How to Evaluate a Business Idea and What to Do Next
Many web designers are also entrepreneurs. They often have money-making side projects. Some even go on to found start-ups and even wind up incorporating themselves.
Unfortunately, other designers go on to start new business ventures–only to have them fail after a few months.
What’s the difference? Could your great idea be a successful business?
There are some crucial steps to starting a new business that every would-be designer/entrepreneur needs to understand.
In this post, I’ll explain how to evaluate a business idea and explain what the first steps to starting a business are. I’ll also identify some sources for funding a new business start-up.
How to Evaluate a Business Idea
The first thing to do when you get a business idea is determine whether it’s a good idea. Not every idea that seems good at first is practical. And some business ideas have no market.
You’ll need to do some research to evaluate your business idea. Here’s a checklist of questions to use as a guide:
- Is there a need for this product or service? Some of the most popular products and services meet a need that people currently have. The product or service may improve upon or complement an existing product or service, or your idea may be a completely approach to meeting a need.
- Is there a desire for this product or service? Admittedly, some of the most popular products are desire-based rather than need-based. That means that someone is purchasing the product because they want to. A few needs-based reasons for a purchase include to increase status or to follow a trend.
- Who is currently meeting the need for this product or service? Answering this question gives you a start on evaluating your competition. You need to know not only who your competitors are, but also how many of them there are. Don’t forget to consider indirect competition.
- Who will buy this product or service? Find out who your typical customer is likely to be. This may involve conducting surveys, testing the waters, finding a focus group, and more. The better your understanding your potential customer, the more likely you are to create a successful business.
- How big is that market? You may have a great business idea. It may even be brilliant. But, if the market for your idea is very small, your business might not be viable–that is unless people are willing to pay a premium for your product or service. Which brings us to the next question.
- How much are people willing to pay for your product or service? Your intake from your product or service needs to cover your costs and should include a healthy profit. Remember, that even a small niche market can be profitable if potential customers are willing to pay you enough money.
- How hard will it be to implement the idea? Let’s face it, some ideas are easier to implement than others. When answering this question, take into consideration the amount of time it will take you to launch your business as well as whether or not you will need to hire someone to help.
After doing your research, you should be able to tell whether you want to continue on and develop your business idea.
7 Start-Up First Steps
What steps should a web designer take when starting a new venture?
Here’s a brief overview of the seven steps it takes to start a business:
- Research. You’ve already gotten started on your research with the questions from the first section of this post.
- Plan. A business plan outlines how you will proceed and can be crucial to finding funding.
- Fund. Many business ideas require funding. Fortunately, there are new sources of funding available.
- Develop. You’re ready to put your idea into motion.
- Test. Many new business start with a trial (or beta in the software world) to test their idea and remove any problems.
- Market. Even the best business ideas need to be promoted to attract the customers you need.
- Evaluate. Whether your idea was a success or a failure, it’s important to stop and review what you did.
Now that you’re familiar with the first steps that you should take with a new business, let’s go into a little more depth on the one area that many new business owners struggle with–finding funding.
Here are some potential sources of funding for start-ups (in no particular order):
- The Bank. This is probably the first source of funding that most people think of. Banks often offer the lowest interest rates for business loans. To get a small business loan it helps if you have a proven record of business success. The bank will also check your personal credit history if your business does not have a credit history of its own. Remember to check with more than one bank.
- Angel Investors or Venture Capitalists. Angel investors are wealthy individuals who support start-ups. They are similar to venture capitalists, which are sometimes firms rather than individuals. Both types of financing are looking for high returns on their investment. They may even want to take a role in making your business decisions to assure that return on their money.
- Crowd Funding. A new type of funding for start-ups is known as crowd funding. The concept is that a large number of investors purchase a very small stake in your company or donate to it. The founder of a crowd funded company usually retains control of the company. This type of investing is still in the pioneering stages. Two examples of crowd funding sites are Kickstarter and Indiegogo.
- Your Rich Uncle. Maybe you don’t exactly have a rich uncle, but you may have friends and family who are willing to invest in your business. For many start-ups and entrepreneurs, this is the first step in finding financing. The support of friends and family can be crucial for some. Besides, if your company doesn’t succeed, your friends and family know where to find you (just kidding, kind of).
- Self-funding. You may not be rich, but you may have some savings that you can sink into your own business idea. In fact, if your idea has relatively low start up costs, this may be the way that you want to go. The biggest advantage of self-funding is that you retain complete control of your brand new company.
Have you taken a great idea and developed it into a full-fledged business? What advice would you give to others? Tell us how you did it in the comments.
Published July 24th, 2013 by Laura Spencer