BUSINESS IDEAS
Starting to Get New Business Ideas
The location and development of viable business ideas is as much an art, or matter of luck, as the use of systematic techniques. Certainly, you can use structured approaches, as described below, but the reality is that having the right background, being in the right place at the right time, and working hard to create lucky breaks are likely to be just as important in coming up with sound business ideas.
The concepts presented below represent a series of checklists. They need not be followed systematically and, most certainly, they should not be perceived as a sure-fire recipe. Instead, view them as a series of menus from which you can pick and choose according as your thoughts develop. Probably, the only issue which everyone searching for new business ideas should review systematically is their own strengths and weaknesses and to use this as their key building block and jumping off point.
Looking for New Business Ideas
When looking around for business ideas, bear in mind that these could be based on any of the following approaches:
A manufactured product where you buy materials or parts and make up the product(s) yourself.
A distributed product where you buy product from a wholesaler/MLM, retailer, or manufacturer.
A service which you provide.
Bear in mind that most good business ideas are not completely original. You may be familiar with the following diagram which shows the possible combinations of existing/new products/markets.
The simplest business ideas (existing products in existing markets) will be located Box 1 and the trickiest (new products in new markets) are likely to be in Box 4. If you concentrate on pursuing ideas involving existing products in existing markets, you run the risk of being exposed to severe competition. If you focus on new products in new markets, you might find yourself too far out on a limb. Look most closely at the combinations of products and markets in boxes 2 & 3.
You must narrow your search to specific market or product areas as quickly as possible. For example, the "food business" is too broad a search area. Do you mean manufacturing, distribution or retailing, or do you mean fresh, frozen, pre-prepared etc. or do you mean beverages, sauces, confectionery etc.? It is better to pursue several specific ideas (hypotheses) rather than one diffuse concept which lacks specifics and proves impossible to research and evaluate.
Generally, you should always aim for quality rather than cheapness. Be very cautious about pursuing ideas which involve any prospect of price wars or are very price sensitive; of getting sucked into short-lived fads; or of having to compete head-to-head with large, entrenched businesses.
Observe consumer behavior:
What do people/organizations buy ?
What do they want and cannot buy ?
What do they buy and don't like ?
Where do they buy, when and how ?
Why do they buy ?
What are they buying more of ?
What else might they need but cannot get ?
Look at changing existing products or services with a view to:
Making them larger/smaller, lighter/heavier, faster/slower
Changing their color, material or shape
Altering their quality or quantity
Increasing mobility, access, portability, disposability
Simplifying repair, maintenance, replacement, cleaning
Introducing automation, simplification, convenience
Adding new features, accessories, extensions
Changing the delivery method, packaging, unit size/shape
Improving usability, performance or safety
Broadening or narrowing the range
Improving the quality or service.
Be on the look out for:
Emerging TrendsFor example, the population within your area may be getting older and creating demand for new products and services.
Expanding Market NichesFor example, local industries may be outsourcing more of their services.
Try the following approaches to locating ideas and suggestions:
Brainstorm with your friends, associates
Ask people for their ideas
Use one idea to spark a better one
Read relevant trade magazines (local, national and foreign)
Skim through trade directories (local, national and foreign)
Above all, open your eyes wide and try to spot the obvious gaps. By all means be inventive, imaginative and original in your thinking but stay market- and consumer-orientated rather than product-obsessed. We all know stories about people inventing a better mousetrap and never getting a nibble from the market!!
Assessing the Business Ideas
Having built up a moderate list of ideas, these must be evaluated so that a short-list of preferred options with the greatest potential and lowest risk can be assessed in greater depth.
One way of evaluating ideas would be to use a simple scoring system using gut-feel with a limited number of criteria as shown below.
Before scoring individual ideas, run through the criteria and set what you feel should be minimum desirable scores for each. The resultant total could be used as your overall minimum threshold. If some ideas don't achieve satisfactory scores, drop them and look for better ones.
Once your short-list has been developed, you will need to start devoting substantial time to assessment, research, development and planning. For a start, you could pursue the following tasks:
Discuss products/services with prospective customersWould they buy from you, at what price, with what frequency etc.? Why would they prefer your products to the competition?
Find out what they really think - there is a danger that people will tell you what they think you would like to hear. Listen carefully to what is being said; watch carefully for qualifications, hesitations etc.; and don't brow beat respondents with your ideas - you are looking for their views.
