So you've got an idea now, is it worth it?

Some weird balloon in orbit...

Ok, I told myself, "They're going to start getting tired of these space photos..." Hey! I can't help it! SORRY!

Continuing from the "Eureka!" piece on March 3rd, now you've got a single idea or maybe two good ones that passed your initial questioning process.

Now the real fun begins. Now that you've identified your idea, now you need to quantify it and see if it's actually worth the time and if there's real demand in the market for such a product/service.

There are four key areas you need to look at to determine the feasibility of your idea, which I will break down more in detail:

1. Competition - Is your idea already being done by many competitors? If so, what are their strengths and weaknesses?
2. Market growth and trends - You need to determine if the pie is growing or shrinking. Also, it is essential to determine key consumer and supply trends to determine if there's demand and needed resources to make your business successful
3. Suppliers (if applicable) - If you're making a product, are there good suppliers out there? If you're marketing a service, can you find the talent needed?
4. Economic trends and conditions (to start, in your local area first, unless your idea is international, nationwide, or purely on the internet) - This isn't as important as the other 4, but it's useful in solidifying your approach. This category includes government regulations.

Before we delve into these 4 factors, lets go over a list of reliable free resources you can use to do your research:

• Google (of course)
• Bureau of Economic Analysis (www.bea.gov) useful for seeing macro-economic trends
• Bureau of Labor Statistics (www.bls.gov) could be useful for labor-related research
• US Census (www.census.gov) great for demographic information
  
• Major publications (New York Times, Inc Magazine, Wall Street Journal, Crain's)
• Trade associations related to the industry you're going into - these guys often provide data and statistics for free (not all of them though)
• Trade publications related to the industry you're going into - there are trade publications for literally every industry and subject under the sun. These often have very useful articles and statistics you can use to collect information on the market and your competitors
• CALL people up such as industry experts, journalists, etc. and even your competitors! (you just need to be a bit more careful when calling competitors). Usually you can learn A LOT just from talking to people.
  

Now...here are some PAID resources you can use if you either have the money, or already have access to them through your local library or something.

• Factiva/Lexis Nexis - These databases aggregate articles from all major publications nationwide and worldwide)
• Marketresearch.com - Often have great market reports with robust statistics and data you can use to determine the market and the strength of your competitors
• Business Source Premier (EBSCOHost) - The literal hub of trade magazines and articles - very useful
• Dun & Bradstreet - There could be many small businesses in your region that you don't even know about. This database is useful for determining companies' credit ratings and their estimated revenue and employees. Also, a lot of bigger companies conceal the actual number to their corporate headquarters. This database also gives you their direct number in case you want to call them
• Trade shows / networking events - Sign up for a bunch and go to them, ESPECIALLY if they're in your area. You can learn A LOT and meet new people who can help you.
• Gartner - Only if your venture is IT-focused. These guys are EXPENSIVE though, so try to access them through a library or something.
• Author of this blog *COUGH* ;)
  

Competition

Competition will be one of the most important factors you look into. In order for your new venture to be successful, it must be able to take advantage of the weaknesses of your competitors.

Using your research, you need to be able to answer some key questions about your competitors:

• First of all....WHO are your competitors? and WHY? You need to know why, otherwise you might overestimate who your competition truly is. You should only count someone as a competitor if they serve the same demographics and a similar need to your own business.
  

Let me give a quick example. Lets say, for instance, you're opening up an organic dog food store (I want royalties for that idea if you use it!!! ;) ). As you do your research, you find out that someone else in your area has a store that sells organic food to fish and cats. Is he a competitor? No. Why? Because he doesn't serve the same "demographic" or "needs" as you do. Dogs are not fish or cats, therefore the other store is not competing with you.

Let me give one more quick example to drive the point home. Lets say you're opening up a retirement home for rich, socially inept younger people who don't want to work anymore and who are in their 20's to upper 40's (I REALLY want royalties for that one ;) ). Would you consider a retirement home for the elderly your competitor? No. You don't serve the same demographics or needs as they do. Your demographic is towards younger people. The needs you serve for them are not really health or hospice-related, but rather, probably more for hooking them up with fun activites and new friends.

• If your venture is more regionally focused: Who is your competition in your area? and why?

• What products/services do they offer, and what is their geographic coverage? (this depends on your idea)

• What are their strengths and weaknesses? This is very important because it will determine your angle of attack, if there is one. Your idea must be able to take advantage of your competitors' weaknesses.

• Is the market dominated by a few big companies or by many small ones? You can determine this by the market share of your competitors. The more fragmented your market is, the better. It is difficult to enter a consolidated market, and the big guys like to keep it that way. You must understand what kind of barriers to entry you are facing.

