According to the Small Business Administration, roughly 627,000 new businesses emerge each year, and these companies employ 47.5% of the country’s workforce. However, each year, 595,000 businesses permanently close. Still, despite the high risk of failure, starting a business remains alluring to many people. Often, founders begin their entrepreneurial journey with dreams of becoming fully independent and making millions along the way.
While there’s nothing wrong with having big goals, it’s crucial that entrepreneurs take a realistic approach to make their dreams come true. In order to do this, they must assess the profitability of their new business venture early on. Before seeking the assistance of established investors, entrepreneurs must have a clear idea of how their business will operate and who their customers are. When you’re ready to start a business, first take the following steps to understand whether the concept is strong enough to pursue.
1. Write Your Business Plan
Before beginning your business, prepare for the undertaking by creating a cohesive business plan. With this information, you can get a clear idea of whether or not your idea is viable. In the early stages of planning, start with this information:
- Who are your customers? You should know your target audience and what your sales projections are early on.
- What is your company? You must establish your company’s name, the company’s legal form, and its location. This will make it much easier to address the other aspects of your business plan later on.
- Who are you? Customers want to work with companies that they can trust. In order to cultivate trust with partners and clients, you will need to identify who your company’s founders are, the company’s overall mission, and your long-term goals.
Writing a business plan will ensure that you understand your company’s direction from the very first steps, guiding you throughout the start-up process while allowing you to assess the risks and rewards of your venture. For instance, if you aren’t able to point to a strong customer demographic, it may be a sign that your business model is too broad or too niche. You should know who you are serving, and in what areas.
2. Assess Market Demand
It is extremely challenging to convince people to purchase a product or service that they’re not interested in. To avoid this predicament, test the market before taking the plunge and launching your business. When you’re assessing the current market for your business, answer the following questions:
- What problem will your business solve?
- How do potential customers currently handle these problems?
- Does this product or service currently exist? If so, how can you set your business apart from competitors or improve upon the options that customers currently have available?
Although some people can conceive a completely original business model, most of the time, the business you’re interested in creating already exists in some form. However, even completely unique concepts require a strong market demand to turn a profit. Your answers to the questions above will help you ensure you’re creating an ingenious new solution to a current issue or solving problems better than your competitors.
3. Know Your Competitors
Every business is competing with other brands in their market. It’s essential to understand what your competitors are doing, along with any flaws in their execution, so that your business can outperform them.
There are two types of competitors: indirect competitors and direct competitors. Your direct competitors are companies with the same products or services that your company will offer, while indirect competitors are companies with different products or services that meet the same customer needs.
When you have a clear idea of who your competitors are, you can better understand the likelihood that customers will work with your company instead. If it seems that customers have a good reason to choose your company, it increases your business’s potential profitability. In business, we refer to this as your “unique selling point,” also known as the USP. For instance, there may be thousands of e-commerce websites selling the same product as you, but your company is the only one with an added feature that inspires customers to make a purchase with your brand. When you understand your business’s USP, ensure that you capitalize on it to the fullest extent.
4. Understand Your Customers
You should have a general idea of your target customer base from inception. After evaluating whether or not there is space in the market for your business, you will need to understand who your customers are in greater detail.
With extensive market research, you can determine what your customers want and how your new business can meet their needs. Some people choose to create online surveys to obtain this information, but if a market already exists for your product or service, you may be able to find existing information using online search engines. Important demographics might include:
- What gender does your target audience identify as?
- What age group is your target market?
- Where does your target market reside?
- Do your ideal customers purchase similar products or services? If so, how much do they typically spend, and how frequently do they complete these purchases?
- What brands does your target market prefer, and why?
The responses that you obtain will allow you to fully understand your audience so that you can tailor your products or services toward their desires. Furthermore, this information will allow you to see your business idea from your customers’ perspectives and make any ideal pivots or improvements.
Get Started with Fahad Alrajhi Group
Once you’re sure your idea has profit potential, how do you find the startup funding to get it off the ground? If you’re seeking venture capital to finance your business, consider contacting Fahad Alrajhi Group.
Fahad Alrajhi Group seeks to endorse a culture of entrepreneurship and invest in business ideas that radically impact society while diversifying regional economies. If you have an exciting business in alignment with our values, contact us today to find out how we can help make your vision a reality.