Is it a great idea? Not if you can't
fund it, enjoy it and profit from it
By Jenny C. McCune • Bankrate.com

For most people, it can be pretty easy to come up with an idea for a business. Inspiration strikes when you have a problem and realize there's no solution on the market. Or when a friend says there ought to be a "blank," and you smell a business opportunity.

The hard part is deciding whether your business concept is viable -- whether it will work in the many ways a business needs to work. And the way to arrive at an answer is to ask yourself and your advisers a series of questions that will help you decide whether to turn your idea into a business or fold up the board game and go home.

Is this business idea fundable?
Maybe your idea is a great one, but maybe it requires more financing than you can raise, says Paul Frison, president and CEO of the Houston Technology Center, a business accelerator/incubator. If so, there's no point in pursuing it.

To answer this question, come up with a realistic estimate of how much money is required to design, develop and market your idea, and then get the business off the ground. Take that number and compare it to your personal savings and the amount that you can raise from private investors -- your most likely capital route as a startup.

Also be sure to include a cash reserve of at least six months, because it will probably take you that long (or longer) to achieve profitability, says Al Napier, professor of management at the Jones Graduate School of Management at Rice University in Houston.

Is this business idea properly differentiated from existing businesses?
"There has to be some unique property to set it apart," Napier says. For example, conceiving of an online site where consumers can purchase books probably isn't a worthwhile endeavor since it would be a virtual copycat of Amazon.com.

Is there a market?
Because you own three dogs, you see a great need for a pet-grooming storefront where owners could wash and groom their pets instead of doing it at home and making a mess, or paying top dollar to a dog groomer. You'd patronize such a shop, but you need to find out if the demand is there.

So find national statistical information on pet grooming and pet ownership.

The federal government gathers and publishes a great deal of statistical data from the U.S. Census Bureau. Also check out the Small Business Administration and the Bureau of Labor Statistics (for business and employment data). Trade journals or associations that focus on your market also can provide useful information.

In addition, be sure to check around locally. For example, you might get useful information by asking local veterinarians and dog-boarding kennels if they see a need for your do-it-yourself dog-grooming salon or if they are aware of any data on local pet ownership.

Can I sell this product or service at a price that I'll make money?
There are many great ideas for things that people would like, but if you can't deliver it at a price that they'll pay, then it's probably not a moneymaker.

Figure out various pricing strategies and run them by your family, friends and business advisers (your CPA, banker or lawyer). Would they be willing to pay for this product or service at this price? If you find you'd have to price dog washes at $15 per dog to make money and people in your area would be willing to pay only $10, put the idea on the shelf -- or figure out a way to trim costs.

Is this something that I'd be good at?
Maybe it's a good business idea for someone else, but not for you. If you come up with a dandy retail store idea, but you're shy and retiring, the retail concept may not be the best business for you -- unless you can find a partner to act as "front" man while you take on a role in the background.

"It has to be an idea that you're fit and able to do," the Houston Technology Center's Frison says. "If you come up with a product that requires a lot of engineering and you don't know anything about engineering, it's probably not a good fit for you."

Finally, seek lots of advice
In addition to asking yourself these questions, seek advice from friends, family and other business professionals. Barry Star, chairman of Onecore.com, a financial portal for small businesses, calls it "mother-in-law" research.

Frison recommends lining up business types such as your lawyer, your banker, your CPA -- businesspeople who you know -- and get some feedback from them. "If your banker tells you that you're crazy, then it's probably time to move onto a different idea," Frison says.

For difficult-to-visualize products or services, consider building a prototype that will take an abstract idea and make it concrete to your advisers, OneCore.com's Star says. "It can make it easier for them to evaluate and give you feedback," he says.

Many would-be entrepreneurs are fearful that someone will steal their business idea if they show it around. "That's a big mistake," Star says. Of course, you don't want to show it around to people you've just met off the street, but there's nothing wrong in tossing your concept around with people who you trust, the entrepreneur says.

"It will help you think things through and figure out whether you should proceed," he says.

Jenny C. McCune is a contributing editor based in Montana
To comment on this story, please e-mail the Bankrate.com editors

-- Posted: July 28, 2000