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The Best Businesses to Start In 2020 – Part 2

Investing in your own venture is one of the most important decisions you will ever make. The physical and emotional challenges are huge, and you need to have the determination and resolve to make sure your own business will prosper. In the first part of this series, we have talked about low capital infusion for starting your own business. On this second part, we are going to assess some of the biggest opportunities in business but may require bigger startup capital.

Start a Business Under $50,000

A $50,000 capital is ideal to buy your own franchise. The good thing about this is that you don’t need to develop your own business operating system because everything will be handled to you in package. The only downside to this is that you will not be carrying your own brand because you are franchising an already established business name.

Start a Business Under $50,000

Pros

  • Business is already established
  • Business plan for long term and short term is already developed
  • Known brand means more customers

Cons

  • You miss the opportunity of building your own brand

Here are some franchising ideas under this price range:

  • Non-medical home care
  • Residential cleaning
  • Auto glass repair and replacement
  • Travel agencies
  • Group fitness classes, conventions, apparel, and accessories

Start a Business Under $100,000

In general, buying a business under $100,00 will reduce the risks of not carrying out various tasks such human resources, operations, sales and marketing, legal compliance, customer service, finance management and accounting, and a whole lot more. When you buy a franchise business, the foundation of the venture is already developed and its operating system as already been tried and tested and came out successful.

Start a Business Under $100,000

Pros

  • With this amount, you need to consider the business model that is best for you.
  • There are tons of choices to choose from and some of the businesses also have popular names that are known to many.

Cons

  • Obtaining additional capital may be needed on because the actual franchise cost is the not the only expenses you will incur in the process of setting up your business.

Here are some franchising ideas under this price range:

  • Supplemental Education
  • Fitness centers
  • Outdoor pest control
  • Residential heating & air conditioning maintenance and repair
  • Commercial cleaning
  • Mechanics’ tools and equipment

Start a Business Under $250,000

As you plan to get involved in a type of business that needs more capital to get started, it tends to become little more complex because of the amount of capital you need to infuse. However, they also offer more opportunities of growing into larger more established enterprises. You don’t necessarily need to franchise them. Since you have the money, you can develop your own business plan and create a brand that you can call your own.

Start a Business Under $250,000

Pros

  • Even if starting a business with huge capital can be a very daunting prospect sometimes, this is also a highly profitable business opportunity particularly if you are able to choose a brand that is already well strategized and doing perfectly in the business.
  • The best business can earn you a lot of profits and by sticking to the established objectives and mission of your company; you can make sure that your business will be successful regardless of how the economy goes.

Cons

  • The risk is higher because of the amount of capital you need.
  • Certifications and trainings may be required depending on the industry your business belongs to.

Here are some business ideas under this price range:

  • Air Charter Service
  • Arcade/Party Rentals
  • Car Wash
  • Child Development Center
  • Coin-Operated Laundry
  • Earthquake Products/Services
  • Fiber Optic Transmission Systems
  • Fitness Rental Equipment
  • Manufacturer/Retail Item
  • Used Car Leasing

Start a Business Under $500,000

Franchising a business is one of the fastest ways of becoming a full pledge entrepreneur with this amount of capital. At present, among the cost effective and practical franchise opportunity is the food industry, convenience store, and coffee shops among others. So if you are looking for a better way to pave your road towards becoming a successful entrepreneur, getting into the franchise business is the most lucrative way to invest in a particular business.

Pros

  • There are plenty of franchise opportunities that offer huge ROI.
  • This is basically a business distribution system or an expansion strategy with a trademark that is sheltered by specific laws and agreements. The products, services, establishment, and ambiance of the business will look the same as the mother company regardless of where you plan to set up your franchise.
  • The franchising system has been tested and proven to work successfully and this is also one of the reasons why leading fast food chains like McDonald’s franchise are also one of the leading franchisors in the world.

Cons

  • Growing capital infusion means growing risks for your investment.

Other popular industries that offer franchise for sale within this price range include 7-Eleven, Ice Cream, Starbucks and Nando’s Franchise. You are not simply buying an existing business but you are buying a business model and operating system that is proven to make money and generate hefty profits.

Start a Business Under $1,000,000

The reason why some ventures fail is because the business owner does not provide the right of products or services or the target market is wrong. But with this amount of capital, you need not be wrong with your options.

Pros

  • With a million dollars as your startup capital, you have the opportunity of buying an already established business with good branding and large customer base
  • The success of the business can easily be duplicated when you decide to buy a brand where you can have the advantage of setting up a business instantly with a proven trademark.

Cons

  • Bigger business means bigger risks.

