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Starting Your Own Business: Finding the Right Idea

How Do You Find the Perfect Business Idea?

The answer to this question is that the perfect idea probably doesn’t exist. Your aim should be to choose an idea that is practical and workable, given your skills and experience, and your long-term goals. It should also be an idea that fires your enthusiasm and something that you can really believe in!

Some new business people find it hard to settle on a single business idea because they are worried about missing out on new opportunities or narrowing their options too early on. But remember, even when you have started your business, it is possible to add new services or products, or even to begin a second or third business. You and your businesses will continue to grow and develop – so in selecting your first business idea you are not saying ‘no’ to other opportunities. However, to give your first business idea a really strong start you might need to put other ideas on hold for a while!

Inspiration for your new business may come from:

  • inventing something new – some people are naturally good at finding original solutions to problems. Others come up with completely new ideas based on new technology or other developments. Sometimes people are driven to invent a solution when they are faced with a problem in their own life and realise there is no solution… yet.
  • copying someone else’s idea – this can be a great starting point. If an idea is working for one business there’s a good chance it could work for yours too. However, this one needs to be handled with care. If the marketplace is already overcrowded, you will need to offer something really special to earn your share of customers.

“Sandra was considering opening her own hairdressing salon – other hairdressing businesses in her small town seemed to be doing very well, and she was an experience stylist with several years professional experience under her belt. However, once she began researching her market, she realised that there were six salons in a small town of perhaps 15,000 people. It also became clear to her that although a couple of the salons were doing very well, two of the others were really struggling. This was an overcrowded and highly competitive market. If she wanted to open her salon in her home town Sandra needed to decide how her business would be different. How would she stand out from the rest and attract customers?”

  • spotting a gap in the market – this often happens by accident. Perhaps you look everywhere for something you need, only to realise that no one in your area is providing it.
  • developing your own skills and interests – building on your own areas of expertise can be a great starting point, not least because you probably already understand the market and the needs of your potential customers quite well. Many people dream of earning a living doing something they love, and there is no reason why they shouldn’t achieve this goal, given careful planning and hard work.

“Graham was a keen fly fisherman. He decided to start a business running fishing holidays to Iceland, a place he had visited several times himself, and where he had several useful contacts. The business was highly success and with three years he had expanded his fishing holiday business to cover Canada, Russia and Norway as well.

Graham’s business catered to a small, specialised market. This is sometimes called niche marketing.

Business ideas may be found in the most unexpected places or in everyday situations. Ideas don’t need to be wildly inventive or original to succeed:

“Often the simplest and most obvious ideas are the best. When I first started out, I picked up a yellow pages and flicked through to find out what everyone else was doing. I reasoned that if they were already doing it, that proved there was at least a market for it!”

Charlie Stevenson.

Some exercises to get you started:

  • List all the skills you have.
  • Think about the experiences you’ve gained in your work and personal life. List the most significant.
  • List any other hobbies and interest you have.
  • Ask your friends/family for their impressions of your greatest strengths and skills. Ask them to tell you honestly what you think your weakest points are in terms of setting up your own business.
  • Look out for gaps in the market.
  • Explore other businesses, and identify those you might be able to copy. Look for ways in which you could improve on the business in question. What could you offer that they do not? How could the product/service be improved?
  • As noted earlier, finding the right idea means being honest about your own skills and limitations. This is just as important as all the other factors considered so far, if not more so. Summarise your key business idea. What product or service are you going to sell? Who are your clients or customers? Assessing Your Idea So you have your idea… But how good is it really? Will it stand the pressure of the marketplace? Are there enough potential clients/customers to support your new business? Is the market already overcrowded? (While an overcrowded market definitely shouldn’t put you off – after all, it shows there is a lot of demand for your product or service – it is a signal to step back a little and assess the situation carefully.) The first and most important question you should ask is:

    • What is special about my idea? In what way is it different from other, similar products or services already on offer?

    Now work through the following questions, jotting down your answer to each one.

