In order to market your product or service, you will want to be very clear about what it is that your business actually does or has to offer. You should be able to quickly and accurately describe your business concept in just a few sentences.
You will probably have to rewrite and refine your initial idea several times as you gather more information.
In this section, we will explore some sources that you can use to come up with new business ideas, and how you can assess business opportunities. You will also look at different means of going into business and different types of businesses.
Means of Going into Business
There are three ways you can get into your own business:
- Buy an existing business
- Purchase the rights for a franchise
- Plan and start your own venture
Buy An Existing Business
Independent businesses are bought and sold on a regular basis. You might find out about the pending sale of a business through a real estate agent, an accountant, a lawyer, a bank manager, or the current owner of the company.
When you buy an existing business, you can expect to pay the owner of the business for the assets (equipment, tools, vehicles, inventory) of the business, as well as for the level of sales activity that has been developed (goodwill). In other words, the owner wants to be compensated for their successful efforts in launching and running the business for the length of time they have owned it.
If you choose this option of getting into your own business, you will need cash to invest. You will also need the guidance of an accountant and lawyer to help you prepare the initial offer to purchase and assist you with the negotiations.
Purchase the Rights for a Franchise
The franchise option is very popular and becoming more popular every day, even in industries that one would not think of!
While a franchise may have a higher chance of success when compared with independent businesses, the down side is that most franchises require a substantial initial cash investment together with some type of ongoing royalty fee. Further, you may not have the flexibility to do things “your own way” once you sign the franchise agreement.
Before you enter into any franchise agreement you should obtain the help of an accountant and lawyer to assist you with the evaluation of the franchise itself and obtain guidance on the legal aspects of the franchise agreement.
Plan and Start Your own Venture
Perhaps the most appealing to you as an entrepreneur is the opportunity to start your own venture! This option, while allowing the greatest flexibility, requires diligent planning and commitment. As in the previous two options, the entrepreneur should seek professional help and guidance, when needed.
All new ideas are not necessarily viable options. An entrepreneurial idea is necessary but not sufficient for a small business. In fact, studies suggest that a very small percentage (only 1%) of the patents generated in Canada by the Patent Office provide a commercial return to the inventor.
Every idea needs to address a specific need, want or problem. It is clear that the business, while it must have commercial merit, is perhaps not the key ingredient, but rather it is the entrepreneur who can identify a market opportunity that is large enough to support a business venture.
If insufficient numbers of people experience the need, want or problem, then the idea will not have enough customers or clients for it to be successful. Therefore, most entrepreneurs start by identifying an opportunity, clearly defining the opportunity and then trying to generate a specific idea to respond to this opportunity.
To summarize, not all ideas for a new business have a large enough market demand to make them viable businesses.
Opportunities are not always obvious. As situations and events change, new opportunities continually arise. For example, changing legislation, increasing levels of concern or awareness, unexpected events, and trends all give rise to new opportunities. Opportunities generally stem from a need or desire, an issue or problem, or a change as described above.
Exploring Ideas and Opportunities:
If you don’t already have a business concept in mind, the following resources might help you come up with some ideas:
- Trade shows
- Trade publications
- Auto shows
- Craft shows
- Home and Garden shows
- Labour Market Surveys or Statistics
When assessing opportunities for a new business venture, consider the following questions:
- Is this really an opportunity that would lead to a viable business venture?
- Has it been identified by others? Have they acted upon it?
- How long will the opportunity last? Will it support a long term venture?
- Do you have sufficient information to properly assess the opportunity? Is it accurate?
Evaluating Your Idea
While nothing will guarantee the success of a business, a viable idea based on good research is certainly a factor for success. How do you know your idea is a good one?
Table 1 presents some questions you can ask yourself in order to evaluate your business idea.
Table 1: Guidelines for Evaluating Ideas
|Evaluating Business Ideas|
Why Businesses Succeed or Fail
Certain factors contribute to the success of a business. These factors include:
- Viable idea based on good research
- Good business plan with short and longer term objectives
- Sufficient financing
- Effective management
- Good financial controls
- A business might be based on a good idea, but could still fail for some of the following reasons:
- Insufficient research to validate a demand for service or product
- No business plan, or a plan that is not followed
- Insufficient financing
- Lack of proper training and commitment
- Unclear target market and inappropriate, or no marketing plan
- Lack of financial controls
Click on Worksheet 2.1 to identify your business idea and evaluate your business opportunity.