Do You Really Have a Good Idea for a Business?

Are you thinking about starting a business? Perhaps you have already started one.

Either way, it's important to think about whether or not you have a profitable idea.

I remember a Saturday Night Live sketch with John Candy from many years ago. He and his partner (Dan Adkroyd?) opened a store in a mall that sold one product - Scotch tape. All the walls were filled with that one product.

On opening day, Candy and his partner 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.

The second reason for their failure is that the product lasts a long time in most homes and businesses. If you sell cars for $30,000 that's not a problem. But most retail stores need repeat customers who buy frequently.

The third reason the business was doomed was that you can buy tape in so many places -- in the grocery store, the drug store, the big box store and so on. There was no reason for people to go out of their way to buy tape in that one store when they could get in other stores while shopping for other products.

So keep this lesson in mind when considering a new business, or before you invest too much time, money, sweat and emotion in one that may not be viable.

Here are a few question to ask yourself before taking the plunge or going to deep once you've started:

Does your business have a clearly defined audience?

Will your business fill a need that is not already being met?

Can you sell your product or service with enough profit margin to make it worthwhile?

Do you have a competetive advantage?

And finally, do you have enough capital to start and sustain the business in the early stages?

Once you have answered these questions, you will see whether or not you truly have a good idea for a business.