Mother’s Day is Sunday, and many of us will be setting aside time to honor our moms as well as those who have been a supportive and loving presence in our lives. Just as mothers nurture their children as they grow, small business owners are responsible for the care and cultivation of the enterprises they have created. This includes coming up with new ideas and fresh approaches to help their businesses improve and evolve.
Entrepreneurs often have no problem generating great business ideas. The question is whether or not the idea has a chance of succeeding. If you are looking to launch a new product or service or start a new business venture, there are some basic questions you need to ask (and answer) to help determine if your idea is worth nurturing.
Does it solve a problem?
Solving a problem means delivering a solution that makes life easier for a sizeable number of people. The problem can be something that no one else is addressing or one that is not being dealt with effectively by other businesses. It is also important to determine how your offer will differ from that of existing competitors. Ask yourself why customers would choose your product or service over what someone else is offering.
Is it scalable?
Scalability is the potential of your business opportunity to grow and serve an expanding market. Some experts believe that to be truly scalable, an idea needs to be relatively low-cost and high-profit (think Facebook). You certainly need to be able to expand on your idea, monetize it, and retool it if necessary to meet changing market or customer demands.
Is there a market for it?
One of the most important aspects of qualifying a business idea is identifying the ideal customer. Consider factors such as age, gender, education level, income, and geographic location. The more you can fine-tune this picture, the better. Once you have a clear idea of who you are going to sell to, you can determine whether or not there is a market for your idea.
You will need to conduct market research to understand the size of the market, who else is marketing something similar to your potential customers, and if there is room to add your product or service to the mix. Consider industry trends and how much buzz there has been about the need for what you want to offer. Without a large enough market, it may prove difficult to gain traction with your business idea.
What will people pay for it?
Once you have determined that you are solving a problem in a scalable way for a sizeable market, you need to assess the value your idea delivers and what people would pay for that value. To be viable, you must be able to sell your product or service at an attractive price that allows you to make a good profit. As part of your planning process, make sure you can bring your idea to market at a price that makes sense for your margins and your customer. No matter how good the idea or how well it solves a problem, if it is not priced right, people will not buy it.
How will you fund it?
Conducting a financial analysis is an essential step in evaluating whether or not to move forward with your business idea. What will it cost to start your business or get your new product or service off the ground? Where will that capital come from? How will you bridge the financial gap between the start-up or launch process and turning a profit?
Entrepreneurs who need capital to start or expand their companies will find they have access to a diverse range of financing sources. Many business owners cover costs with personal funds or credit cards, while others rely on investors, banks, or other lenders who offer programs specifically for small businesses. It is important to do your research before choosing between crowdfunding or funding from family and friends, or deciding if an angel investor, bank loan, or line of credit is your best option.
When you need working capital to initiate your new idea or expansion opportunity, Summit Financial Resources can provide unique funding solutions that work for you. We offer working capital loans for small to medium-sized businesses that involve using your accounts receivable and other assets as collateral. We can mix and match from a variety of product options to suit your needs, including invoice factoring, asset-based lending, inventory lending, and equipment financing.
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Does it pass the test?
While many entrepreneurs operate on gut instinct, it is helpful to get feedback on your idea before taking the plunge. The easiest place to start is to share your thoughts with other people. Explain your idea simply and succinctly and see how they respond. It may be tempting to focus only on friends or like-minded colleagues, but be sure to seek out people who might be potential customers in order to test your idea’s true potential.
One of the best sources is your target market. Consider creating a small group of ideal customers who would use your product or service, and conduct interviews, a survey, or a focus group. Tap into online social media groups that might be interested in your idea and solicit their comments and suggestions. Testing your idea with a carefully selected small group will give you a clear indication of how it will be received by a larger audience.
Even after conducting thorough research, developing a solid strategy, and securing ample financing, there is no guarantee your great idea will be a hit. However, making sound business choices and delivering an affordable, quality product or service that solves a real problem will greatly improve your chances of success.
Working Capital Financing is a few clicks away.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.