Testing a Business Idea

Testing a business idea is key to making sure the enterprise is going to be profitable and satisfying, especially for small business owners.

Getting a Business Idea

Business ideas for individuals, inventors, and partnerships come from a variety of sources including personal and professional experience or a combination. A successful business meets a need in the marketplace.

May Hui of Catch Matchmaking started her dating service for single professionals in Los Angeles after working in a Fortune 500 company and discovering how corporate life made developing relationships a tough task.

Actors Brian Vermeire and Kristina Hughes created an organizational tool to help performers log auditions and callbacks after devising a system to meet their personal needs.

Professional chef Gerard Turbush and his father Chuck started a green salsa company years after his father was receiving compliments and had requests from friends and family for the product.

Developing the Business Idea

The next step is developing the business idea. Answering a series of questions will help lay a framework for effective planning:

- What is my purpose in starting this type of business?

- How will the business help the target customer or client?

- How much money will it take to develop before the business is launched?

- How much time will it take to plan details, gain additional knowledge, and get licensed?

- Who are the most likely customers?

The Small Business Administration has a list of additional assessment questions worth answering in detail. The SBA provides this and other resources free of charge.

Answer the questions as thoroughly as possible and then write a mission statement or purpose statement for the business. A mission statement can be as brief as two or three sentences stating why the company exists and how it solves customer problems, needs, or wants.

Getting Input on the Business Idea

Getting input on a business idea is a critical next step. Check with a variety of people from family and friends to former employers and work colleagues. Listen to the different perspectives on ability and temperament levels to make sure the business is aligned with the personality type. Listen to the naysayers and the encouragers. Try to sift through the advice objectively and not be defensive with those who are negative.

Next meet with counselors at groups like the Service Corps of Retired Executives (SCORE) or business development centers like PACE in Los Angeles which hosts a series of low cost workshops ranging from $ 30 to $ 80 on starting a business.

Conduct Market Research

Conduct market research - informal and formal - on gathering input on the industry, trends, profitability, and packaging. Nearly every industry has a business association - from lawn mowing and lingerie stores to vending machines - that offer free or low cost information. Take time to read through the information to educate and test assumptions about what best business practices and what prompts customers to purchase.

"Big companies conduct market research on new product lines and consumer tastes constantly," says Jim Cooper, principal of Conscientia Research in Monrovia, California. "There's no reason why small businesses shouldn't utilize market research as well and include the cost as an investment in their company and their future."

Cooper's firm charges from $ 1,500 to $ 5,000 for a range of market research services including regulatory data, packaging, lead generation, and making a list of specific recommendations to guide business owners in strategic decision making that will lead to sales.

Survey Existing Businesses

All businesses have competition - all businesses. Spend time looking at competitors locally or similar businesses nationally before investing time and money. Try to speak with the owners if possible. Larry Flax, co-founder of California Pizza Kitchen, told an audience at the Los Angeles Chamber of Commerce that he and his business partner studied a pizza operation in Chicago and one in Glendale, California before opening the first CPK restaurant in Beverly Hills.

The more planning that goes in to testing the business idea means the more stable a foundation the business will have once operations get started. This helps new business owners prepare for the challenges that inevitably confront a company and increases the chances for long-term success.

Use these sources in the article for further reference:

Catch Matchmaking . . . . www.catchmatchmaking.com
Chef Gerard and Chuck's Green Stuff . . . http://jalafresca.net
Click here for SBA assessment questions
Conscientia Market Research . . . www.conscientiaresearch.com
PACE Business Development Center . . . http://www.pacelabdc.org