Some of the businesses you may consider under this price range include:

  • Food and Hospitality Business
  • Industrial/Manufacturing Business
  • Cafe and Restaurant Business
  • Beauty, Health and Fitness Business

Need more business ideas? Here are the best businesses to start in 2020 - Part 1

The Best Businesses to Start In 2020 – Part 1

With myriad of business ideas for the year 2019, it can be quite difficult to figure out which have the more potential for growth and expansion for 2020. You will want to establish a business that is not only lucrative for the current year but can withstand market changes for the long term. In this list, we have compiled several business ideas that have seen recent growth previously. And because this list is based on the amount of startup capital you need, it will be a lot easier to browse for a god business to invest into based on your current budget.

Although joining a new trend may pose some risks on your investment, it may prove to be highly profitable and rewarding if your business idea takes off. Some of the business ideas we have included on this list have always been popular for years making it less risky but more competitive. But on the other hand, every business niche will certainly help make you money so choose wisely.

Start a Business Under $1,000

You don’t need a ton of capital to start your business. If you have $1,000 or less, you can start a business as long as it is within your interest. Here are some business ideas under this price range.

Start a Business Under $1,000
  • Coffee Cart – coffee carts are booming industry for small business entrepreneurs. You don’t need a full coffee shop to enter the coffee business. The advantage of this is this is very mobile. You can easily move from one location to another. However, competition with bigger coffee shops may require you to perform extensive marketing.
  • Photography – although photography equipment can be quite expensive, you can start with a basic DSLR model under $500. The rest of the money you can put in accessories and fund your marketing to let potential clients know that you are in business.
  • Pool Cleaning Business – this can be a seasonal business idea but the good news is, this is a good investment option for your $1000. All you need to invest in is your time and some cleaning equipment and you are ready to open up your own business.
  • Virtual Assistant – if you would like the idea of working as an online freelancer from home, you may consider starting a service business as a Virtual Assistant (VA). This is a great way to break into the thriving online work industry. Virtual assistant’s salary can range anywhere between $3 and over $60 per hour

Start a Business Under $2,500

Investing bigger capital in a business means you are serious about its development. One of the main advantages of a bigger capital means stability for your business because you can purchase more assets for your business. Here are some business ideas for this price range.

Start a Business Under $2,500
  • Moving Service – Did you know that you can start your own local moving service even if you don’t have your own truck? Yes you can and you do this by renting one. Using rental trucks as you establish your own moving service is a very practical move. You don’t need to worry about operating costs even when your business is on idle because you are only renting the trucks you use.
  • Room Rental – For this price range, room rental is one of the easiest business ideas to start. You can use the Airbnb or other similar model and basically market your business online. You can put your ads on various travel websites and social media platform to have a wider reach of the market.

Start a Business Under $5,000

Some of these business ideas can be launched with less than $5,000 but it will give you more leeway for asset investment. An infusion of funds into these types of business is always a welcome because it helps build more stability. A lot of businesses usually try to raise capital for their business but you don’t really need that much if you know where to start.

Start a Business Under $5,000
  • Business Consulting – Business consulting is a practical choice for this price range especially in the waste disposal and recycling management industry. Overhead costs for this type of business often include marketing peripherals, promotional materials and any specific certification that are needed for this industry. You may spend between three to five grand for this business to take off.
  • Pet Services – If you love all sorts of animals, getting into the pet service industry is a viable option for you. From pet sitting to retailing pet foods and accessories, this is a good startup idea if you have the capital to invest. Prepare to spend on obtaining a license, insurance and a bond because some areas require them.

Start a Business Under $10,000

Having a bigger startup capital means being able to invest more in your business. Here are some business ideas that fall under the $10,000 price range.

Start a Business Under $10,000
  • Online Retailer – Online retail business is a billion dollar industry and its growth continues as more and more people are embracing the culture of online shopping. Your overall startup capital will depend on the products you are planning to sell but with a massive infusion of capital, you can opt to sell more expensive items because there are less competitions in this field. The good thing about this is that you don’t need an overhead cost because you can start your business at home.
  • Party Planning and Services – Setting up a party planning services is relatively easy. With most of your capital going to various assets you need for your business, you may want to set aside part of that capital to spend for your marketing. All you need is excellent organization skills, proficiency to manage customers and establish some contacts in the events industry.

Start a Business Under $25,000

A capital infusion of $20,000 to $25,000 can already buy a franchise business. Here are some business ideas you may want to consider.

Start a Business Under $25,000
  • Convenience Store - Liquor and convenience store business is a venture that specializes in retailing so when you buy a franchise business; you need to choose one that can offer you the best location possible. Good traffic and a sufficient floor space can really make a big difference for the success or failure of your franchise.
  • Oil and Gas Investment - Buying a franchise in oil and gas business for high yield investments is generally not a new concept in building one’s own portfolio. Almost everyone with interest for this particular type of investment vehicle knew that to buy a franchise in this type of venture can actually earn huge amounts of profits if it is done the proper way.