    • What is it that you will personally bring to the business in terms of relevant experience and expertise? In what way are you qualified to run this particular business?
    • And just as importantly, are there any skills or is there any knowledge that you need to acquire before you can run this business?
    • Is there a market – a need for the idea, and customers who will pay for it?
    • How big is the market, and how will you reach it?
    • Who are your main competitors?
    • How will you fund your business idea? (How much income do you need?)
    • What might go wrong?

    It will also help if you keep up-to-date with the current events to help you identify new trends and new products being launched. You should think about whether your idea serves a need created by new technologies and consider whether social trends will boost or cut demand for your product.

    Ultimately your business idea is only a good one of it allows you to create a successful business.

    Will Your Idea Stand-Up?

    It is important to assess your idea objectively in the cold light of day. By all means seek expert opinions, and ask the opinion of people you trust. But make your own assessment of the facts too. Business history is littered with examples of highly successful business ideas that no one but their inventor believed would work – one need look no further that Dyson’s bagless vacuum cleaner or Richard Bayliss’s clockwork radio. What distinguished these two inventors was absolute determination and the ability to grit their teeth and plough on, regardless of criticism and opposition.
    Interestingly, in a recent follow-up to the much-acclaimed UK series Dragon’s Den, it was often the businesses the Dragons criticised most heavily and decided not to invest in that were most successful. Did the Dragon’s criticism drive the rejected entrepreneurs to prove them wrong, or does it simply show that even successful business people don’t necessarily recognise a good idea when it lands in their lap!

    But that doesn’t mean you should completely ignore other people’s opinions or skimp on market research. Indeed careful planning and research will allow you to hone your original idea, creating an embryonic viable business.

    Thorough market research is critical – it can tell you whether customers really are willing to buy your product or service. It can also give you a good idea of what you should be charging and reveal who your competitors are. We shall be looking at market research in some depth later in the course.

    Carrying out the following key steps will reveal whether you have a viable idea or not. At best they will give you a solid launch pad for your business, at worst they will reveal an insurmountable hurdle that causes you to seek out alternative ideas. But if there is a major problem, it is better to identify it now than six months down the line when you have already invested time, money and emotional energy into your idea.

  1. Investigate the marketplace thoroughly.
  2. Identify your customers and get to know their likes and dislikes.
  3. Identify your competitors – how many of them are there, and how successful are they. Who is the lead player? Who is second? Find out as much as you can about them – collect brochures, leaflets and any other information you can. Test out their websites and call their enquiry service or visit their shop/office if it is open to the public. Analyse their service/product honestly and objectively. What are their strengths? What are their weaknesses?
  4. How much is it going to cost to launch your business (that is to get the first product on the shelf, to serve the first customer or to provide your service for your first client)?
  5. Where is the money going to come from?
  6. Include money in your plan for contingencies. Consider what might go wrong – not just financially, but in other ways too. Plan for the unexpected and think through both the best and worst-case scenarios.
  7. Assess your businesses long-term potential.
  8. Visualise yourself running your business.
  9. copyright: Linda Pollitt

Five Smart Steps for Buying a Business

Fable:
A business buyer asks a fortuneteller “What it will be like to own a business?” She answers, “The next five years will be hard – very hard.”
“Okay,” he says, I can handle five years, then what?”
“You’ll get used to it.”

Though more than two dozen steps must be completed to successfully buy a business, five of the most basic steps are often ignored completely. These buyers often find these steps confusing and unfocused, all five steps show up early in the process and will spell the difference between business-buying success and failure. The five steps are: know your reasons, don’t go it alone, begin with criteria, search in the private marketplace, don’t be lazy.

1. Know your reasons

Actually owning a business frequently fills the new business owner with feelings of such uncertainty that the experience becomes unlike anything else the new owner has ever known. Strong positive images are needed to drive the new owner through the initial hard work and feelings of doubt.
Both seller and banker for example will want to know about the buyer’s motivation and resiliency. Will you the potential buyer give up when you hit a hard spot, or will you plough through? Seller and banker want to know how much they need to use their knowledge, network, and time to help you.
You must have a good reason to own a business, one that emanates from your gut and that drives your faith in yourself. If you have that, others will see it, appreciate it, and will want to help you succeed.