• What are your competitors currently planning to do? Are there new technologies or product/service lines that they're developing that could threaten your business?

The Market & Trends

Everyone wants a piece of pie. Question is, is there enough pie to satisfy? (hey, that rhymes!). The condition of the market you enter into is essential in determining whether your idea is even worth pursuing.

You need to be able to answer some key questions about your market:

• Is it consistently growing or declining? And by how much? Large increases indicate the market is still in its growth stage. Flat growth indicates it is mature, and declines mean the market is dying off. If you enter a mature or declining market, your only chance of being successful is to actually steal market share from your competition, which can be quite difficult. In a growing market however, everyone has room to grow, and there is not yet enough supply to meet demand.

• Are there any substitute technologies that might threaten the market? For example, the CD market has been consistently shrinking due to increasing adoption of mp3 players.

• What are the consumer trends in your market? Do you see signs of consumers embracing things that are similar to your product/service? Remember, your idea must serve a need or create one. However, you can't do that unless you understand what your future customers are thinking. You need to understand what makes your intended consumers want to buy the products/services in your market. Is it Price? Quality? A mix of both? These things you need to determine.

If you're more regionally focused, then you need to try and figure out the market conditions and trends in your area specifically. For example, you find out that the luxury yacht market is growing overall. However, if you serving somewhere like Mississippi ...chances are you're in for a rude awakening. That area would show a stronger preference towards smaller boats rather than luxury yachts.

Suppliers

Determining the nature of your suppliers and what they charge is essential for when you begin to put everything into numbers. You need to understand this area well in order to accurately predict your costs. You need to answer some key questions:

• If you have a product: Are there a few big suppliers or many small ones? This will determine how much leverage and negotiating power you will have with them. What are their prices and lead times? (Lead time refers to how long it takes for them to manufacture and ship the item to you)

• How scarce or plentiful is the labor you need? And what is the going market rate for employing them? (you can determine this either by articles or by the Bureau of Labor Statistics) Can you outsource? Sometimes, utilizing a third party is the best way to go, and often more affordable.

• If you're providing an outsourced service (i.e. you use another company to serve your customers) - what do they charge? What is their lead time? And what is their quality of service?

• What are the different incentives/perks among these suppliers? (i.e. bulk discounts, free shipping, etc.)

• WHERE are your suppliers located? (this can apply to both products and services)
  

Again, this will be essential in determining if you can secure the supplies you need, and also essential for your financial planning. You can't run a business unless you know if you're even making a profit.

Economic Trends & Conditions

Chances are, you will find out more about this subject as you look into the three other categories. Therefore this is the least important of the four. However, it is worth looking into, and you'll want to answer some key questions:

• Are there any government regulations in place that could have an adverse or positive effect on your idea? You need to find out about both federal and state regulations. If you're going international, then you should understand any relevant laws of those countries that affect your business. (this is the most important question in this category)

• One interesting thing to check is to see if there are any government grants related to assisting in starting a venture like yours. You'd be surprised what regulations are out there that provide incentives for people to start all kinds of businesses.
  

• Has disposable or overall income been on the rise or on the decline for your demographic and geography? What about living costs? (again, this is a plus to have, but not necessarily required)

• What is the employment situation for your demographic/geography? The more people that have jobs, the more people that can spend money. (again, this is a plus).

As you do your research, you'll probably come across more questions that what I listed here. Depending on your industry and your idea, there might be specific questions that come up that you will need to answer. Remember, "Luck" is simply when preparation meets opportunity. Do your homework!

And if, from your research, you find out that perhaps your idea isn't as attractive as you thought, SCRAP IT! Base your decisions on facts rather than emotions. If the facts don't support your hypothesis, then it's time to look somewhere else. Many entrepreneurs come up with many ideas that don't fly. The successful ones dump the bad ideas through research, and embrace the good ideas with the proper planning and knowledge. Ultimately though, no matter how many facts you have, you will still need to make a decision based on your gut feeling. Don't get into what some people call, "paralysis through analysis." Get the facts, but then MAKE A CHOICE.

Also, you must remember that it'll eventually come down to numbers if you're planning to start a business with high overhead. If you start a business with very little overhead, then financial projections are not as vital, because you have very little to lose and potentially a lot to gain.

Remember, you can make the numbers say whatever you want. In the end, numbers are there to make sure you're not losing your shirt rather than telling you how rich you're going to be.

If the idea turns out to be good, then the good news is, you have most of the stuff you need to write a solid business plan.