Is there room for you?
Is your idea original or are you building on an existing concept? If it’s the latter, is there really room for another player in the market, and is your idea sufficiently distinct and compelling to lure business away from your competitors? You need clear unique selling points (USPs). Similarly, if no-one else is doing it, is there a reason for this?
One way to evaluate the viability of your idea is to conduct a SWOT analysis. This is a strategic planning tool that involves analysing the Strengths (what gives your company an edge over competitors); Weaknesses (in what areas would your company be at a disadvantage); Opportunities (what external chances are there to make greater sales or profits) and Threats (what could put your idea at risk, eg a larger competitor copying your idea).
Is there anything about your technology or approach that couldn’t be easily copied by a rival with big buying power? If the answer is no, think carefully before moving forward.
Mitigate the threats by protecting your intellectual property where you can. You can’t protect the idea itself, but you can safeguard your name, brand, designs and inventions through trade marks and patents. Equally, run a search on the trade mark and patent databases on the Intellectual Property Office’s website to ensure you’re not treading on anyone else’s toes.
What’s the business model?
It’s what you do with a great idea that counts – you need the right execution. Google wasn’t the first search engine and Facebook wasn’t the first social network, but by finding the right business model and honing the offering, these companies were able to build on an existing concept to become market leaders.
You have to be able to monetise your idea if you want a sustainable business. You also need the right marketing, pricing and cost base, and a product or service in tune with how your customers want to use it.
Often there will be different business models and revenue streams to consider; for instance, a web business could charge end users a monthly subscription fee, or make the website free for the user but earn a commission for every ‘lead’ or sale that it generates for another company (eg Toptable, price comparison websites), or sell advertising space. The freemium model, where a basic service is offered for free but customers can pay for a premium service, could also be an option.
Again, research is vital to test the viability of your model – what are your customers willing to pay for and how much would they pay? Can you charge enough to cover your costs and turn a profit?
Can you fund it?
Do you have the funds in place to get your business off the ground? You need enough to support yourself and to provide sufficient working capital until your company hits profitability.
Undertake some honest and thorough analysis of how much it will cost to set up and run your business, how much you expect to sell each month and when you expect to break even. What are your margins? Can you sell enough at the right price to make it viable?
Look at sales figures from your industry and analyse your competition to forecast more accurately and think carefully about all the costs involved. It is better to over-estimate than to find yourself falling short. Ideally, do three different forecasts, covering the best-case and worst-case scenarios, and your likely results. Can you stay afloat if the worst happens?
Think about how to keep costs down without cutting corners and avoid unnecessary extravagances. Operating online or from home initially, negotiating with suppliers, shopping around for the best deals, being ruthless with spending, trying to exchange your products, expertise or services for those of others and using freelance or part-time staff could all help to keep your start-up costs down.
Unless you have savings, minimal costs or you’re starting a business while still employed, you may need to raise external finance. You will need a bulletproof business plan that includes your detailed cost analysis, and sales projections backed up by solid research. Crucially, if you are looking for a bank loan, remember to factor debt repayments into your forecasting.
Have you got what it takes?
Last but by no means least, have you got the right attitude and skills to make your idea a success? Setting up a business is an endurance challenge. The success of your idea hinges on your commitment to seeing it through – during the bad times and the good. Your idea needs to be something you’re passionate about, and you then need the skills, drive and belief to make it work.
The British Library Business & IP Centre (runs workshops, networking events and has a wealth of useful resources, including key industry guides.)
The Office for National Statistics
The British Retail Consortium
EEF (the manufacturers’ organisation)
Small business support organisations
The British Chambers of Commerce
The Forum of Private Business
The Federation of Small Businesses