What’s really important isn’t having someone else tell you your idea is good or bad. That has little value in itself… If you need arguments to back that up, take a read through our article “From idea to business opportunity, it’s only a short step! Or not…” In actual fact, what’s truly important is determining whether or not a business opportunity really exists! And to find out, all you need to do is apply the equation “feasibility – desirability – viability”!
Let’s look into the tree components of this highly useful and comprehensive method to help you determine with objectivity whether or not your idea is an opportunity to seize.
Component #1: Feasibility
What activities need to be carried out? Are you capable of handling all of them yourself? Do you have the resources required to do so within the given timeframe?
Break down your project and draw up a list of the actions required to see it through. It must include all steps relating to setting up, producing the product, presenting the service, marketing, etc. For instance, if you plan to launch a clothing brand, your project involves design, patronage, sourcing of fabrics and contractors, marketing, prospecting among retailers, communications, etc.
It is essential to assess:
- required resources (human, financial, skills, materials, etc.). For example, if you’re starting an e-commerce business, your main activity will be purchasing/selling products online. Have you found solutions for product storage, order preparation and shipping?
- any constraints that could affect the various actions necessary to see your project through. For example, if your dream is to open a food truck, look into product perishability. Do you know how others deal with perishability in the restaurant industry, and particularly in small spaces?
Next, make a list of the skills required for each identified activity. Skills can usually be broken down into three major categories:
- technical skills: If you want to open a beauty salon, are your fingertips endowed with the know-how of an esthetician? Do you know what certification, degrees or other prerequisites are required from a legal standpoint? If you’re looking to start an app for car park booking, are you familiar with the technical aspects it takes to develop it?
- strategic and sales skills: communications, marketing, prospecting, sales, customer relations management, creating and maintaining a network and an engaged community…
- management skills: financial, administrative and human management.
At this point, you need to ask yourself the following questions:
- What skills are key for carrying out your activities effectively?
- Do you have those resources on hand (either yourself or within your team)?
- Can you find certain resources externally?
Keep in mind that all projects require financial resources, as well as a certain degree of technical know-how. For instance, could you outsource all of your accounting needs without knowing how to read a balance sheet or a profit and loss account? If you were to have an app developed by a web agency, would you be capable of providing them with technical specifications and assessing the quality of the delivered product? How would you go about interpreting the figures from a Google Ads campaign made by a web marketing freelancer without even knowing the bases of digital marking lingo?
You owe it to yourself to be an expert in your field. You must know the ins and outs like the back of your hand! It’s about more than just your credibility or legitimacy – it’s about how you perform compared to the competition. It will also prevent you from making bad decisions due to lack of knowledge once your business is up and running.
Component #2: Desirability
From a market standpoint
There is no opportunity without customers! So how can you measure the potential of a given market? It can take weeks or even months, but at this stage, you can already check a set of elements:
- What are the characteristics of the people within your target? Three things must always be taken into consideration for customer segmentation:
- sociodemographic information: age, gender, income, dwelling, marital status, education, etc.
- behaviour: in your opinion, what are your customers currently doing in response to their problem? How are they dealing with the needs you intend to fulfil with your solution?
- psychology: what problems/frustrations are your target customers suffering from? What are their fears, their motivations, their goals, etc.?
Next, answer these questions:
- How big is your market? Are you targeting Luxembourg only? A certain part of Luxembourg? Or do you hope to reach international customers as well? If so, where?
- Who is your direct and indirect competition?
It’s essential to have an in-depth understanding of other offerings available on the market to know just how to position your business and stand out from the competition.
- Is the market you’re targeting a new market, fast-growing, mature?
- What are the obstacles for entering into your target market? Obstacles may be: regulatory, financial, technical, linguistic, etc.
From the standpoint of the budding entrepreneur
We mustn’t forget about the most important factor in your project - you!
Your project has to be desirable for you. It will be your reason to get out of bed in the morning for many years! So taking time to make sure it’s the right project for you is absolutely indispensable:
- What is your vision? How do you see your project 1 year from now? 3 years from now?
