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Questions to ask yourself before you start

You have a great idea and want to start a business. But do you have what it takes to make it a success? Every year, more new small businesses fail than succeed. But that shouldn’t stop you — test your idea and yourself by answering these questions.

Do I have what it takes?

Running your own business can mean long, unpredictable days, with little respite until you start to make a profit. Reaching that milestone can take years.

You’ll need to be:

  • Passionate: If not, you’ll find it hard to keep going when you hit a hurdle.
  • Prepared to make sacrifices: You’ll have less money to spend and may have to give up hobbies and social activities, at least while the business is getting up and running. Make sure your family is prepared for changes, too.
  • Good at managing risk: It may take time to develop a steady flow of revenue.
  • Persistent: Things may not always go your way.
  • Open to learning new skills: You may have to be company CEO, bookkeeper, sales team and cleaner until you hire specialist staff or advisors. You’re also going to be developing what your business is selling — and working out how to sell it.

This Action Plan will help you evaluate your idea so you can decide if you are ready to join the ranks of the self-employed.

Many people are able to come up with new ideas, but there’s a crucial difference between a good idea and a commercial idea. Often the most successful ideas are the simple ones, like identifying a gap in the market that can be filled with a new product or service, or adapting and improving an existing business idea.

Taking this time to evaluate your idea before you leave your job, borrow money and put your family life on the line is crucial.

Will I solve a problem or fill a need?

Is your idea for a business going to solve a problem — or tap into an unfilled need — for the public or other businesses?

If your answer is no, scrap it and start again.

If your answer is yes, think about the scale of this problem or need. If it’s minor, you going to struggle to make sales. You need to solve what’s giving people a major headache, or provide something they can’t get elsewhere.

This is a key aspect of business planning. It’s a good idea to draw up a basic business plan — even just a one-pager — to help test whether you have a sound idea.

Accordian Common Ledger71

Case study

Countdown to launch

Before launching tech company Common Ledger, Carlos Chambers and his team had an idea for software to streamline the information accountants received from their clients’ different programs. They spent six months speaking to accountants in New Zealand and Australia to understand their potential market and refine their product.

“We learned there was this really deep problem that accountants around the world were facing. That’s what we were looking for — huge problem and huge opportunity and a huge way to really help this industry move forward.”

The next step was to develop an 18-month plan and a three-to-five-year strategy to turn their start-up into a fully fledged company. They have since raised more than $1m and launched in both countries.

“We’re close to our targets on our initial forecasts. We’ve brought on the right board. We’ve hired the right team members. All these things are probably the result of thorough planning. We would never have been able to usefully create our strategy if we hadn’t done that first six months of research.”

Will people buy from me?

Unique selling point

Unless you’re going to sell something no one has thought of before, you’ll be competing against other businesses. Your products or services must stand out from the rest.

Developing your unique selling point (USP) 

Customer profiles

It’s worth creating personas — fictionalised profiles of the people you most want to sell to — as you shape up your idea.

Identifying key customers

Numbers game

You need realistic estimates of future income and costs to work out when you’ll be in profit. If the numbers show you won’t make profits for some time — even years — do you have funds to carry you through?

Tips on cash flow forecasting

How much will it cost to start up?

How much will it cost to start up?

Once you’ve drawn up a basic plan and crunched some numbers, check out our guide to how much money you’ll need to start a business.

Who are my rivals?

Some markets are more crowded and harder to break into than others. For example, if your area is flooded with cafes, what makes you think yours will be a success?

Ask yourself:

  • How many competitors will I have?
  • Are there any who will be in direct competition with me?
  • How difficult will it be for others to repeat what I’ve done?

Remember, you’ll need a unique selling point to make you stand out from the rest.

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