For many people, their dream is to become an entrepreneur and make their business idea a reality. Doing so is certainly in the realm of possibility. This, of course, is the story of many extremely wealthy business people. However, even more people fail to launch a successful business. About 80 percent of businesses eventually end up failing.
This can be a depressing statistic to hear for those that have long held the aspiration of starting their own business empire. While many businesses do fail, there is a lot you can learn from their mistakes. Doing so can help you avoid those mistakes so you do obtain long term business success. Below are some of things you need to know before you start a business.
Is Your Business Idea Doable?
Many people think they have a great idea for a business. While there are potentially many great untapped business ideas out there that could make entrepreneurs into millionaires, far more business ideas actually won’t work in practice. Just because you have an idea does not mean there is existent demand out there for that product or service in the market.
However, there may also be demand for your product idea, but the demand might be so low that consumers are only willing to pay an amount that wouldn’t be enough to cover your fixed costs. This is often the case when a product can be obtained for free by consumers. Think, for example, how much file sharing on the internet has harmed the music industry. Piracy is even hurting video streaming services like Netflix and Amazon. Piracy costs the video streaming industry $50 billion a year.
Overall, if you want to find out if your business idea is a good one that could actually create a profit, you need to perform market research. Without this research, you will not have a good gauge on whether your idea should be tweaked or even abandoned. You could end up losing a lot of money.
Who Are Your Customers?
You also need to know exactly who your customers will be if you want your business to succeed. Without this knowledge, it can be extremely difficult to create effective marketing. You need to know exactly who your target demographic is in terms of things like age, sex, race, ethnic background and much more. Even knowing things like the hobbies and religion of your target market can be extremely valuable information to have for marketing purposes.
If you don’t know what your target market is, on the other hand, you could end up marketing to the wrong segment entirely. You need to perform the research required to figure this out. Companies spend a lot on marketing. Most companies, in fact, spend 10 to 13 percent of their revenues on marketing efforts. Wasting your marketing dollars on the wrong consumers can be a huge mistake to have to pay for.
What Is Your Business Model?
Once you know there is a segment of consumers with demand for your product idea, you need to create a business model. Your company’s business model is basically the blueprint for how it will operate. It should include outlining how you will deliver your product, how you will create revenues, who your customers will be and how you will obtain financing.
For example, whether you start your own brick and mortar store, sell your products online or use a distributor to bring your products to retail store shelves is certainly part of your business model. Having to invest in ecommerce website design will certainly be cheaper than building your own brick and mortar location.
Overall, starting your own business is a difficult endeavor. Despite this, about 543,000 new businesses are launched every month. While the statistics for failure can be scary, you can increase your chances for success by doing the proper amount of research and planning before you try to obtain financing for your business idea.