Bright Ideas # 88 - Is your business viable?

If you don’t know the answer to the question, don’t feel bad. Most entrepreneurs I run into are like my neighbor—they have absolutely no idea.

How do I know this? Because most entrepreneurs I’ve met haven’t taken even the basic steps towards prepare a business or marketing. And these are many of the same steps you take to determine if your business might actually make some money.

Instead you start a business doing something you know, or something you love. If you’ve started with something you know, or were doing for someone else, there is a reasonable chance you have some idea of the competition and the marketplace.

But if it’s something you love, I’ve found the chances are good you probably haven’t really looked into it at all. You just figure, well, I love doing it. So now I can do this all the time and get paid for it.

Great idea. But if you haven’t answered the following questions, you may run into severe cash flow problems. In other words, your business—as it is today—may not be viable. So take a few minutes to go through these and see how you are doing…

1) What are the overhead and miscellaneous costs of running your business (this is rent, utilities, employees, office supplies, bookkeeping, etc.?

2) What is your salary (If you don’t take a salary yet, come up with a figure that represents the minimum you think your job is worth, or that you need to make, and use that number)?

3) What are the manufacturing costs (or time costs if you deliver a service) associated with the business?

4) How much do you anticipate each client or customer will spend with you per purchase and per year?

5) How many customers do you need to cover all of your expenses?

Once you know the answers to these questions, if your business still looks viable you’re in good shape. If not, you need to rethink what you are doing and retool it until it is viable.

That may mean simply raising prices…Or possible restructuring your current business.

It could mean you need to add new products or services to increase revenues. Or it could also mean you need a new business altogether.

If you are planning to launch something new, you definitely want to do your due diligence there as well. And I’ll show you how in my next two emails.

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