As someone who has a lot of "creative ideas" knowing how to evaluate whether they'd make a viable business has become a important process to learn. In the past I'd mull over ideas for weeks, maybe months before taking any action so I thought today I'd share some tips with you on how I check the market and decide whether an idea is 'RIGHT' to pursue!
THE QUICK 3P VIABILITY TEST:
Does your business idea really excite you? Do you see yourself still loving it in 5 years time? It's important to be honest with yourself here as it's the passion for your business that will get you through the times when you're not making enough money, you're finding things difficult or you need to get up at 5am on a Saturday!
A personal revelation for me was that it's actually a good thing to not try to monetise everything you're passionate about. Sometimes it's hard to choose which avenue to pursue if you have several passions but actually it might be better to keep some of them for yourself. For example, I love salsa dancing but after teaching classes for a few months I realised that it was taking the fun out of it for me and therefore it wouldn't be a viable business. Whereas I can talk about entrepreneurship + marketing all day and night and be even more excited about it the next day (I know, I'm a geek!)
Questioning your passion for your business idea is the first step of the viability test. If you have the time, try to just do nothing but think about your idea for 8 weeks and see if you passion for it dwindles. If after 2 months you still can't stop thinking about it, you're definitely on the right track!
Does your business idea align with your life goals? I'd recommend thinking about the type of lifestyle you want over the next 1, 3, 5, 10 years... Would running this business allow you to travel / be at home / have a family / have enough flexibility to fit in with your lifestyle? For example setting up a business in the wedding industry is likely to involve spending the majority of your weekends working or driving around the country to wedding venues - are you ok with this?
Of course every business will have it's good and bad sides and I doubt any idea will ever be perfect, but it's important to think through the daily practicalities of what actually running your business will involve so you can go into it with your eyes fully open.
If you know anyone who's done something similar to your idea ask them where the challenges are, sometimes they're not so easy to spot until you're doing it everyday!
How will your business make money? Will you sell a service or a product? On a very basic level you need to understand exactly what people will pay you for. Then, if you can, determine if it has the earning potential to meet your financial needs now, and in the future?
These questions may become more clear as you move on to doing your market research but at the very least have a play on your calculator... I usually start by taking the minimum amount of money I need to live over a year and dividing it by how much you will charge. This will give you the number of customers you need to find throughout the year, which I then divide by 12 to see whether the number of customers or sales I need to make each month is achievable? Of course this little sum doesn't account for any costs either but it's a handy, quick test to see how viable your business idea is.
The other major consideration here is what you need to get set up in terms of costs and your time? How much do you think you'll need to spend initially and ongoing? As with the above numbers I always overestimate the costs and underestimate the prices / sales so that I've thought through the worst case scenario!
I really hope the 3P's will be helpful for you in weeding out the ideas that aren't right so that you feel confident with your chosen business idea. Then you're ready to start doing your market research and I have a guide with some tips for you coming up very soon!
Have you settled on your business idea yet? Which of the 3P's did you find most useful?