When you’re faced with several impressive business ideas, it’s often difficult to decide which of them is the best for you.
You may find yourself asking questions like: “What criteria do I use in selecting the right business idea?” “What steps should I follow to arrive at the best business idea?”
Deciding is even more difficult when you have to choose between two or more business ideas.
But in this post, I’ll be sharing some guidelines to help you decide on the best business idea.
Guidelines for Choosing the Best Business Idea.
Arriving at the best business idea requires some effort on your part for sure. But there should be a guide of some sort to make the decision process easier. Right?
Below are some steps that you can think through to simplify the decision process and arrive at the best business idea for you.
1. Compare the Idea with your passion:
In choosing any business idea, your passion for the business is an essential consideration that you should make.
Do you have a passion for your business?
It’s easy to lose focus and direction in any business when you have no passion for it.
At some point, everything feels dull and monotonous, no matter how much profits the business makes.
So before choosing any business idea, make sure you either have some passion or interest in it.
2. Meet a need:
Although a passion for the business idea matters, you have to make sure that the business idea is capable of meeting people’s needs.
People are often willing to pay for and patronize a product or service that is of genuine help to them.
So, In choosing a business idea, make sure it meets people’s needs in the best way possible.
Focus on a specific segment of the market, which makes up your target market, and make plans to provide them with specialized and custom products and services to meet their unique needs.
3. Do market research:
Before going into any business, you need to do market research first.
Carrying out market research is to shows you exactly what people need your product or service.
Information from the market research tells you more about your target market. It helps you decide if the business idea you have in mind has enough demand, who the potential customers are, where they are geographically concentrated, and so on.
Find out if your business idea has enough demand to earn your profits if you embark on it.
When doing market research, what should you be looking out for?
- Make sure that your business idea has sufficient demand.
- Make sure that your potential customers are located in a place within your reach.
- Find out if the target market trends show an increase in demand over time or a decrease over time. This information helps shape your decision on whether or not to embark on the business.
4. Do a Competitor Analysis:
With more competitors in the market, it is more challenging to gain a significant market share. Before choosing any business idea, you need to carry out a competitor analysis.
Find out who your competitors are, what strategies they use, and how you can perform better than them.
Are there gaps in their products or services that give you an edge? These are some things you should consider before choosing a business idea.
If you have a lot of high-performing competitors with relatively larger market shares than you, then you have to put in more work to be more successful and to outperform them.
The costs involved in outperforming them also matter. Are they high or low, will you be able to meet up?
If the business idea you have in mind requires many high costs for you to thrive, then you should consider the different forms of financing and which of them you are eligible for.
5. Can you meet up the startup costs?
Just as I mentioned, the costs involved in starting and operating a business idea are essential criteria that you should consider when choosing a business idea.
Before going into any business, you need to make an estimate of what the costs will be.
Some entrepreneurs tend to overlook the startup and running costs of a business idea before diving in.
And it always ends tragically.
You need to find out if you can manage the business’s costs and how long you can finance it independently until it can make profits.
6. What are the estimated profits?
Finding out your estimated profits is also essential to your success in business. How much do you expect to make in profits?
Make sure that your estimated profits are enough to cover your costs.
Also, find out what opportunities you have for success in business. Are strategies that you can take that can make you stand out? Is there any differentiating factor for your business? What would make a customer choose your product over others?
Define your USP, which can help you differentiate yourself from your competitors.
If your business’s estimated profits are lower than the projected costs, then the business idea may not be profitable enough to be embarked on.
7. Write a business plan
Before choosing any business idea, it is advisable to write a business plan first. Your business plan helps you strategize for your business.
A business plan gives you direction for your business and magnifies the errors that you may have overlooked. It is very important in choosing any business idea, no matter how small it is
Many entrepreneurs go into business without writing a business plan. Although this might be successful sometimes, it is generally not the safest approach for choosing a business idea.
By writing a step by step business plan, you are able to see your business from different perspectives. It’s strengths, weaknesses, opportunities, and threats.
Let’s look at these in more detail.
8. Managing risks and threats (SWOT analysis)
Nobody goes into any business fully aware that there are no opportunities for success. But do the threats and weaknesses of the business overwhelm its positives?
With a SWOT analysis, that’s exactly what you’ll be finding out.
In a SWOT analysis, there are four components open for consideration.
- Strengths: What advantages does the business have that give it an edge over other firms in the same industry?
- Weaknesses: What are the deficiencies of the business that give other businesses an edge over it?
- Opportunities: Are there any growth or expansion possibilities open in the market. Can the business be easily changed? Is it flexible? Are there new demands that the business can satisfy, giving room for more sales and profits?
You need to consider your ability to take advantage of the opportunities when they arise. For example, If a new but related demand arises, will you have the right resources to meet them without compromising quality and efficiency.
- Threats: What are the potential threats that your business might face? A range of factors could stand as threats to a business. Some factors that could affect your business are new competitors, higher prices from suppliers, and a change in the demand of the market, just to mention a few.
If any of these threats become real, what plans has your business put in place to go through them successfully without crumbling?
Does your business have the right resources to handle the threats which are inherent in your business idea?
9. Test out your product:
After carrying out a SWOT analysis on your business, and everything looks relatively good, then before selecting the business, you should carry out a test on the product.
You can test your product on a small group and get feedback from them. Find out what needs to be improved on and what needs to be completely removed? What features do you need to include in your product or service to get the results that you want?
Product testing is crucial for every business idea. It helps you see the flaws in your products before they are released to the general audience and gives you insight into how the defects can be fixed.
10. Get Consulting/Mentoring:
One of the best ways to avoid business mistakes and utilize not-so-clear opportunities is by taking advice from someone who has years of business experience.
It’s easy to overlook many opportunities and danger signs, too, without proper guidance. This isn’t to say that you can’t be successful in business without a mentor or consultant but that it is easier to be successful when you have an experienced mentor or consultant.
Business decisions are often not as straightforward as they seem, especially when it comes to choosing a business idea. But with the right guidance, you can avoid the horrible mistakes and claim fantastic opportunities.
Choosing a business idea, although it requires a lot of research and comparisons, is not as complicated as it may seem.
With guidelines like those I have given in this post, you are ready to get started in choosing a business idea.
What points in this guideline helped you choose a business idea? Feel free to share your thoughts in the comment section.
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Esther Alu, the Founder of TheAceBusiness.com is an entrepreneur who writes step-by-step guides for starting several business ideas. She is constantly learning and discovering effective ways to help her readers launch and grow successful businesses.