Determine your business feasibility
Test the feasibility of your business.
It’s vitally important to test run your new good or service in a sample market so you can get a clearer idea whether it’s worth investing more time and money.
Of course, there’s no way to absolutely guarantee your idea will be a winner. Help clarify if you’re likely to make a reasonable return on your investment by finding out:
- How many customers are interested in your product or service?
- What products or services are likely to be competing against your newcomer?
- Do you intend to sell your new offering over the Internet?
If you sell online, research online
These days, many businesses sell their goods through their own website or via a third party online. If you’re planning on selling your new service or product over the net, it’s crucial you conduct some research online.
For example, if you’ve been working on a tea tree oil hair product to introduce to your range of home grooming goods, and you plan to sell it online through your website, it’s a smart idea to use a keyword planner tool. This tool can help you find out how many searches are being made for tea tree oil as a hair product per month.
You’ll also discover what kind of tea tree oil terms are being searched for and if ‘tea tree oil for hair’ is trending online.
Connect with industry associations
If your business has a physical location and you’re planning to introduce a new product onto its shelves, get some insights from your industry association.
Most industries have an industry association that produces research or can offer you some information.
Check any available statistics
Find out if there are any existing statistics on the type of product or service you plan to introduce to the market. A site like Statista may help you gather more information on your target market or type of product.
Your research will help you ascertain what price customers might be prepared to pay for your new product or service. But you’ll need to calculate the cost (per unit) of producing your new product, or the cost (per hour) of providing your new service.
From this point, you’ll be able to come up with a couple of price scenarios such as:
- Pricing high – above competitors’ offerings due to what you think customers will perceive as better quality or value.
- Pricing low – to beat your competitors on price or to attract more buyers to your new offering.
Survey customers on price and demand
It’s important that you survey your existing and new customers in your target market for your latest product or service. You’ll want to know whether they will actually purchase your newest addition, how often they’ll buy it, and at what price.
You could get this information by conducting a:
- Focus group – a smaller sample of 8-10 participants.
- Survey – a few quick questions when potential customers visit your store or website.
- Informal chat – simply getting your customers’ opinions as they go through the checkout process.
Examining potential profitability
How long will it be until you expect to break even with this new good or service? Create a cash flow forecast of the upcoming year to get a realistic idea.
Work out your anticipated costs, selling price and quantities you need to sell by:
- Calculating research and development costs.
- Adding variable costs – for example, the cost of operating machinery in the production process.
How long will it take to build up the sales of your new item to a point where it pays for itself and begins to turn a profit?
As with anything in business, it’s important to do your due diligence. If you’ve had an idea that’s great – a big chunk of the work is done. But it might be that although your idea is a good one, it’s just not feasible to sell it for what it costs to make it, or that there won’t be sufficient demand for it. So before you go investing a whole lot of time and money into launching a new product or service, make sure it’ll be profitable in the long run.