Need more business ideas? Here are the best businesses to start in 2020 - Part 2

10 Things To Know Before Buying A Business

If you are planning to buy an existing business, there are several things you need to think about before making the purchase. Buying a business is a little complicated than most people seem to think and there are various issues that need to be addressed in order for you to make your choice of investment successful and more profitable. Small business for sale can be very profitable if you are able to properly structure it.

When you are evaluating a particular business option you are interested to buy, you have to know certain aspects related to the business like whether the place of the business is owned or if it is being leased, and also some determining factors that can significantly influence the price or ability of the business to earn profits in the long run.

Here are ten essential things you need to understand about buying a business.

1. Why is the business for sale?

Why is the business for sale?

When someone offers you to buy an existing business, no matter how attractive the selling price is, you have to know first why the business is for sale. You need to find out if the business is failing or the owner has simply lost interest and wants to retire. Or maybe there is a new competitor in the area that poses real threat to the business. Also, you may want to ask if the current owner already had offers for his or her business and ask why the deal did not push through if somebody already offered to buy it.

2. Ask for the business’ financial records for the last three years

Ask for the business’ financial records for the last three years

It is not rude to ask for the company’s financial records when you are buying a business. At a minimum, you can ask to evaluate at least three years’ worth of financial statements just so you can have an idea of how well or bad the business performed during those years. It will be best to have an accountant or financial auditor go over the figures because they have the expertise to look at these statements with a fine tooth comb.

3. Evaluate the industry statistics

Evaluate the industry statistics

When buying a business, you need to know if the industry the business belongs to is stable. To understand this, you have to study the industry statistics to see if it is growing, matured and secured or gradually diminishing. Buying a business is an ultimate investment and you do not want to buy something that belongs to an industry that is slowly losing its market appeal. If the industry continues to grow and stable, it means that the business you are buying is from an established market segment that is not just a fad.

4. What value can you add to the business?

What value can you add to the business

When you buy a business, you must have future plans for its growth. So if you want to grow and develop an existing business you are planning to buy, you must know firsthand how to plan to achieve it. What expertise and skills will you bring in and do you have the necessary business connections that will allow you to accomplish your plans. The value you can add to the business is a significant advantage that allows you to develop it and make it more profitable.

5. Ask about taxes, payroll, and healthcare obligations

Ask about taxes, payroll, and healthcare obligations

One of the characteristics of a successful business is its profitability. You don’t want to buy a business where you will inherit financial obligations from the previous management. Make sure there are no unpaid taxes, payroll or healthcare obligations. In some states, tax authorities may come after you if you purchase a business with payroll and other business taxes obligations from the previous owner. It is best to avoid legal complications by doing your research and making sure that all financial obligations of the company has been settled before you make plans of purchasing it.

6. What contracts and other agreements are already in place?

What contracts and other agreements are already in place

Make sure you totally understand what you are getting yourself into before you buy an existing business. Contracts and agreements are essential to a performing business but you have to understand what these contracts are and what it contains. Does the business have existing employee contracts, sales agreements, terms of sale, supplier contracts, and rights of renewal. Depending on how these contracts were penned, some agreements may last for a number of years after you have bought the business.

7. Does this business align with your passion and skill set?

Does this business align with your passion and skill set

Developing a business and seeing it grow is a very tough task even for an experienced entrepreneur. So when you buy a business, you need to make sure that it is compatible with your passion and expertise. You don’t want to buy a mom and pop diner when your passion is into car parts and accessories. If you think the service or product is not within your line of expertise, then it is probably not an ideal line of business for you.

8. What are the terms of the transition period from the previous owner to the new owner?

What are the terms of the transition period from the previous owner to the new owner

When you are planning to buy an existing business, another important question to consider is will the current owner stay on in the business, and if so, for how long? Ask about the transition period, what will it cover, and what training is included. You also need to know which key staff remains in the business.

9. What IP and non-tangible assets will come with the business?

What IP and non-tangible assets will come with the business

Buying a business does not end when you purchase the tangible assets. You are also buying an existing brand so you need to know what other intangible assets those come with the purchase so you would know if the price is ideal for its value.

10. When analyzing the price of the business - What method has the owner used?

When analyzing the price of the business - What method has the owner used

To really know the price of the business you are buying, you also need to know the method used in calculating its value. Did the previous owner used a discounted cash flow valuation method or was the price based on existing assets? Was the price based on recent comparable sales or earnings multiple or a combination of any of these valuation methods?