2. Don’t go it alone

Nobody knows enough all by themselves how to buy a business. Though people are ready to help you, they don’t like helping total “do-it-yourselfers.” Thus the first two people on your team should be an attorney and a CPA. A CPA helps with the numbers, provides some perspective and talks about taxes. Your attorney will know about forms, letters, and legal work to be done. He’ll understand, for example, how to do due diligence on the seller’s legal record.
Nobody can manage all aspects of a business. Recognize your areas of strength by next adding a business consultant or coach to help you identify those and strengthen your weaker areas. Trade associations and Chambers of Commerce are good places to start to find such an advisor
Another valuable member of your team will be a business buying mentor, someone who knows about how to best buy a business and can guide you through the many steps. Such a mentor will steady you to prevent “buyer fever,” essentially a crazed emotional state of mind that hurries you through the process and sometimes burns bridges. You need to stay cooler than that.
All these advisors will help you to adequately prepare, search, conduct due diligence, negotiate, and (ultimately) close the right deal. Mention these advisors as references and both seller and banker will now know you are a serious, careful, motivated buyer.

3. Begin with criteria

Criteria are different from goals. Goals are your issue. Criteria help others see how they can help you. Once introduced as a business buyer, you’ll be asked a simple question: “What kind of business do you want?” You’ll want to answer with such specifics as type, size, location, and industry. These details allow others to visualize the right business for you.

You won’t want to answer this way: “Oh, any kind. I’ll know it when I see it.” Too vague. Answers like “profitable” or “owner ready to retire” are too vague as well. Do not force someone to guess.
A truly serious buyer knows criteria about size, type, scale, and “tempo” of a good business. Imagine a conversation with someone who knows businesses, who loans money, or who may know someone that you should meet. Specific criteria allow this person to visualize your ideal business and match it up with people he knows who might be willing to sell.

4. Search in the private marketplace

The Internet, newspaper ads, and brokers are all easy places to look for good businesses. This is the public marketplace. But most good businesses are sold privately to people in the owner’s network of friends, advisors, suppliers, and customers. These deals are never located publicly.
According to the SBA, about one-fifth of all businesses change ownership every year. Most of these don’t “go public” with their situation. These businesses would be open to talking with a qualified buyer confidentially.

With your advisors, you can make a target list so that you can carry out a comprehensive, professional approach to shopping your target businesses. You will be using networking, publicity, and direct approaches. This system will get you out of the “business-buying business” and into the “business-owning business.”

5. Don’t be lazy

Clicking through online listings after work while you’re also watching a ballgame isn’t going to get the job done. Making a few phone calls and asking a few questions of a few brokers isn’t going to make your dream happen either.

Ask yourself, “Will I spend 10 to 15 hours a week committed to the search?” It’s going to take that much and possibly more, weeks filled with a lot of looking, reading, analyzing, and conferring. You’ll need to do research, make phone calls, and meet people. Here’s your new motto: “If you can’t spend the time, don’t spend your dime.”

In conclusion

Money is indeed necessary to buy a business. But preparation and knowledge are even more important. My five basic steps will help get your business buying and business owning process launched in the right direction, guiding your search and your due diligence and everything else you need to bring the process to a happy conclusion. You will be working with all the advice and guidance you need to put together a deal that will be work for you.

The 7 Basic Rules Business Start-Up Tool Kit

Starting a business? Here is a short list of the kind of questions that you need to ask yourself before setting out on starting up your own business.

Nobody starts out a new business venture with the aim of being unsuccessful. And yet:

It has been statistically proven that four out of five business start-ups will close their doors within five years time. Yet every year hundreds of thousands of individuals venture out to do “their own thing”

The short list of questions below will prepare you for what’s awaiting you around the corner when you set out on your own.

