Want to know whether or not your business idea is a good one -- or even feasible? A simple business feasibility study can help.
There are three conditions which can determine whether or not you will have a successful home business. First, is there a market for your product? Second, can you actually make money? And finally, how many competitors will you have? If you want to know what makes a successful home business and whether or not yours is poised to become one, carefully consider these questions. This simple business feasibility study could save you from sinking too much time and money into a lousy home business idea.Does Someone Want To Buy What You Are Selling?
As lofty as your intentions are, the feasibility of a successful home-based business all boils down to whether or not you have someone who wants to buy what you are selling. Is there a market for your product? I wouldn’t consider Phoenix in the summertime an ideal target for hand-knitted, wool sweaters. Nor would I hit up a trailer park with offers to finish basements. Basically, you want your product offering to satisfy an unmet need for your potential customer.
Another thing to consider as you review your product offering, is whether your product or service has something that will encourage a customer to return. There is an old marketing adage that states, “it costs 10 times more money to get a new customer, than to retain an existing one”. It is a great idea to find ways to continually drive your existing customers back to you for service updates, refills, the newest products…etc.Can You Make Money?
I had a friend who made custom baby headbands. Not the simple ones, but the really elaborate kind (I am talking the Ashton Martin of baby headbands). Per headband, she easily spent $30 on supplies and over five hours in labor. She soon came to a frustrating realization that the majority of potential customers within her area were only willing to pay up to $45. The maximum she was able to make on each item was $15, but after accounting for five hours of labor and the other expenses of running a business, her actual profit was a few pennies. This was not a successful home business model.
The goal of any business should be to make a profit. When setting up a business, consideration should be made on how to price the product according to what the market will bear.
The baby headband business was able to realign its product, target market and pricing to make a more sustainable and profitable business. In non-business jargon, what that means is all is not lost if you have a screwed up business model. If you are willing to evaluate where the problems are and make the needed changes to your business, most of the time things can be fixed.How Much Competition Will You Have?
Often when there is too much competition, businesses begin to duke it out over price. If you run into this situation, it may be a bloody battle you want to avoid. However, another possible strategy is to promote the positive differences of your product (your competitive advantage).
Why would this help? Customers fall into different categories. Some buy strictly off price and some are more interested in quality or a company’s experience. Refining your product and your marketing message can help compete for a customer segment not interested in buying solely off price. For instance, perhaps you decide to position your product as a premium alternative (a luxury line) and price it a little higher. Leading with that type of marketing message says you aren’t going to battle on price because your product isn’t like the others.
Changing how you do business in a competitive market can increase your chances for success. In some instances, however, competition can be so fierce it is a lost cause. A more prudent decision may be to throw in the towel before you lose too much time and money.
Now that you can do a simple feasibility study using the three conditions contributing to a successful business – your ready to do some market research. Learning more about your competition, the industry and customers will get you ready to write your necessary business plan (no groans please).
If you are interested in conducting a more comprehensive and formal feasibility study, here is a great sample of a formal feasibility study.
This article is part of a 10-Step Guide on How to Start a Home Business.