Starting a business is easy; deciding on what business to engage in is the difficult part. There are literally hundreds of ideas you might think of that could bring in extra income. How do you know which of these business ideas will bring you success?
Most home business entrepreneurs start-up with very little money and a strong belief that success will come to them if they work hard enough and offer a quality product or service. While this positive attitude is essential, it is not enough to guarantee financial success. A lot hinges on your management and marketing skills – and your product or service.
You can either choose a product-oriented or a service-oriented home business. A product-oriented business allows you to either create or manufacture the product yourself, or resell products that are made by others on a direct sales or drop-ship basis. On the other hand, you can opt to engage in a service-oriented business where you perform services at your home (work generally performed at home after sale of service) or perform services from home (some or all work performed away from home after sale of service).
Before you begin to develop your business idea, you need to determine its strength and viability. Below is a checklist of criteria to help in evaluating ideas that is particularly well suited for you and your goals. Ask yourself the following questions to help you decide what business to start:
1. Does it satisfy or create a market need?
Introducing a new product without first testing the market is like jumping off a cliff blindfolded. In fact, many businesses fail because there is no adequate market for their products or services. Before you risk your resources on a new venture, it is necessary to get an objective picture of your prospective market. Although accurately determining the customer reaction to a new product is difficult, a new business owner must try to get hold of as much information on the market as he or she can either through a formal market research or through secondary research.
The rule is: find a need and fill it. To the extent possible, do not offer a product or service so new or unusual that people cannot understand why they should buy it – unless you want to spend most of your time and resources educating the public. Big companies, with their deep pockets, can afford to launch a massive educational campaign for breakthrough products. Home businesses, given their size and nature, often do not have the resources (capital, personnel, technology) to mobilize such campaigns. Also, do not offer a product you love to make but whose market potential is weak at best.
2. Will the product maintain market appeal?
Beware of fads and fleeting trends as these markets change quickly that your business cannot achieve a sufficient volume or a sufficient share of the market. If your product, however, is a fad, make sure that you can move fast enough to capitalize on it before it dies. Also determine if your product or service can be used nationally, or is it simply limited to your geographical area. With the increasing globalization of business, you may need to look at the international market and see if there is significant foreign competition.
3. How unique is your product?
The goal is to be able to differentiate your product from your competitor. You need to show why your products and services are unique, distinct, or of considerably superior than your competitors. Every product in the world can be sold or presented in a new way. If you seriously intend to capture a significant market share, your potential customers must find more value from your product.
4. How useful is your product?
Many new ideas and products are successful because their creators identified an unmet need in the market. Identify at the onset how your product or service will be used, and determine the frequency of product use. Some business ideas fill a real need, but in some cases the need have to be created through promotional advertising and promotions. This information can help build your marketing strategy.
5. How much competition exists?
Remember, there is never a “no competition” situation. You product will always have its competition. Determine the kind of competition you will have – locally, regionally, and nationally. Look for heavy or moderate competition – the fact that competition exists in that market proves a demand, or at least a need for what you offer. However, test for market saturation. Unless you are offering a groundbreaking product, stay away from market with extremely few competitors. Lack of competition could mean that your business idea is not profitable to begin with, or that your idea is so new and unique that no one has thought of it yet. Few players in the market could also imply that the market may be controlled by a monopoly or a cartel, the barriers to entry are too high for a small firm, or that the demand is too limited to sustain another entrant in the market
6. Have you priced your product competitively?
The right price for a product or service is one of the essential elements in a solid business model. Don’t do yourself injustice; the wrong price tag is like a ticket to disaster. Economic survival is the primary consideration underlying all pricing decisions. Ideally, a price should meet three requirements: it should match the competition; it should be attractive to your potential customers; and it should earn a profit for you. Set your prices, not by competition, but based on the needs of your business. Depending on your products, consider pricing yourself on the higher side: the higher you price yourself, the higher you position yourself.
7. What is the level of difficulty in the creation or implementation of the product?
You need to consider the economic factors in the execution of the product, such as time, capital investment required, and marketing costs, personnel needed, among others. Also determine if you have the engineering, production, sales, and distribution facilities adequate for the product’s implementation. You may have an excellent business idea, but if you do not have the economies of scale to produce it, then you might be better off to consider other products (or at least a scaled down version).
8. What are the growth possibilities?
Your business model stands to succeed if the demand for your products or services can be expected to grow with a change in the economy. Check if your product can survive a major technological surge or obsolescence.
9. Can I get backend sales?
Back-end sales are all the products or services you sell and resell to customers or clients after they have made their initial purchasing transaction with you. Determine if your product or service will warrant repeat sales. There is real business value in building a pool of repeat customers. The bulk of the sales, cash flow and current profit comes from utilizing and then better utilizing a back end.
10. Is the product safe?
The safety of a product use is an important consideration for many consumers, particularly for manufactured products. If you are in the service business, you need to make sure that your personnel are properly trained with the goal of satisfying your customers foremost in their minds. Educate your consumers on how best to use the product and include clear instructions to avoid costly legal entanglements. Make sure that your business is insured against various forms of liabilities that may arise.
11. Can my product be promoted with strong advertising copy?
Emotion sells. People are often motivated to buy a product or service because of some emotion, whether it is greed, fear or want. Response to advertisements often increases whenever you inject these elements into your ad. Sit down before you write the ad and ask yourself what you want to feel. Then translate these feelings to written words for your advertising copy. Stress what people can gain from ordering your product or service (financial reward, becoming the envy of others, knowledge to get ahead in life) or tell them what they lose if they do not order (loss of time and convenience, discounts for ordering before a deadline).
12. Will you be left with an inventory?
Avoid inventory risk; make sure that even you will buy the product. If you have inventory, consider getting homeowner’s or renter’s insurance policy to protect your business against all possible disasters, be it fire, tornado, hurricane or earthquake.
Recommended Books on What Business to Start:
- What Business Should I Start?: 7 Steps to Discovering the Ideal Business for You
- So, You Want to Start a Business?: 8 Steps to Take Before Making the Leap
- The Idea Hunter: How to Find the Best Ideas and Make them Happen
- One Simple Idea: Turn Your Dreams into a Licensing Goldmine While Letting Others Do the Work
- 201 Great Ideas for Your Small Business (Bloomberg)
- 101 Businesses You Can Start With Less Than One Thousand Dollars: For Stay-at-Home Moms and Dads