Assess the market using desk & field researchHow does the market segment (by price, location, quality, channel etc.)?What segments will you be targeting? How large are these segments (in volume terms) and how are they changing? What are the price makeups/structures? What market share might be available to you bearing in mind your likely prices, location, breath of distribution, levels of promotion etc.?
Analyze your competitionWho are they and how do they operate?Are they successful and why?How would they react to your arrival? What makes you think that you could beat the competition? At whose expense will you gain sales?
Consider possible start-up strategiesWill you be able to work from home or part-time? Will you seek a franchise or set up as an in-store concession? Will you start by buying in finished products for resale as a precursor to manufacturing? Will you contract out manufacturing? Will you buy an existing business or form an alliance? Could you lease or hire equipment, premises etc. rather than buy?How will you stimulate sales? Look carefully at the White Papers on Devising Business Strategies and Developing a Strategic Business Plan.
Set ball-park targets and prepare first-cut financial projectionsEstimate possible sales and costs to get a feel for orders of magnitude and key components and to establish a rough break-even point (when our sales might start covering all your costs). Our Exl-Plan (for Excel) can be used to prepare 3/5-year financial projections (P&Ls, cashflows, balance sheets, ratio analyses and graphs). It incorporates a Quik-Plan facility for doing quick and dirty projections.
Avoid over-estimating likely sales and under-estimating costs or lead times. Better to be relatively conservative. Don't confuse profits and cash - see the paper entitled Making Cashflow Forecasts for further information - and make sure that you make adequate provision for working capital.
Prepare a simple action planCover the first year of operations to highlight the critical tasks and likely funding needed before the business starts generating a positive cashflow. This is critical especially if you have to undertake significant product or market development or need to give credit to customers.
Critically examine ideas from all anglesCan I raise enough money? Can I get a premises/staff etc. Will the product work? How will I promote and sell?
Think through possible problems. What would happen if sales took twice the expected time to develop while costs escalated? What would happen if .......
Bear in mind that the incubation period for a new business can easily last several months or even years. Don't rush into the first feasible idea without letting it incubate or develop in your mind for a reasonable period. There might be a tendency to get all fired up and enthusiastic such that your heart is starting to rule your head. Instead, stand back and think!!
Do not be afraid to seek external assistance from professional advisers or from enterprise support organizations which are virtually everywhere. These include SBDCs in the US, Enterprise Agencies & Business Links in the UK, County Enterprise Boards in Ireland, EC BICs throughout the EU and so on......
From Business Idea to Business Plan
Having firmed up on a specific idea and conducted preliminary research, you have several options including the following:
Undertake more detailed/specific market research.
Do further product research, development, testing etc.
Review and refine your proposed start-up and developmental strategies. Refer to the papers entitled Devising Business Strategies and Developing a Strategic Business Plan for further insights into strategy development.
Draft a detailed or outline business plan. Consult the papers about Writing a Business Plan and Insights into Business Planning as well as the Checklist for Preparing a Business Plan and Free-Plan, free 150-page Business Plan Guide and Template in Word format.
Prepare financial projections. See the paper about Preparing Financial Projections and look at our Exl-Plan (for Excel) business financial planner.
Start looking around for the key resources - people, money. premises, partners etc.
Most probably, you will start addressing all these tasks in parallel rather than sequentially. Other issues which you may need to start thinking about include the following:
Select a company or business name, logo etc.
Decide how you will start trading - limited company, sole trader etc.
Enquire into any licenses which might be needed, or regulations to be complied with.
Think about where the business will be located.
Look for professional advisers (lawyer, accountant) and a bank.
Consider likely telephone/communications needs.
Bear in mind that, to develop a successful business, you must:
Define precisely the nature of the business
Offer clearly identifiable products or services
Tap a real need or generate a demand for your product/service
Operate within your expertise and resources
Have realistic targets and have reasonable expectations
Keep everything as simple and straightforward as possible.
If, at all feasible, there are huge advantages to be gained by embarking on a "soft start" or pilot launch before plunging full tilt into the new business. This approach can be of enormous value in helping to firm up on the scope of the opportunity; gaining more insights into the market; debugging products and getting customer feedback; curtailing costs and personal or financial exposure; acquiring a track record etc. etc. - check Devising Business Strategies for further insights into "soft start" strategies.
