Never invest in a business without first analyzing its potential for success.
Planning a new business is an exciting undertaking. I get that.
But before you invest too much money in a start-up, spend some time up front looking at the nuts and bolts of the potential for the business. There are 4 analyses used to assess that.
- The Opportunity Analysis looks at the size of the industry and specific market you’re getting into.
- The Customer Analysis defines who you’ll sell to, why they’ll buy what you offer, how many potential customers there are that you can potentially reach, and what problems or desires they have that will motivate them to buy from you if/when you provide them with an appropriate solution.
- Your Competitor Analysis is another important activity to include in your initial planning and it should be undertaken at least once a year. Make sure you spend some time checking out the competition. You should always know who they are, what they are up to, how their offers and pricing compares to yours etc. The key to your success in beating any competitor is to find what you do better and build on that.
- The Product and Pricing Analysis demonstrates your level of understanding of not only your business and the market you’ll be competing in, but also your potential to make a decent profit (which of course is going to be required if you want to someday take home an income from your business).
The results of these four analyses must be taken very seriously before moving forward. Too many let emotional attachment to an idea prevail when all else indicates the potential for success is extremely limited or non-existent.