Recognizing a business opportunity and coming up with a great business idea is definitely the first step towards starting your own business. But how do you know if the idea has actual profit-making potential?
You can follow a systematic approach to help you make an informed decision about whether your business idea is worth pursuing or not. Before you decide to put your time, money and energy into realizing your business dream, ask yourself a few questions like the following:
Are you addressing the consumers’ needs?
The first step is to identify what customer needs you will be addressing with your proposed product or service. Ask yourself a few questions like, are those needs already being met by another provider? If so, what added value will you be offering?
Who’s going to buy your product or use your service?
Identifying a market for your business and how you plan to reach them is another big question. Once you know the customer segment and profile you want to cater to, its important to know what’s the best way to reach out to them.
What resources do you need to get started?
Plan and arrange for the financial and human resources required to start and run the business. According to the nature of your business these can include initial capital, office space and employees. Many banks provide financial solutions to SMEs in the UAE, for e.g. CBD offers various financial products for SMEs like the CBD My Business Account and CBD Business Loans.
How will you face competition?
If you’re entering a highly competitive industry or one with fewer but bigger competitors, you must have a strategy for handling competition. You can beat your competition by innovating or significantly improving quality, amongst other strategies. If you’re entering an untapped market, you should have a plan for retaining your first-mover advantage.
How will your business earn revenue?
You must also have a revenue model in place. The whole purpose of starting a business is defeated if you don’t have a systematic plan to generate revenue to fuel your business and to make it viable for you to run the business.
There are various tools and frameworks that you could use to help you get started with your business strategy:
• Porter’s Five Forces:
The Porter’s Five Forces tool helps you analyze the competitive environment within an industry. Entrepreneurs can judge the potential of their business based on intensity of rivalry within the industry, threat of new entrants, threat of substitutes, bargaining power of buyers and bargaining power of sellers.
• SWOT Analysis:
SWOT analysis is a useful assessment tool to help you analyze the strengths and weaknesses internally related to your business, as well as the opportunities and threats related to your market or industry.
These tools can make your business strategy easier to plan and help you get off to a smoother start.
CBD has a section on their website dedicated exclusively to SMEs where you can take a short quiz to assess your entrepreneurial potential.