Recap

10 Things To Know Before Buying A Business

Buying a business can be very profitable venture especially if you are armed with the right information. Knowing the things you should do before buying will ensure that your investment will have a chance to grow and earn you huge profits in the future.

How to Validate Your New Business Idea in 2020

Strategy State’s guide to testing your business idea

What is business idea validation?

Well, it’s a fancy word for “testing your new business idea”. The concept is quite simple, you want to figure out whether an idea is worth pursuing, before driving in. In this article, when we refer to “product” this also includes “services” based businesses.

The rate of business failures is pretty high.

According to the Small Business Association (SBA). The SBA states that 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10 years (source).

So, it goes without saying that most of us would like to know if our New Idea is worth the ink on the paper!

No one wants to spend years of hard work, thousands of dollars, and the frustration and stress that comes with being a business owner, only to discover that the idea you had, didn’t have legs to start with. Problems identified are problems avoided.

The below guide is an outline of how we test our business ideas. Validating your business idea is different for everyone, and it differs from industry to industry.

Apply what works best for you.


A few points before we begin!

100 / 10 / 3 / 1 Rule!

When evaluating your business ideas, GO BIG!

What does going big mean? Well (unless you’re a seasoned entrepreneur, Venture Capitalist or otherwise) throw out as many ideas as you can.

As a rule, when I want to come up with an idea for a new business to start, I’ll make a massive list. 100 ideas are not too many. Then, I’ll narrow it down to the 10 best ideas from my original list. And from that list of 10, I’ll decide on three ideas that I’m going to test/validate. And finally, from that list of three, I’ll start the idea I feel the most pumped about.

How to get great business ideas

All too often, I see people running with the first idea that pops into their head.

When narrowing down your list of ideas for a new business, you may want to create some criteria that will help you. Here are a few examples of criteria you might use to cut your list down to 10 prospects.

  1. Can I, will I make: $50k, $100k, $500k or $1m per year in profit?
  2. Is this idea scalable?
  3. Does it offer a Recurring Revenue Model?
  4. Is the business based off my time? (hourly work/effort)
  5. Is the idea in a Growing Market (CAGR)
  6. Does this idea/industry provide Strong Margins ($)
  7. Will I require a world-class team, just to get it off the ground?

Your business idea needs to be a 2.0, not a 1.2

Your idea needs to be a 2.0 not a 1.2

 

What some entrepreneurs fail to understand is that ideas succeed or fail based on “Value”. At the end of the day, customers are buying value. To provide more value than your competitor, you need to offer something different, better or ideally both.

I’ve often seen people come up with ideas that are the same as existing ideas, with small, insignificant changes, and they think because of this tiny change, people are going to fall over themselves trying to get your product.

In reality, most people don’t care.

Your idea needs to be a 2.0 not a 1.2

This is something to think about when analyzing your new amazing idea. Will your product be a 1.2 version of an existing product or a 2.0 version game changer? How are you going to drive value?

400 Hour Rule

Most businesses fail because of a lack of research and planning!

We can all agree that there are many reasons why businesses fail (planning, cash flow, leadership, marketing, executing etc). But if you don’t do some thorough research up front, you’re not exactly off to a great start!

If you’re thinking about starting a business and prepared to sacrifice years of hard work, significant amounts of capital, then you should be prepared to do a little research before you pull the trigger.

It’s okay to spend 400 hours gathering information and researching your idea. I know of entrepreneurs who spend significant amounts of time gathering intel on certain industries before deciding what they will do.

If at the end of your research you decide that your idea is not worth perusing, then that might be the best decision you have ever made.

Walking away from an idea is okay.

Business Idea Validation Checklist

Download your free Business Idea Validation Checklist:

Download Your Free Business Tool


Let’s get Started!

Research your business idea:

Google it!  YouTube it! Amazon it! eBay it! Aliexpress/Alibaba it! Google Play it! Apple Store it! Business Directories it!

The first thing you need to do is conduct some basic online research, this may seem oversimplified for most, but you would be surprised how many people neglect such a simple task.

Depending on your idea, you’re going to search from the list provided above.

The focus here is to:

  1. See if someone is already doing what your idea is?
  2. Are they established and doing it really well?
  3. Is the current offering the same as your idea? Or do you have a different angle?
  4. Does it look like they are making a success of it? (good opportunity/money – Yes/No)?
  5. Identify ways in which you can do things better or different.

This first step is basic, and it’s designed to immediately quality or more importantly disqualify any ideas you may have.

Read the reviews of actual customers

Read the reviews of actual customers

What are the customer reviews telling you? Where are the opportunities to improve or create a better product/service?

