One of the most challenging considerations when developing a business idea is incorporating quality characteristics that will make the project feasible. The mistake often made by entrepreneurs is preparing a business plan without the consideration of the market environment in their chosen field. This error can be eliminated when the market environment is properly examined considering flexible and uncertain factors such as pricing, availability/accessibility of raw materials and level of competition.
Here are 10 features of a great business idea that will help you kick-start your business or adjust your already existing idea.
- Identified market need or gap: Your idea must clearly identify a market need to be commercially viable. Your business idea needs to be intuitive and should be able to provide innovative solutions.
- There must be a growing market: It is easier to launch a business into a new or growing rather than declining market. It is important to bear in mind that a declining market may be revived through an innovation, growing necessity or a change in the business environment. Instead of entering an existing market, another option is to create a new product or service.
- A business idea must be sustainable: A business idea must be built on solid foundations to ensure longevity amidst uncertain macro-economic conditions.
- High profit margins: The more innovative the product/service is, the higher the profit margin is likely to be. To make sure you have a profitable idea, a financial projection can be used to roughly estimate when you may break-even, and when you will make your first profits. This is a good gauge for your business ideas. If you create the projection and it looks like there is no chance this business will reach profitability within a short time, it may be a good time to start thinking of new business ideas or making the project scalable (breaking it down into smaller projects).
- The project must be scalable: Small projects can get started quickly whereas larger projects can be difficult to implement. As an alternative, large projects can be broken down into smaller projects that can be implemented. The idea is to avoid as much risk as possible for as long as possible but to make sure you do not miss the window of opportunity completely. This is all a question of judgement and changing market conditions, so you need to remain flexible and think through how you might scale-up the project when it proves successful.
- Identifiable risks should be properly monitored and mitigated: Identifying risks is the first step to understanding how they can be monitored and then mitigated. The more strategic options you have identified, the greater your chance of success.
- Low fixed costs: Low fixed costs mean lower risk (which is a key factor to look out for when creating a business plan). A combination of high profit margin and low fixed costs (high profit, low risk) is always very attractive.
- The business plan must be able to attract investment: Putting in robust operating and financial controls increase the chances of survival and success and ultimately will add value to the firm. The major imperative in the early years is to monitor and manage cash flow. Also, if you do not have sufficient resources, the project needs to be able to attract finance.
- Good managerial skill is an asset that should be leveraged on: An entrepreneur needs to have the appropriate managerial skills. If they do not have this required skill, they need to acquire them or partner with others who possess this skill.
- The product or service must be unique: Your business idea needs to be different from existing products or services. Products and services might have homogenous characteristics but additional services such as great customer service and good quality of products or services will be contributing factors to ensure customer loyalty.
Business ideas can sound great in your head, but it is important you spend time to improve them considering the features above. If you are still stuck on how to progress with your ideas, hopefully these tips will help you critically think about your business idea in order to make it a reality.
Let’s keep the conversation going. Please write in our comment section on any useful tips on developing a great business idea.
LSETF Research and Policy Unit
