How To Test the Viability of a Business Idea
Every new small business, product or service starts with an idea. It could be something you’re passionate about or simply something you believe will fill a market need or help solve a problem.
But not every idea, even the best of them, is going to yield a business that is viable for the long haul. According to the Bureau of Labor Statistics, 20% of businesses close in their first year, and only 50% make it through year five.
One of the keys to a successful business is making sure there is a place in the market before you go all-in on your investment and launch. We’ve pulled together five tips to help get you started.
5 Tips To Test Market Viability
1. Research your competition.
Are there businesses in your area that are offering the same products and services? If so, you need to make sure there is enough room in the market for your business or product to succeed. Also, look at what the other businesses are offering and see if you can add a value or solution they don’t provide.
2. Talk to business owners in the industry.
Find someone who operates a similar business but in a different market to ensure they would not be a competitor. Ask them for tips so you can learn from their best practices and improve upon their mistakes. If they’re willing, ask if you can look at their revenues and expenditures to see if they match up with your financial research. This can let you know if you’re on the right track.
3. Talk to customers in the market.
See how much customers in the market are willing to pay for these products and services. Ask them if there are any needs that are not being met with the current offerings. This will give you a chance to lay out what your business is all about and listen to ways you can improve your idea before launching it. Two ways to do this are to host focus groups and send out marketing questionnaires.
4. Call your potential customers to action.
Here are some possible approaches:
- Create a landing page that lets potential customers sign up for updates, declare their interest in your business or preorder your products.
- Utilize a crowdfunding campaign. This will not only boost your startup funding but will help you gauge the market size and general interest in your product. Remember that, in many cases, people expect to receive something in return for their pledge, like the product itself.
- Test a prototype with potential customers who have declared their interest. See if it lives up to their expectations or if you still need to make improvements before you’re ready to launch.
You can utilize social media advertising to help get people to your landing page and crowdfunding campaign. For those who declare their interest, provide regular progress updates to keep them excited.
5. Work with a commercial lender.
Even if you’re not yet at the point of needing business financing, you may need it in the future. It’s good to start that relationship early and know what kind of financing you will qualify for. Commercial lenders have heard many business ideas from entrepreneurs, and they will ask the right questions to make sure you have everything you need to start a business. If you do decide to pursue a small business loan, you’ll need a solid business plan to improve your chances of being approved.
Read More: Why Your Small Business Needs a Business Plan
See the Cards Before You Go All-In
No matter how great your business or new product idea may be, you must make sure it is viable and there is room in the market for it. The Small Business Administration (SBA) and your local Small Business Development Center (SBDC) can help you create a business plan for success before you go all-in on your investment.
Visit the SBA website to find your local SBDC and learn how they can help you start and operate a business successfully.
Small Business Financing for the Next Step
You’ve worked hard to build your business. Now make sure it continues to thrive. Local businesses are vital to the community, which is why helping yours grow is our priority.
Talk to a Business Banker Today
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