When dreams become reality
Evaluating the practicality of a business idea can be the first step to a realistic beginning.
Entrepreneurship most often begins with “just an idea”, but some ideas just don’t go away. If you have one of those ideas, you owe it to yourself to give it some serious thought. There are key points to consider that will help you evaluate your idea and decide if it fits more into the dream category or if it merits pursuit as a viable business.
First, is there something about your idea that is unique? The U.S. marketplace has an overabundance of goods, foods and gadgets – so what is it about your idea that offers something truly different? Ideally, your idea would be something that fulfills a need, rather than a want. If you have something that people only want, you may also have to convince them that they need it, to be able to continue selling to them over time. According to the University of Wisconsin, it costs about five times more to bring in a new customer than to keep an existing one.
To measure how your idea fits into the marketplace, it is important to do a little market research of your own. Visit a wide variety of stores and websites that might carry your product, and see how many of the same or similar items are already out there. Does your idea offer more value in some way? What kind of packaging is used? Make notes about prices too so that you have an idea of what the market will bear. Think about where you would go, what you need to make this product, and how available and costly that may be.
Another key question is, “Who will be your customer?” You can look at groups of people by age, gender or other demographics, or by buying habits or lifestyle. How many are there? You can be assured that not everyone will love and buy your product. It is recommended that you identify one or two groups of consumers who will be your target customer. The next step, of course, is figuring out how you will reach those customers and convince them to buy.
If you determine that this idea is profitable and sustainable, you should also consider your financial position to begin this venture. It is difficult to start a business without some start-up funds. You don’t need a million, but things like licensing, legal documents, advertising and equipment may require a substantial investment. A few thousand dollars would certainly go a long way, especially if you’re a good manager. And that is essential for any entrepreneur.
The MSU Product Center, in partnership with Michigan State University Extension, provides business counseling for product development, packaging and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food, value-added agriculture, and natural resource products. For more information, visit the MSU Product Center website or call 517-432-8750.