Starting a Business

To reduce the risk of failure (and increase your chances of success) it is crucial that you put a lot of thought and effort into researching exactly what your business will be. There are three essential aspects that need to be closely examined.

Is there a market? (marketing)

Do people really want your product? There is no point producing the best hat stand in the world if people don’t really wear hats anymore. Similarly fashions change and what you are producing just might not appeal to the market at the moment– for example hand painted mosaic tiles come and go in popularity and different trends emerge in regard to the colours, sizes, motifs and uses for the tiles. It is also useful to examine the market you will be operating in, in terms of competitor’s positioning, total size of potential market and how you will let your chosen market know what you offer.

Can I meet the market? (operations)

Do you have the skills and the level of workmanship required? Producing a product to a saleable standard can be very exacting. It is important to be professional and consistent in what you offer as customers are often not as forgiving of imperfections and problems as you may be. For example if there is a market for identical handpainted mosaic tiles the variability of colour from firing small batches or the small differences in paint stoke between tiles may not be acceptable. Similarly order quantities may be much more than you can handle without investing a lot of money in equipment and additional staff.

Can I make money out of this? (finance)

You may be able to produce a product the market requires but can you do so at a price that enables you to make a living out of it? If it costs you $2 to produce a handpainted mosaic tile but the market is only willing to pay $1 it is obviously unviable. Often the profitability or otherwise can be much more difficult to pin down as you try to estimate sales volumes and costs but often by developing a model (on paper or as a spreadsheet) you can run different scenarios to get an idea of how the different variables interact. In addition to this basic pricing/costing model it is useful to perform a cashflow forecast and prepare an indicative start up budget.

Generally no problem will be insurmountable. If you view your product as a bundle of attributes it is normally a matter of tweaking these factors to find a workable combination. This may mean changing your production methods or materials or your sales outlets. It may also result in you either increasing your production capacity or slowing growth down and taking the time to let the business build itself. There are no right or wrong answers to these questions as it depends on your personal situation, the level of acceptable risk and what you actually want to achieve. Of course these changes shouldn’t be contrary to your reasons for starting the business and your personal values but a flexible and pragmatic approach is required to make sure your business is viable.

For more information and assistance with your business idea please contact Venture Southland’s Enterprise Services department for a free and confidential consultation.

Contact Details

Venture Southland
143 Spey St
PO Box 1306
Invercargill
Ph (03) 211 1400
Fax (03) 211 1401

enterpriseservices@venturesouthland.co.nz

www.venturesouthland.co.nz