If your idea is a physical product, you may want to identify similar products that already exist. Then read the feedback and reviews. You can find an enormous amount of information about products from the reviews section.

Competitor Analysis

Competitor Analysis

Competitor Analysis Tool

Who are the top 10 competitors in your space/area?  

This is important as these are the companies you’re going to be potentially competing with. Create a list of the 10 or so direct competitors that you’ll be going up against. Use a competitor analysis template – click here to download.

This will help you get a feel for the market and what’s going on.

Sign up to all their newsletters and find out what’s happening. This will keep you in the loop with what products they are offering, and how they are marketing them.

Talk to actual customers

Talk to actual customers

People who have already brought a similar product or are “in-market” for your product idea. Rather than pitching them your idea, ask them WHY they brought this product? What is the value they receive when they make a purchase?

Get to the core root of what the value proposition is.

Buy one of your competitor’s Products / Services

Buy one of your competitors Products

Try out what your (potential) competitors are already offering?

You’ll gain great insight into their practices.

  • Do they have a good selection of products?
  • What was the service like when you emailed them inquiries?
  • Was the payment process easy?
  • What was the delivery/scheduling time like?
  • What was the packaging like?
  • What was the quality/finished product like?
  • Are they amazing at what they do? Can you do better? If so how?
  • Is the industry “Soft” or “Super Competitive”?

Keyword and Web Research

The idea of keyword research is to analyze the top keywords for your product. This helps you gain a better understanding of the key phrases used to search your product, along with the search volumes and difficulty to rank on Google.

  1. Start by identifying the top 10 keywords for your business idea.
  2. Use the following tools to estimate the monthly search volume and competition level.
  3. Search for related/similar keywords.
  4. Generic terms vs long-tail keywords.

What’s the difference between generic terms and long-tail keywords: Generic terms are keywords and phrases that are shorter and more general. Long-tail keywords are longer keyword phrases, usually containing three or more words and more specific.

It’s important to research for both generic terms and long-tail keywords because it’ll give you a better idea of how many people searched for your potential product, this is because generic terms are generally searched more frequently, making them often much more competitive and harder to rank for than long-tail terms. However, long-tail keywords, may show lower search volumes, but can be more effective and provide “easy wins”.

Example:

Generic Term: Arborist

Long-tail Keyword 1: Price to trim a palm tree.

Long-tail Keyword 2: Tree trimming services near me.

Google Keyword Planner

A free tool by Google that helps you estimate the search volumes. You can filter by language and location. It also offers you keyword ideas related to the keywords you have inserted.

Google Keyword Planner

Google Keyword Planner

Google Trends

Is another free tool by Google. This helps you look at the trends of the search volumes for specific words and industries over a period of time.

Google Trends

Google Trends

Ubersuggest

A free tool that enables you to explore and analyze keywords by search volumes. It also tells you how difficult it will be to rank and provide suggestions for similar keywords.

Ubersuggest

Ubersuggest

Keywords Everywhere

This tool is similar to Ubersuggest, in that it helps you to analyze a list of keywords and discover keywords ideas. This tool also comes as a Chrome Extension that can work directly with Google search results.

Keywords everywhere

Keywords Everywhere

Ahrefs

A paid tool that offers a wide range of SEO features. Ahrefs allows you to research a list of keywords and analyze it by using a verity of keyword metrics such as search volume, click rate, organic and paid difficulty. This tool also helps you to explore competitors and understand how challenging it will be to outrank them.

Ahrefs

Ahrefs

SEMrush

SEMrush is a great tool that offers a wide range of keyword research functions, as well as competitor analysis features.

SEMRush

SEMrush

SimilarWeb

SimilarWeb is a tool that allows you to analyze a certain website and shows you data such as traffic volumes, traffic source, main keywords while providing graphs that show trends over time.

SimilarWeb

SimilarWeb

Regarding the above Keyword and Web Research tools, you don’t have to use all of them, just use the tools that will be the most useful to you and you’re comfortable using.

Online Analysis

Online analysis is focused on your target audience and market size based on demographic metrics such as locations, age, gender, interests, etc.

Facebook Manager

Use Facebook Manager to get a better understanding of your target demographic. You can drill down to specific segments such as: marital status, family size, life events, etc.

Facebook Audience Definition

Facebook Manager

LinkedIn Business

Use LinkedIn Business to research professional related segments, such as job title, company size, industry, etc.

LinkedIn Business

LinkedIn Business

Based on the information you have gathered from the tools above; this should give you more detailed information on your potential audiences size and demographics.

Industry Benchmarking

What is industry benchmarking?

Industry benchmarking is the process of comparing what the industry averages are for a particular industry.

They look at things like cost of sales, expenses, average rent, labor costs, etc.

