We've all probably heard this question many times from friends, family, and acquaintances. As a small business owner, I've struggled with it too. I've had lots of great small business ideas (at least they're great in my mind), but which ones should I pursue? How do you decide if your small business idea should become more than just that?
I'm not a small business expert, but I have run a small business for over a decade, and in that time, I've identified three crucial questions for you to ask yourself to help you decide whether your small business concept is worth pursuing.
Of course, this list isn't exhaustive, but these three questions can help scope what I like to call "The Success Triangle" as a back-of-the-envelope approach to help budding entrepreneurs decide whether to pull the trigger on that small business idea.
Consider these three elements of The Success Triangle: concept, execution, and profitability.
1. Concept: Is it a "good idea"?
Let's start with the obvious: not every idea is a good one, and just because your mom thinks it's great doesn't mean it is. Too many of us suffer from that "If we build it, they will come" mentality that can be equally tempting and dangerous. Just because you are obsessed with your dogs and think the world is clamoring for the introduction of canine teeth-whitening pens doesn't mean it's true. Remember the frenzy around the launch of online grocery shopping that everyone anticipated to cripple grocery stores around the turn of the millennium? That theory didn't materialize.
It's easy for something to seem like a great idea initially, but you should ask yourself several key questions to help determine whether the concept or idea is truly solid:
2. Execution: How well can you execute the concept?
- Is there a need? How significant is the need?
- How much competition exists in this space?
- How large is your potential customer base?
- Do you have a unique ability to provide this product or service?
- Do you have experience or passion in this area?
- Are there trends in the marketplace or industry that might make your produce or service more or less attractive going forward?
While it's great to have a solid business idea or concept, it's quite another thing to execute it well. Your idea of selling doggie teeth whitening pens might be a viable concept that the marketplace needs, but how well can you execute it? How do you manufacture the product? How well does it work? How easily can you apply it? How do you market and deliver the product? These questions and others are critical issues to consider when contemplating how well your business idea scores on execution:
3. Profitability: Is your business model profitable?
- How will you provide great customer service?
- What is the quality level of your product or service?
- How efficiently can you produce your product or service?
- What is your time to market?
- How is your product or service produced? Fulfilled?
- How easy or difficult is it to market the product?
Unless you're starting a nonprofit, of course, most entrepreneurs are hoping to be profitable—quite profitable in fact. There's no shame in expecting a profit. In fact, if you're not managing your profit levels, you won't be around long most likely.
As part of this analysis, it's important to evaluate your overall business model. For your dog teeth-whitening pens, you should consider your pricing structure. Are you selling whitening pens individually or in bulk? Are you only selling pens or also providing a whitening service? Where will you sell—online, through vets/spas, through retailers?
Consider these questions to help evaluate your business model and profit potential:
- What is your cost structure? What are your expenses?
- How much does it "cost" to gain a client?
- What is the anticipated demand (quantified)?
- How will you sell? Online, brick and mortar, using party concept, through resellers?
- Are you focused on B to B (business to business) or B to C (business to customer) selling?
- Are you selling to individuals or groups? Bulk or individual products?
- Are you using a franchise model?
- Are you selling products, services, or both?
These questions aren't a substitute for developing a thorough business plan or considering a particular individual's suitability for entrepreneurship, but they are a simple guide to help the budding entrepreneur begin that critical vetting process.
Having developed a small business over the past decade, Dana Brownlee is an advocate for helping other small businesses succeed. She is president of Atlanta-based training company Professionalism Matters and is an acclaimed keynote speaker, corporate trainer, and team development consultant. You can reach her at [email protected] and on LinkedIn and Twitter (@DanaBrownlee).