It is not enough to have a good idea – or even a great idea –
for a product or service. What you need to find out is whether you can
provide that service or product to enough people who will pay enough so
that you make enough profit.
So where do you start? The first thing is to research is what is out
there already. If the market is saturated with competitors providing the
same goods or services as you, then your business must have a pretty
compelling USP (unique selling proposition) to make it stand out.
Check out the competition
How are your competitors doing? Companies must file their accounts at
Companies House, and companies listed on the London Stock Exchange will
have to provide detailed financial information to the public, which
means that you can find out quite a lot about them after a few clicks on
the internet.
Market research
The next thing to do is firm up the scale of your potential customer
base and how much they would be prepared to pay. The best people to tell
you about this are strangers (friends and family might fib to protect
your feelings). If you need the results of the research for attracting
funding, it can be worth paying professional market researchers who will
present impartial findings in a clear way. If you end up doing the
research yourself, strive for professional looking results. Common
research methods include questionnaire and interviews with interested
parties.
Conduct a realistic appraisal of costs
Think through every penny you need to spend to sell your goods or
services, and make a note of them. Have you counted business premises,
transport costs and tax implications? If you are making a product it is
easy to focus on components and blank out these other issues which still
have a bearing on whether your business can be profitable.
Think about business models
Finally, think about the structure of your business and whom you will
be working with. If you lack certain skills, should you consider going
into a partnership with someone who can make up that deficit? Or should
you be considering setting up a limited company? Setting up a company
can only take a couple of hours with a formation agent, and mitigates
the risk in case your business turns out not to be viable.
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