Part of developing any business idea into a successful company is understanding the addressable market for it.
The best ideas often have clear answers to the following questions:
Who is the most likely to purchase from you with the least amount of convincing? Who’s already spending money on products like this and what are their defining qualities?
To develop a deeper understand of who your business idea can serve, you can:
1.Use technology to conduct a competitive analysis of other businesses in the same space. This is the process of identifying and evaluating other companies providing similar solutions to your potential customers.
2.Interview prospective customers or host focus groups to learn more about their wants and needs. This can help you discover business opportunities you may not have considered.
3.Explore communities on WhatsApp, Facebook or on industry blogs where your prospective customers already congregate.
A clearly defined opportunity and audience will make it so much easier to grow with a straight line to early sales, by starting from your lowest hanging fruit and working your way up the rest of the tree.
Once you start your own business and begin acquiring customers, you’ll gain feedback that you can then use to adapt, refine, and even change your messaging to better resonate with potential clients and customers.
How profitable is your business idea?
All business ideas must have the potential to be profitable in order to be worth your while. But profitability is a bit more complicated than simply ensuring your company is in the black after subtracting your total expenses from your total revenue.
Let’s say you want to sell hot sauce at $20 a bottle. If it costs you $5 to manufacture and get it ready to ship, you’ll bring in $15 in profit per unit sold. That’s not a lot of money to spend on finding a customer for it, let alone the other business expenses you’ll incur.
The good news is there are many levers you can pull on to boost the profitability of your new venture. You could:
1.Increase your price. (This may seem obvious, but a solid pricing strategy is crucial to creating a sustainable business model.)
2.Bundle together multiple products to increase the average order value of each customer.
3.Sell in bulk to other retailers.
4.Entice your past customers to make repeat purchases. It’s much more cost effective to market to existing customers.
5.Offer a subscription to encourage more repeat orders.
6.Expand your offerings with new, more profitable products or services you can sell to the same audience.