How do You know if your Business Idea will Succeed

Majority of small businesses fail in the first three years. As remarkable as this statistic is, it doesn’t stop number of aspiring entrepreneurs from pursuing their dream of owning a business. They think about their idea as the best thing since sliced bread was invented and are convinced that there is a huge untapped market out there that nobody as cracked. They have run their idea by close confidants and got their endorsement. Uncle Bob likes their product and Aunt Ann can’t wait to get her hand on it. There is only one problem. It is still an idea in your head!!!

So how do you go past this “pie in the sky” idea stage and make it a reality? Even more important, how do you know that this idea will succeed and will not leave you with agony and angst when it’s all over?

While there is nothing wrong with pursuing your dream – in fact, it should really be encouraged – you need to make sure you have covered all bases in terms of research before jumping in the water. After all, the end result could haunt you for a long time if it doesn’t work out as planned.

We believe you need to go through 4-step evaluation process before making a go / no-go decision on your business idea. They amount to understanding different pieces of the puzzle and making sure they fit well so that the end result will be a nice piece of art instead of jumbled mess.

1. Know Yourself – Before doing any type of business the first question you need to ask is – “Do I have what it takes to be a successful small business owner?” Failing to understand this can wreak havoc on your personal life and financials. In addition, you need to make sure all your family members are on board with your decision. While there are number of myths out there about owning a small business, running a small business takes a heavy toll on your close friends and families. Failing to get their approval will result in either hurting your family or business or both.
   Coming up with a good working business idea can be difficult, especially of you are dealing with international business practice. But with online resources you will learn skills needed to make a smarter choice.
2. Know your Business – Not everyone is fit to operate every type of business. While there are certain management skills required for all businesses you do need specialized skills to operate certain types of business. For example, it takes different set of skills to operate a restaurant versus automotive repair business. You have to ask yourself – “Am I in the right business that matches my background, experience, skills and personality?”
3. Know your Market – The goal of any business is to sell the right product, to right customer, at the right price so that you will make acceptable return on your investment. For this to happen you have to understand if the product you plan to sell has a market, what types of customers will want to buy it, how the competition stacks up for these products and how and at what price you will sell them. Without having a clear understanding of your product and market there will not be enough customers for your products, leaving you with pile of invoices to be paid, but not enough revenue to support them.
4. Know your Finances – Finally, once you are convinced that you have the right product and customer base and you will succeed in making proper return on your investment you need to look at your financial situation to see if you can afford the upfront investment. How much money will you need as initial investment? Can you start the business with as little money as possible? How long will you need to continue putting the money in the business before it start generating positive cash flow? Who will you go to if you cannot come up with the entire investment need?

As you can see, all the questions raised are meant to provide you with opportunity to do self-assessment before jumping in. It helps to prepare a business plan that will answer many of these questions. Be sure to prepare, at least preliminary version, yourself rather than asking for a professional help. Here is a sample business plan to get you started.