Evaluation of a business idea: criteria, methods, mistakes
Before starting your own business, it is important to draw up a competent business plan. If you can't do this on your own, they use already developed methods, adopting the experience of larger companies. But it's worth learning more about the structure and information content of the document.
A business plan is the result of planning in the economy. It allows a potential investor to answer the question of whether an investment business project is worth the investment.
Thanks to a business plan, a person who has invested in a business (trade, service sector, education) has reliable information about how much money is needed for implementation, what are the deadlines, and what will be achieved upon completion of the project.
When drafting a document, it is important to rely on an idea that can be implemented with the greatest benefit to yourself. It should be:
- Unique. Uniqueness does not mean the invention of the bicycle, but the ability to apply the skills of its assembly in new conditions. For example, if there is not a single self-service car wash in the city yet, but such a service is in demand, then by opening an appropriate institution, an individual entrepreneur will occupy a completely new niche for a specific market. The idea of opening a car wash in this case will be original.
- Real. The idea must be real. For example, you can dream of building a spaceship, but opening your own tennis court for the average entrepreneur is much more realistic than a spaceport or a factory for the production of rocket parts.
- Demand. If an entrepreneur plans to open a candy store in an area where there are already 2-3 similar points of sale, then there is a high probability that his establishment will not be in great demand. It may be worth moving the store to another area.
Money is needed to implement an idea. The financial part is the most important in the plan. If the potential costs of implementing the idea exceed those that were included in the planning, the business can be considered unprofitable even before opening.
Implementation decision making and market research
Before implementing a business idea, in accordance with the instructions developed by experienced entrepreneurs, they decide on the need to research the market. A businessman needs:
- to study the state of the market, its conjuncture, popular trends, capacity and reaction to the emergence of new products in the chosen niche;
- learn about the share of large companies in the market, their prospects and opportunities;
- to determine the target segment and the level of demand;
- to find out what price level, whether there will be profit, what is the norm for the chosen niche in the market;
- are there any free niches for doing business?
Important! It is imperative to identify the strengths and weaknesses of your competitors. A specific and understandable idea (goal) will help reduce waste and save time by choosing the most effective market research methods.
Drawing up a business plan yourself
Ideas for business come to minds of many - the question is what these ideas are worth. That is why, if you are going to translate an idea into business, it is worth creating a business plan in which you can detail your concept and prove its effectiveness, both organizationally and financially.
What is a business plan?
A business plan is a document that outlines your business. In it, you talk about exactly what you will be doing, about the structure of the business, the state of the market, how you plan to sell your product or service, what resources you need, what is your financial forecast, and also give permits, leases and any other you need. documentation.
Essentially, a business plan helps you prove to yourself and others whether or not to develop your business idea. This is the best way to take a step back, consider an idea from all sides, and protect yourself from potential problems for years to come.
In this article, we share tips for writing a successful business plan, describe the points to include in the plan, and provide examples.
The translation of the article was prepared with the support of the EnglishDom online school of English. Before diving into the details, let's start with some basic, general tips.
Business Planning Tips
Focus on your specifics
Before you dive into drawing up a business plan, you should carefully consider what makes your business unique. For example, if you're looking to start a sportswear brand, you need a way to stand out from the many other sports brands already on the market.
What makes your brand stand out from others? Are you planning to design clothing for a specific workout or activity like yoga, tennis or hiking? Are you using environmentally friendly materials? Do you donate part of your proceeds to charity? Does the brand promote a positive body image?
Remember: you are not selling just a product or service - you are selling a product, value, and brand experience. Consider and answer these important questions before delving into the details of the research for your business plan.
Keep it short
Evaluation of a business idea can occur in two scenarios. The first one is "Oh, cool, we launch ads, start sales, trample 100%." The second approach is based on a thorough analysis of the competitive environment, product, target audience and other important factors. It is not hard to guess which of the scenarios will be the most favorable in most cases.
It takes time to analyze and evaluate a brilliant idea or a carefully developed plan. And it is better not to save this resource at this stage. There are many approaches, criteria and methods for effective analysis. We will talk about them in our material.
Main criteria for evaluating business ideas
Here are some criteria by which a business idea is usually evaluated:
how realistic is the idea;
is the chosen idea relevant for the business;
is it intended to use innovations;
is the intention clearly formulated;
will the planned business become profitable;
how long will it take to run it.
The criteria are clear, but how to approach the solution of the problem? How to correctly formulate the main questions that both you and the invited experts have to answer in order to assess the reality of the plan?
The process is often quite lengthy. One or two people do not always have enough versatile knowledge and experience to make a competent assessment of a business idea. Therefore, if the author of the project is far from an expert in some area, then it is better to seek help from specialists who are able to conduct a comprehensive analysis.