The idea here is to see how the industry is performing, and what you might need to do, or not do, in order to achieve certain targets.

By looking at the charts/images below, you can see that the Hairdressing benchmarking has been broken up into three turnover categories. ($50k – $150K, $150k – $300k, and $300k +).

Industry Benchmarking

Use this as a guide to see where your sales might fall.

The next axes are the key benchmark matrices.

After deciding on a particular sales range, you can then see what the industry average performance is for each matric.

Industry Benchmarking

Benchmarking from an idea validation perspective is a great way to eyeball the industry, and decide what the lay of the land looks like before you jump in.

If you want to do better than the industry average (in any particular area), you’ll need to have a clear understanding of how you’re going to do this.

Benchmarking is another tool we use to help us analyze our business ideas.

Industry Benchmarking

Industry Benchmarking

Industry Associations

Industry Associations

Industry associations can be a great place to find information on a particular industry. They often have resources, tools and useful articles that can provide tons of great data.

Because industry associations are passionate about their particular industry, they’ll know when all the conferences and workshops will be held.

Be sure to sign up for their newsletters and notifications.

Google Alerts

When researching an idea you may want to keep an eye on what is happening within the industry, and what your potential competitors are doing.

Google Alerts is a tool that helps you keep your finger on the pulse by sending you notifications when new results are found (based off your key search terms). It automatically finds and sends you an email when new articles, webpages, blogs or research that matches your search terms.

Google Alerts

Google Alerts

Financial Analysis

This is one of the more important aspects to look at when validating an idea.

At the end of the day, however amazing an idea may sound, and no matter how passionate you are about something, it has to make sense financially.

Here are a few basic things you should consider from a financial aspect.

  • What are the Start-up/Set up costs? How long will it take to get set up to an operational level?
  • Are you charging by the hour? Or a fixed price?
  • What is the Average Sale Price per unit? Job? Project?
  • What will your Fixed, Variable or Unit Costs be?
  • What is your Unit Contribution Margin?
  • How long will it take you to Break Even? (free Break Even Calculator)
  • How much Working Capital will this business require?
  • Have you set up a working budget for the first 12 months?

Another financial factor you could consider is, is your business idea suitable for crowdfunding? Could you utilize platforms such as Kickstarter?

Learning Curve

  • With this new fancy idea you have for a business, what does the learning curve look like?
  • Does this idea require special skills, experience or network and connections?
  • If so, do you possess them?
  • If not, can you acquire them in a short period of time? Or hire talent to fill these gaps?
  • What will it cost to hire talent to fill these skill gaps?

If it’s going to take you a long period of time to learn all the ins and outs of an industry, then this will play a factor as to whether or not you will pursue this idea.

Learning Curve

An example could be an Antique Dealer. Although the idea of running an antique business may sound romantic and exciting to some, in reality. Many people who are antique dealers have decades of experience within the industry and have deep relationships with estate agents and alike that keep the stock coming.

If someone was to start an antique business from scratch, they would have to have a solid plan as to how they would solve this challenge.

If your business idea is one where information is more freely available, then you need to ask yourself, how can I gain 20+ years worth of experience in the shortest time possible? What resources, programs, courses, books, and mentors can I utilize to shorten the learning curve?

What are the 25 best books on this subject that will help me?

If the learning curve is too high, then you may decide to move on from your idea. If not, you’ll have a better understanding of what you may need to do in order to shorten your learning curve and become successful in your new venture.

Established Industries

Established Industries

Who has been in this industry for 20+ years?

If your idea in an industry that is well established, why not talk to someone who is already operating in that industry. There is a good chance you won’t be directly competing with them (the world is a big place).

Example

If you’re looking to get into a retail store, why not reach out to someone who has been in the industry for 30+years and pick their brain?

These people have seen the highs and lows of the industry. They have been through thick and thin. They have pushed through recessions, high-interest rates, booms and busts. You name it.

You’ll discover all kinds of things you never thought about, and most of the time this information will cost you nothing.

Who was in this industry, but has now left?

Who can you talk to that WAS in your chosen industry, but has now left?

What was their experience like? What did they learn? What mistakes did they make? What would they do differently? What advice can they give you to make your business a raging success?

What will you need to do to make $100k, $500k or $1m in profit each year?

And also ask them,

Who else do you need to talk to that would be useful to you?

Legal

Depending on the product, service, industry or sector you’re looking to target. There will be specific legalities, licenses, permits or certifications that will need to be met. Before even thinking about contemplating a new venture, you should always fully understand the legal requirements.

What might seem like a straight forward business from the outside, may be a legal minefield in reality. This step is something that cannot be overlooked.

Usually, basic information from trade and industry associations can easily be found, but it is recommended that you consult with a commercial lawyer before making a final decision.