Your vision is pretty much the “higher objective” you hope to achieve. You can check out this article (in French) to delve further into the subject.
- What are your values? The ones that represent you as a person, that you want to convey through your project, that you could never go against?
- What motivations are propelling you to make this your business project? This is of the utmost importance. Ill-defined motivations can lead to major disappointment. It’s best to think things through upstream!
Here is a non-exhaustive list of entrepreneurial motivations and questions to reflect on in the soul-searching phase of your project:
- A search for independence: make sure you’re not going to walk yourself into certain mistakes, like isolating yourself or turning away the help and advice of other people. It’s also important to know that constant pressure from your clientele can seriously alter the feeling of independence.
- A desire for responsibility: will you be capable of making strategic decisions and facing their consequences alone?
- Pursuing a dream or a passion: passion should not be blinding. Is your project viable on the long term and will you be able to make objective decisions?
- A change of life: are you prepared to undertake a sudden change of lifestyle, where you’re the only one handling your choices and organization?
- Seizing an opportunity: if it’s something you just “happened upon,” is entrepreneurship really what you’re made for if you had never before given it any thought?
- What constraints do you face? Think broadly: time, money, health…
A piece of advice: I speak from experience when I say projects always take longer and cost more than anticipated. Always!
- What are your dominant personality traits? Do they line up with your project? If you haven’t taken it before, I recommend taking the MBTI test. It’s a recognized and scientifically verified personality test that situates your profile amongst 16 “archetypes.” If you’re going into business with other people, get the whole team to take the test. It’s very informative, you’ll see!
- What is your “entrepreneurial potential”? Will you be able to step outside of your comfort zone to carry out the actions required to develop your business?
No matter the project, you must be able to mobilize the following personal resources:
- Good physical and mental condition
- Resilience and the ability to deal with stress
- Knowing how to negotiate
- Resourcefulness, creativity, accepting imperfection
- Creating and feeding a network
- Creating and maintaining a buzz and excitement around your project
Component #3: Viability
Once you have run through all of the personal elements, it’s time to look into the financial viability of your project. If your project isn’t at all profitable or doesn’t get you the salary you want, you can always consider adjusting your business model to optimize its viability.
Do remember it’s not an exact science. No need for crystal clear answers right now… It’s normal for certain project variables to still be a bit hazy. Being aware of these aspects is already a huge step forward!
How do you set sales prices? What hypotheses can you base them on? Gauging the potential profitability of a business project is not an easy task. But do you know the easiest place to start? Cost analysis! It’s one of the easiest factors to estimate – lucky for us since it’s a major variable in setting your sales prices, which in turn are key for your turnover forecast. It’s all interconnected!
First, make a list of your expenses: everything that will cost you money for the launch of your business and to keep it running. List all expenses that could come into play.
At this point, no need for figures to be down to the penny. You can tweak them later. But this process will help you assess your entrepreneurial opportunity on two levels:
- Do you have a precise view of the types of expenses it will require?
- Yes: Great. Now try to put numbers on them.
- No: Look into the types of fees relating to your activity. You need to boost your business expertise and visibility. For instance: if you want to open a daycare, upgrading the building to meet standards is one of the main expenses.
- Does the estimated amount seem excessive for your financial resources?
- Yes: Do you think you can get the funds you need to finance your activity?
- No: Great. Now you can start thinking about sales prices!
My advice: work methodically. Move one step at a time and think in a circular manner! This article (in French) can help you establish a “creation equation” for your project so you can draw up an initial estimate of your business’ viability.
Now that you have all of this in mind, you’re ready to assess your business creation opportunity!
As you’re going through the steps, if it seems like too many of the questions don’t have (good) answers, it means you need to rethink your business model, your approach, or even your project. Blinders won’t get you anywhere. To move forward with your entrepreneurial adventure and build a sustainable project, what you need is clarity and a broad view of what awaits you.
If you would like our assistance in the process, be sure to contact the team at nyuko!
To take things further…
You liked this content? Share it now!