The birth of a business can come in many forms but most involve that same spark of entrepreneurial creativity. Whether it’s an invention, a product or service that solves a problem or just a gut feeling that you can offer something different, there are so many ways to begin. Ingenuity, enthusiasm and drive are all great qualities to bring into business, however there are also some serious questions to consider before making the jump. Unfortunately, for every success story, there are countless companies that couldn’t make it. Prior to starting your business journey, it’s crucial to ascertain whether your idea has legs and is therefore worth the gamble.
With this in mind, how do you ensure that your business idea can be profitable?
Problem Solving
The main aim of any business should be the solving of some sort of problem. Yes, this can mean inventing a new type of product, but it can be as simple as providing a more streamlined service or offering a solution at a cheaper price point. However, a new business should offer some sort of solution to an existing problem. Otherwise, you’ll be entering a saturated market, without a unique selling point, competing with companies that are bigger and more experienced. It can be difficult to achieve objectivity when the product in question is yours, however it’s extremely important in order to make an informed decision on viability.
Markets
So, you’ve created some sort of problem-solving solution, whether that’s a product, service or business style, but is there a large enough market? You may be able to find some customers who absolutely love your business and what it has to offer but that’s not always enough. In order for companies to grow and become profitable, they need to have a large enough viable market. Niche businesses do exist and flourish, but it is possible to be too niche. Finding out whether there is a large enough available market, before you start a business will require research. Look at other businesses who are offering similar products- is there a space for you?
Competition
Speaking of other businesses, competition is another component which should be factored into your decision. It’s likely that any new business will face some sort of competition but when does that become a problem? Whilst some competition is healthy for business, a David and Goliath situation can be difficult. New companies are up against huge corporations and therefore, you need to be confident that there is a space for you to coexist. In recent years, there has been a push for customers to “shop small” particularly online. However, when big businesses are offering cheaper products, greater convenience and are already household names, this can be difficult.
Economy
Unfortunately, it’s not just the business itself that will dictate performance but other external factors, such as the economy. As we have seen in recent years, changes that affect the economy can have a devastating impact on businesses. Whether it’s Brexit, Covid, political upheaval or the cost-of-living crisis, the current climate is quite hostile to business. This adds another layer to the decision-making process of whether now is the best time to start a business. Of course, there are success stories, even during hard times but this is dependent on multiple factors.
Funding
Of course, a major deciding factor in whether a new business is feasible or not, is funding. Not only do prospective business owners have to think about the costs of running the business but also their own cost of living. This is where a business plan can really help. Forecasts allow you to get a general understanding of sales and therefore the amount of money coming in vs going out. Many new business owners will make lifestyle changes in order to keep their company afloat- whether that’s cutting luxuries, downsizing or taking on a second job. You could also rely on a bank loan or credit card but this isn’t always available.
A new business can have a successful premise, enthusiasm and even a potential customer base but its only with suitable funding that this dream can become a reality.
An independent third-party can really help in providing an impartial analysis of a potential business. The team at Salhan Accountants have many years of experience in providing advice and support for new businesses. If you have any questions or you’d like to work with Salhan, don’t hesitate to get in touch.
