Building a successful and lucrative business idea has become more difficult than ever with growing competition. A statistic by Burea of Labor reveals that 20% of start-ups closed down in their very first year. There could be various reasons behind their failure ranging from a flawed business model, cash flow problem, lack of marketing, legal challenges, or getting outcompeted.
However, after studying analytics, we were able to conclude three steps that can help you create a profitable business idea:
1. Never Underestimate Your Competitors
Having confidence is really important while starting a business. However, one should never underestimate their competitors while doing so. Before starting any business idea you should analyze the market and study your competitors. This is more true in case you are looking for outside investment options. This is because a potential investor is certainly going to ask you your competitive edge.
Here's how you can analyze the market:
Primary Research: Take help from surveys, questionnaires, research, and interviews to learn what your target customer base wants. It is always better to try to learn the customer's behavior and preferences first instead of assuming them.
Secondary Research: Study the data and see if the data matches your level of understanding of the market. You should ask yourself, is your business fulfilling those needs?
SWOT Analysis: You can effectively study your weaknesses, opportunities, strengths, and threats of the business idea by doing a SWOT Analysis. This will help you decide if you will be able to get the kind of profit from the market that you were expecting.
2. Do not romanticize the business idea
There's a very famous saying, that reads, we should do what we love and love what we do. However, at the end of the day, work is work. You need to understand that just because you love that idea, doesn’t mean it will be a profitable one for you. You need to assess the market and evaluate its demands. For example, if you are great at styling and see yourself as a designer one day, doesn't mean you can achieve it with only your passion. You will need to come up with a solid business idea due to high competition and work really hard to make it lucrative.
3. Test Your Hypothesis
After you are done with all the analyzing and researching part and you have gained a clear understanding of your customer demands, then you need to test your product to see if it aligns with consumer needs. You can try the A/B testing method to check what kind of product version or design your customers like better. In this type of testing, you basically create two versions of the same thing, analyze the version compare and see which one got the most quality leads. After you have come to a conclusion, you should work on that product and launch it in the market space.