A Complete Guide to Finding and Evaluating Small Business Opportunities and IdeasFeatured, Small Business, Small Business How to Guides Saturday, February 26th, 2011
So you have decided that you will be starting a small business of your own. What next? The next step is to find and evaluate small business opportunities and ideas. The challenge most small business enthusiasts face is to ascertain whether their business will be successful or not. While no technique can guarantee success, choosing the right small business opportunity or idea increases the probability of success. The question is how and where to find business ideas. Finding the right business idea is not something that happens by accident. Yes there are some Eureka moments but not every idea can be converted into a viable business. Remember that you don’t have to invent something absolutely unknown to the world to start your small business. In fact, most small businesses are built on already proven and successful ideas. Yes, you will have to create a differentiation for yourself and that differentiating factor could be anything from customer service to product variation to operating hours.
How to Find Small Business Opportunities and Ideas
The process of finding small business ideas involves an assessment of your interests, skills, business types etc.
The first step in finding great small business ideas is to evaluate yourself, your preferences and your personality. You need to ask yourself:
- Which subject you enjoyed most in your school and college?
- What are your interests and hobbies?
- What would you enjoy doing even without getting paid for it?
- What are your top three business skills (analysis, sales, accounting, marketing, hiring, training, project management etc.)?
- What are your top three personal skills (creativity, leadership, counseling, problem solving, listening etc.)?
- What jobs have you enjoyed doing the most during your career and why?
- What jobs have you enjoyed doing the least during your career and why?
The purpose of these questions is to find out your strengths and weaknesses, your passion and interests etc. If you are willing to write books, for example, without even being paid for them, it shows you are passionate about writing books. Starting and running a business requires the entrepreneur to be highly passionate about the overall concept of the business. The skills assessment would help you find out what jobs you are good at and shows that you will be able to assume those responsibilities in your business. The skills that are not your strengths can be acquired through trainings and courses. Finding out about jobs that you liked (and disliked) doing most in your career is important because chances are you will still like doing those as part of your business and will be able to do them well. This will also help you select the right category of business for yourself.
Most types of small business opportunities and ideas can be divided into four major categories: Manufacturing, Wholesale, Retail and Services. Understanding of these categories is essential because each one has their own working styles, capital requirements, entry barriers etc.
Manufacturing – The mother of all businesses. Manufacturing businesses are both capital and labor intensive businesses. To run a manufacturing unit, you will need machinery and equipment, human resources, inventory etc. which require capital investments. The upside of starting a manufacturing unit is that it’s a high reward business and, if successful, can grow very quickly.
Wholesale – A wholesale business is the intermediary between manufacturing units and retailers. The wholesale business, in spite of lot of manufacturers dealing directly with retailers and even consumers, is an active and important element in the distribution of products. The wholesalers buy large quantities of products at discounted prices from manufacturers and sell them to retailers at a marked up price. Since a wholesale business has to buy in large quantities and also need to maintain a big inventory, the capital requirement is very high. The upside of a wholesale business with a product that is in high demand can bring significant profits due to economies of scale.
Retail – Everyone knows retail very well because we deal with retailers very often, almost on a daily basis. A retail business has low capital requirements as it does not require huge inventory and the business operates mostly on cash (no receivables). A retail business can also be run on the Internet without needing a physical storefront.
Services – One of easiest and least expensive business types to start. A services business does not require huge inventory (pool of skilled workers is the inventory) and the cost of equipments is also very minimal. The upside of a services business is that it is the safest to start but one can’t expect exponential growth unless there is a revolution, for example the unprecedented growth in the IT industry.
Generating Small Business Ideas
A thorough personal assessment and understanding of business types should most likely give you several small business opportunities and ideas; for eg: if you are a passionate about photography then you can become a freelance photographer or if sales is one of your strength and you love golf then you can start selling golf equipments and gear.
In case you are still not able to find the small business idea for yourself then you can use any idea generation technique. We suggest using SCAMPER as it is provides a structured and multi-dimensional way of generating ideas about any topic. To put SCAMPER to generate ideas for a new product or service, you will:
S – Find or create a Substitute for an existing product or service
C – Combine with an existing product or service
A – Find out how people will be able to Adapt to it easily
M – How it can be Modified to create a different offering
P – How it can be Put To Other Uses
E – Eliminate dissatisfaction, waste etc.
R – Reverse or Rearrange to create a new offering
Evaluating Small Business Opportunities and Ideas
If you follow the above steps you will have more than a couple of small business opportunities and ideas to select from. The next step is to evaluate those ideas to ensure that the business you are planning to open is right one to start and suitable for you.
The demand and supply – Determine the demand for the product or service that you plan to offer. If the demand is high and there is a gap in supply then it makes a right business opportunity.
The competition – Study the competition closely to find out the reasons for their success, operating procedures, strengths and weaknesses. Find out the gaps in their processes and what you can do differently and better. If there is something that they are not offering or you can do something that will be valued more by the customers then go for it.
The Industry – Find out if the industry is overcrowded with big and strongly placed brands. If it is then it is probably not the industry that you should be in unless you really have a game changer in your hand.
The Business Dynamics – Some businesses and industries change very rapidly. Find out your comfort level with the dynamics of the industry that you are planning to be in. You may not want to start selling mobile phones, for example, if you are looking for a slow paced industry.
Specialization – Are you a specialist in the business that you are planning to open. There is a definite advantage in being a specialist and called an expert in any field. An expert is valued more by customers and is given preference over others, for example Starbucks specializes in coffee and Google specializes in search.
Risk – Determine the inherent risks in the business and compare it with your risk taking capacity. If you have low risk taking capacity then go for services or retail businesses.
Affordability – The decision on starting a small business should finally be based on whether you can afford to start and run that business. Of course you can raise funds but that also has a cost that is to be paid. If you are looking for inexpensive business to start then think of providing services rather than starting a manufacturing unit.
If you follow the above steps we are sure that you will be able to find the most suitable small business opportunities and ideas for yourself.
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