Eureka! You’re enthralled by a brilliant (or as you think) business idea as you go through your day. But is the idea enough to be acted upon? Determining when it’s the right time to begin an additional job or better yet, leave your current job may be a challenge.
This article will offer some guidelines to additional resources help determine if you should pursue your supposed game-changing business idea.
The business model can be patentable or protected in some way?
You’re looking for moats. The larger, deeper and more alligator-infested the more favorable. A moat is a reference to obstacles that potential competitors might confront to compete directly with your company.
Moats can be described as patents exclusive licenses, exclusive rights or other information that makes it impossible for competitors to duplicate the business plan.
If your company isn’t equipped with substantial moats, it could be fine. There are numerous examples of consumer-oriented products companies that have achieved success with no or little moats. The company that sells mail-order shaving products Dollar Shave Club is just one of them.
If your business isn’t protected by moats and aren’t able to provide a definitive answer to the below questions the next step is to go back to scratching the surface with your company plan.
Does the business plan need you to be operating within a highly regulated field?
Regulation is great for an individual who is a consumer. It shields your from harm from companies that you would otherwise struggle to defend yourself from. However, when it comes to managing a business, it’s a different story. Regulation is costly and frequently expensively therefore.
There’s a reason for why certain sectors such as health care or government have a tendency to be lacking in innovation. It’s because the bureaucratic red tape stops entrepreneurs from entering markets which is where regulations eat profits for breakfast.
The most effective way to determine the extent to which an industry is controlled is to speak to some people who have already been operating within the industry. In addition to doing your homework, you should look up the federal and local laws which govern the business of interest.
If you’re finding it difficult to identify any laws that are directly relevant to the business you’re contemplating going into, then it might be the right time to celebrate.
Did you think of this idea before? If yes, how did other businesses do?
In the world of venture capital there are two sides of a spectrum to work. One is the “blue ocean,” where there’s no competitor to be seen. There’s also the “red ocean,” a environment where competition is greater than seaweed.
Ideally, you’d prefer to be somewhere in the middle. Contrary to popular opinion the idea of creating a completely new market is not a good idea. It typically requires market training and that means you’ll require an enormous marketing budget or a online component to increase user acceptance.
Search for potential competitors or look for companies that previously were in the market prior to shifting or going out of business. If you discover two or three companies that are operating with success and a substantial market value is present for your service or product, this is a good sign.
Do you think the business idea will need significant upfront cost?
As we’ve mentioned in the past, it’s best stay clear of business ideas which will have large initial costs, with all other things being equally.
Some cautions to consider before proceeding Before proceeding: First, it must be noted that having large upfront costs is an arbitrary measure. Many businesses will require significant upfront costs in order to start. In the second place, upfront costs aren’t always an issue as they could mean that you can gain market share more quickly due to the early investments. In the third place, upfront costs aren’t important if the likelihood that your business will fail is minimal or, at most, if you’re comfortable with a high-risk business environment.
However, you must be able to approximate the initial expenses that you will need for the successful launch of your business before actually launching it.
Are you able to leverage your experience to give your business significant advantages?
Rewind to the moat issue If there is access to a certain type of expertise that is difficult to find Your business will be more successful rather than having to acquire skills that are essential in the development of your business.
This doesn’t mean that your venture will be a requirement to master new abilities. It’s just that creating the business to your strengths will boost the chance that your business will succeed over the long haul.
If you’re thinking you’ll have to acquire a range of skills that will be essential for the success of the company, you might consider hiring an co-founder or a few of early employees who are highly skilled.
Improve your odds
The ability to develop an idea into an IPO (or at the very minimum, to a success as a small business) is aspect of the American dream. Although the majority of small companies will fail within those first 10 years following the company’s creation, if you take time to test your business concept prior to it goes live, you’ll have the ability to dramatically increase your chances of success.