Another important factor that is related to risk mitigation is Insurance. Does your proposed venture require insurance coverage that falls outside the norm? Are there any other forms of risk that need to be identified?

For Sale?

Business for sale

If you’re looking at an idea for a business that is in a well-established industry, then ask yourself, are these businesses for sale?

You can often obtain a bunch of information on an industry you’re interested in by searching for those businesses that are listed online on websites that specialize in selling or buying business.

Start by creating a list of businesses within your chosen industry, then break them up into size, location, years in operation, etc (whatever criteria works for you).

Then analyze the multiples (prices) based off that. You’ll get a feeling for what businesses in this industry are being offered for, and how some of the businesses are being run.

Example:

Often Cafés when being sold will tell you how many lbs of coffee they sell each week. They will also tell you what the turnover is.

You’ll easily be able to find out what they are paying for the coffee per lbs, and how many customers they serve each week. This will give you a gauge as to what the profitability is.

You can then compare this information to every café you look at. This is a basic first step, from here you can drill down on more specific details.

Example:

How many tables and chairs do they have, size of the café, foot traffic, parking, public transport, competition near by, Google reviews, selection of food, etc.

This is all useful information when validating your new idea.

When looking for bricks and mortar type businesses, you can google search to find local listings.

But if your idea is website related, you can use sites such as Flippa.

Flippa

Flippa

Seek feedback

Seeking feedback is another crucial step in the validation process. The feedback stage can give us unique and detailed insight into our product or service.

It’s much more important what others think about our idea than ourselves, after all, they are going to be the customer.

Surveys  

SurveyMonkey

SurveyMonkey

Surveys are a great way to collect quick feedback on an idea. They are easy and fast to set up.

You can use tools such as SurveyMonkey or Google Forms to collect the data.

Keep your surveys short, specific and easy to understand. Use pictures where appropriate.

Surveys work best with a little motivation like running a competition for those who fill out the survey.

Reddit

Reddit

Reddit, which is known as the front page of the internet, is another great tool to help you gain feedback. You can create a post whereby you seek feedback on your idea.

Popular subreddits that can help you do this include:

Before posting on a subreddit, do some hunting around to see if you’re in the right subreddit, there may be some useful information that has already been posted.

Redditors are notorious for being brutally honest. Be prepared to receive feedback that is more honest than what you may be used to. Remember, the feedback is based on your idea, not you personally.

Social Media (Facebook and LinkedIn Groups)

Social Media Groups

Depending on your business idea, social media could be a great place to seek feedback.

The major social platforms for business include Facebook and LinkedIn.

Within each of these social platforms, there are a large number of groups that can be specific to your niche. Target your niche for the most relevant feedback.

Be sure to also search for groups on social media that are dedicated to entrepreneurs and business owners.

Facebook Groups LinkedIn Groups

Helpful links to seek feedback:

Facebook Business Groups

LinkedIn Business Groups

Create an early feedback group

Feedback Group

Create a list of people who can give you some quality early feedback.

These could be friends, family, people you have worked with, customers, suppliers, employees etc. It really depends on the idea you’re researching.

Go through your phone and emails and create a list in Excel of those who will be suitable.

This is where you can get creative.

You can write an email, or create a video, use images, your options are endless.

All you’re trying to do is get some early constructive feedback on your idea.

Tell people you’re looking for feedback on your idea and that you’re not emotionally invested in it. This will ensure you get the most honest feedback possible.

The Lean Canvas

Lean Canvas Template

The Lean Canvas is another tool that you can use in your idea validation process.

The Lean Canvas is a tool that is specifically designed for entrepreneurs, especially those who are looking to test the potential of an idea. It helps people focus on problems, solutions, key metrics, suppliers, must-wins and competitive advantage.

If you have never used the Lean Canvas business model before, then you should definitely check it out.

It is simple, easy and straight forward to use. Click here to download the Lean Canvas Template.

Government Stats

Government Stats

When researching your business idea, there is a multitude of information that can be gathered from government statistics sites.

Governments regularly collect information on industries and business-related data.

This information can include areas such as:

Key Economic Indicators, Business Indicators, Industry Overviews, Price Indexes, etc.

With this data, you can better analyze the landscape in which you plan to operate in.

Helpful sites:

US:

https://www.data.gov

https://www.census.gov

UK:

https://www.gov.uk

https://www.ons.gov.uk

CAD:

https://www.ic.gc.ca

AUS:

https://www.abs.gov.au

Competitive Advantage

Competitive Advantage

When thinking about your business idea, ask yourself, how will you create a competitive advantage? I.e. What advantage will you have over your competitors?

Note: Even if you don’t have competitors straight away, you will in the future.