Rule 1: Business owners must chose the right business, right from the start. Otherwise you will spend valuable time and money trying to figure out what business is right for you.

The most important question is “who are you and what can you do?”

A man weighing 300 pounds cannot run a hundred yards faster than a 150 pound man can.

A 150 pound man cannot lift as heavy as a 300 pound man can.

A 60 year old cannot climb a tree as well as a 12 year old, and a 12 year old cannot solve cross word puzzles as well as a 60 year old.

So “who are you and what can you do?”

Please be honest with yourself. The more honest you are with yourself at this stage, the easier it will be to be chose the right kind of business and increase your chances of success.

An accountant might not be as good in changing oil as a former machine tools worker would be.

The former machine tool worker might not be as good with numbers as the accountant would be.

Rule 2: The truth is, we all have certain capabilities and learnt skills. If we concentrate on what we know best, do best, and what we like to do best, we have already come very close to succeeding.

Find out who you are and what you can do. The best way is to start asking people who know you well. They usually will tell you all about your good sides. Next, talk to somebody whom you don’t know, like a business adviser or a management consultant. Tell them about your plans, your background and your business experience. Ask them to do strengths and weakness analysis about you and your planned business to determine a “fit” and possible opportunities and threats to your business.

Clarify the following questions, before starting your formal business planning process

1. Product or Service

o Have you clearly defined your business?

o What differentiates your product or service from your competitors?

2. Your Personal Needs

o How long can you survive financially?

o Are you ready to work long hours and weekends?

o Will your family support your decision?

3. Your Business’s Industry

o Do you know the cyclical/seasonal nature of the economy, the industry and your market and how these things can affect your business?

4. Marketing Issues

o Are there buyers out there who would be willing to part with their money to purchase your product/service?

o What do buyers pay for in your market: price, quality, or convenience levels?

5. The Competition

o Do you know who your competitors are?

o How does your business measure against the competition?

6. Your Finances?

o Where will your start-up funding come from?

o Are you aware of how much time it will take before you start to turn a profit?

o Are you aware of how your business structure is taxed?

7. Employment Issues

o Will you need to hire employees?

o Have you written a clear set of company policy and procedures for your employees?

8. Insurance

o Do you know what kind of property coverage your business will need?

9. Location

o Does your product or service require specific location needs?

o Can the area support a business like the one you propose?

Rule 3: If you can’t answer the questions above, don’t start your business. Find somebody that can help you answer these questions.

Rule 4: Just don’t ask one person. There are lots of people out there who can’t tell right from wrong. Talk to your banker, talk to somebody at the SBA, talk to SCORE advisers.
All of this advice is free.

Rule 5: Do research on the internet. Use search engines like Google and Yahoo to look for free online articles about setting up a business, and how to write business plans.

You might have heard of the term “paralysis by analyses”. Don’t overdo it. There is no need to for you to prepare an overly detailed business plan and over commit on time and money.

But a business plan will be necessary, especially if you will need to bring in outside investors or get financing from a bank.

Rule 6: Unless you really want to, don’t go splurging on expensive business planning software. They are costly; you will need to spend time to learn how to use the software and most of them just do what spreadsheet programs like Microsoft Excel do.

Rule 7: The final and most important rule! Be realistic. Downsize your business success expectations by at least a half. After you have sold to your family, friends, relatives, colleagues, you will need to sell to total strangers that could care less with whom they do business. Unless you are able to sell and generate repeat sales from total strangers, your business will not make it. That means the following:

Rule 7.5: Your business concept, whether it is selling goods or services has to be sound. You need to do whatever you are doing in the most competitive way that you are capable of. If your capabilities compare to the present market contenders you will be moderately successful. If you can surpass the present market contenders based on how you do things,
and if there is a market for what you are doing, you will be successful. Its that simple.

Rule 7.75: Simple is good. Don’t complicate things. Simple is good.