If you're thinking about starting a small business or a home business, it's vital to consider several things to decrease the chances of failure and increase the chances for success.
You may remember the Saturday Night Live sketch in which two men opened a store in a mall that sold cellophane tape. That's all they sold -- cellophane tape. That's all you could see on every wall.
On opening day, the partners were elated. They knew they were going to clean up. But of course they didn't.
There were several reasons for their failure. First, mall rents are expensive and tape sells for a pittance. They would have had to sell tens of thousands of tape dispensers every month just to break even, let alone make a profit.
Another reason that their idea could not possibly work is that tape lasts a long time. If you sell houses or cars, that's not a problem. But most retail stores need repeat customers who buy frequently.
Third, there was no way their business model could work. Tape is available in so many places -- big box stores, grocery stores, drug stores -- and on and on the list goes. It was simply not convenient for people to make a trip to a specialty store when they needed more tape. They could find it almost everywhere.
So keep this lesson in mind when considering a new business, or before you invest too much time, money, sweat and emotion in a small business that may not be viable.
Here are a few question to ask yourself before taking the plunge or getting in too deep once you've started:
Who are your prospective customers? Have you defined them?
Who are your competitors? How many are there?
How much profit will you make on each transaction? Will you be able to make a good income?
What is your competitive advantage or unique selling proposition?
Do you have enough money set aside to meet business expenses for several months and to live on ?
Answering these questions will help you to determine whether or not your small business idea is a sound one.
Danek S. Kaus is a business journalist and the author of You Can Be Famous! Insider Secrets to Getting Free Publicity. Want more publicity secrets? Read his Blog Find out about his Publicity and Writing Services Here
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