Will you compete on quality/differentiation? Or will you compete on price and be a low-cost provider?

Examples of competitive advantage could be something like:

Compete on Price: Selling a standard Gym membership

Compete on Differentiation: Specialized unique new fitness training system

Compete on Price: Selling generic canvas prints

Compete on Differentiation: Creating one-off unique art for sale

So when thinking about your new business idea, and you have an understanding of what your competitor’s pricing points are, ask yourself, how will you gain a competitive advantage?

Will you offer an amazing product with world-class service? Or will you come in at a lower price point to go for volume?

Barriers to Entry

Barriers to Entry

Barriers to entry is something that is often overlooked. Barriers to entry is, how hard or difficult is it to enter the market.

Example:

Setting up a dog walking business is easy, there are no licenses, certifications or permits that are required. You don’t need degrees or special education to start this business.

Whereas, starting a company that builds bridges is hard. The barriers to entry are high. To start a company like this you would need tens of millions of dollars, a team of highly experienced and skilled engineers, strong networks and a proven track record.

The idea behind barriers to entry is, (generally speaking). The higher the barrier to entry, the less competition there will be.

If the barriers are too low, then competitors will be fierce, thus, it could put pressure on your profit margins.

I.e. (often), the lower the barriers to get into a business, the lower the profit margins.

Google Ads/Facebook Ads (+Others)

Google Ads

Google Ads

Facebook Ads 

Facebook Ads

If you have gotten this far through the validation process, and your idea looks like it might have some potential, then it may be the right time to spend a little money on testing your idea.

A great way of testing your idea is to run a mini online ad campaign.

You can set up an advertising campaign (with a small budget) and see how it performs. This will tell you if there is any interest at all in your idea. It’s an effective way to test your idea, before jumping all-in.

An example:

Say your idea is to sell workshops (classes) to self-employed retirees, who are in your area.

You could either set up a Google Ad campaign based on your keywords. Or create a Facebook Ad campaign based on your demographics.

Ideally, you want to set up a landing page to redirect traffic from this campaign. This page should include an email capture form for people to register their interest.

Another great tool you can use to gain insights is Google Analytics. This will enable you to see the source and behavior of traffic.

Note:

In order to succeed with paid online campaigns, its best to try different titles, headings, keywords, and creatives to make sure it is as effective as possible.

Passion

Validating and testing your business idea is one thing, actually starting it, setting it up and operating it is another thing entirely.

Ask yourself, do you have Passion for this idea? Be 100% honest.

Passion is really important and can’t be underrated. It’s one of the single biggest factors that will determine your business’s success.

When starting a business (especially in the early stages), you’re more than likely going to have to do a large amount of work that you will not get paid for. You may have to give up evenings, weekends and family time.

  • Are you prepared to go without holidays? No more takeout dinners, no online shopping, no cable tv?
  • Are you prepared to use your savings to build this business?
  • What are you prepared to sacrifice in order to make your business idea a reality?

If you’re not 100% in love with your idea, it might not be the right time to kick things off.

Ranging from 1 through to 10, how passionate are you about this idea?

If your idea gets this far, then you may look to build an MVP (Minimum viable product) or prototype

When thinking about building your MVP, think Speed!

You want to build a cut-down version of your product. The key thing here is to go through the iterations (variations of your product) as quickly as possible and gain early feedback while keeping the budget low.

You want your MVP to be just good enough so that people can have an understanding of what the offering is, without you having to go overboard on product development.

The idea that you have, may change drastically after you have received feedback from others. The goal is to use this feedback to make the necessary adjustments to your product.

Some ideas that could help you with your MVP development:

  • 3D Printer/Paper prototypes to create mockups
  • Have people test/use the product
  • Demonstrate the product to people
  • Creating content and seeking feedback – Explainer videos
  • Create molds for prototypes
  • Digital prototypes/Virtual Reality
  • Ordering sample products
  • Set up A/B Tests

Did your MVP pass the test?


Download our Checklist to validate your business idea:

Download Your Free Business Tool

Read more about how to use our Free Business Idea Validation Checklist, including a short instructional video on how to validate your business idea using our simple checklist.

Recap

The below infographic covers key areas of the validation process:

Testing your idea infographic

How you validate and test your business idea will be largely determined by the idea, criteria and what you’re looking to achieve.

What some may view as an opportunity, will be overlooked by others. Timing too plays a big factor. What looks like an opportunity at one point in time, can be eroded over time due to any number of factors.

The main thing is to collect and analyze the required information for your specific idea, so you can make a better-informed decision moving forward. Gaining information about an idea, sector or industry is vital for success.

What do you do when validating a business idea? Share your knowledge.