Starting Your Business

Business Evaluations That Work

Written by Jay Shapiro for Gaebler Ventures

Before you go into business you need to evaluate, in theory, how effective your business idea will be in reality. These questions will help you form an evaluation of your proposed concept before you risk time, effort and money investing in it.

When analyzing any business idea you must test it in theory in order to establish how valid it would be in practice. Each idea must serve an established need, fit into a readymade market, and have the ability to supply solid returns on investments made by you and by others.

These are the key questions you should consider in depth when evaluating your business idea:

Questions the Entrepreneur Should Ask When Evaluating a Business Idea:

1. Exactly what need does the business idea fulfil? Does the proposed product or service solve a particular problem?

2. Who is your target market? You need to know as much as possible about the demographics of your proposed clientele. Consider their age, their sex, marital status, location, ethnicity, spirituality, income, shopping habits, lifestyle, education history, occupation. Know them as well as you know those closest to you.

3. How exactly will you make money from this business? Where are the potential profits going to come from?

4. In what way would your company differ from others offering similar services or products. Consider how you would differentiate between existing companies and your own.

5. What obstacles are you likely to face when attempting to enter the particular market or industry. Can you see a way in which you can fairly easily fit in and make your own mark? Or do you foresee difficulties conquering the desired territory?

6. Do you know how many companies will represent your competition? Are there many businesses of this type vying for dominance?

7. What is the monetary sixe of your proposed market? Do you know how much consumers spend per year on product or services like those which you intend to sell?

8. Is your proposed market growing or is it becoming less popular?

9. What is the size of the market share you intend to corner as your own? Consider the percentage of the overall market that you can reasonably expect to monopolize.

10. Would yours be a Lifestyle company or a High Potential one? Sole Proprietorship? Or a larger concern like a Corporation?

11. How much will it cost to start the business?

12. Will you need to utilize debt capital or raise income in the form of investment? How much will you need in total?

13. Are you intending eventually to go public or sell your business?

14. How much return on your investors' input do you propose?

Entrepreneurs, far from being the risk takers we sometimes view them as, like to be as certain as they can about a business idea before they invest either time, effort or money in it.

The above questions will help you to focus on the following key elements before launching a business:

• Issues within the industry
• The market's structure
• The market's size
• Growth rate of the market
• Market capacity
• Feasible/attainable share of the market
• Cost structuring
• Core economics
• Exit strategies
• Breaking even timeline
• Opportunity costs
• Obstacles to entry

Jay Shapiro is a freelance writer based in the UK. Jay has a particular interest in the emotive aspects of the entrepreneur's character. "Alongside the nuts and bolts of business, the character of the person is often the ingredient responsible for success."

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