Starting a small business is exciting, but it’s natural to wonder if your idea will actually succeed. The good news is that you can take practical steps to evaluate your idea before diving in. By doing a rough viability study, you’ll get a clearer picture of whether your idea has potential. This process involves four key steps: talking to people in the industry, crunching some numbers, researching your market, and doing a SWOT analysis. These steps are simple but powerful tools to help you make informed decisions.
Speak to Others in the Industry
One of the best ways to test your idea is by learning from people who are already in the business. Chatting with other business owners can give you practical insights, from how much things cost to the challenges they’ve faced. Most business owners are surprisingly open and happy to share their knowledge, especially if you’re not a direct competitor.
For example, if you’re thinking about starting a small bakery in South Africa, you could ask a bakery owner about the cost of ingredients, typical profit margins, and any seasonal trends they’ve noticed. Be respectful of their time—schedule an appointment or start with a single question to get the conversation going. Many business owners enjoy talking about their experiences and might even give you advice you hadn’t considered. Just remember, it’s better to avoid approaching competitors in your immediate area to protect your idea and respect their business space.
Do Some Financial Calculations
Understanding the financial side of your idea is critical. You don’t have to be an accountant, but you do need to know how much your idea will cost and whether it can make enough money to cover its expenses. Ask yourself:
- What do I need to buy to get started?
- How much will my monthly expenses be (rent, supplies, salaries, etc.)?
- How long before the business earns enough to pay for itself?
For example, if you’re planning to open a small supermarket, calculate the cost of renting space, stocking shelves, and paying employees. Then estimate how many customers you’ll need daily to cover those costs. In South Africa, you can also take advantage of resources like government-funded small business support programs that offer financial training and tools to help you get these numbers right.
Do Some Market Research
Market research is all about understanding your potential customers and competitors. Start by asking yourself some simple questions. For instance, if you’re opening a corner store, ask: “How many people live in this area?” “Is there already a store nearby?” or “How much foot traffic does this location get?”
In South Africa, knowing your local market is particularly important. Different communities have different needs and spending habits, so understanding your audience can help you tailor your business to meet those needs. Visit your target location at different times of the day, observe customer behavior, and talk to people in the area to get a sense of what they want.
Do a SWOT Analysis
A SWOT analysis helps you take a deeper look at your idea by examining its Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are things you can control, like your skills, resources, or unique selling point. Opportunities and threats, on the other hand, are external factors—things like market demand, competition, or economic trends.
For example, if you’re starting a mobile beauty service, your strengths might include being highly skilled and having flexible hours, while a weakness might be not owning your own equipment yet. Opportunities could include a growing interest in self-care in South Africa, while a threat might be competition from established salons. By being honest and thorough, your SWOT analysis will highlight areas to focus on and help you make informed decisions moving forward.
Do a SWOT anayis
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. When you’re starting a small business, a SWOT analysis is one of the most useful tools to help you evaluate your idea. It’s all about looking at the Strengths, Weaknesses, Opportunities, and Threats that could affect your business. By breaking things down into these categories, you can get a clearer picture of where you stand and what you need to focus on. Let’s dive into what each of these factors means and how they apply to small businesses in South Africa The four areas that make up the SWOT analysis can be better understood if you consider that “Strengths” and Weaknesses” are internal factors (whereas “Opportunities” and “Threats” are external factors.
Internal factors
External factors
Internal Factors: Strengths and Weaknesses
Strengths are the things your business does well—your competitive advantages. For example, if you’re starting a bakery and have years of baking experience, that’s a strength. Maybe you already own equipment, have a great recipe that people love, or know your target market well. Another example could be access to funding, like savings or family support, which gives you a head start in setting up your business.
Weaknesses, on the other hand, are areas you need to improve. For instance, if you want to open a car wash but don’t know much about managing a team, that’s a weakness to address. Another common weakness is a lack of financing. Imagine wanting to open a hair salon but struggling to afford high-quality equipment or a prime location. Identifying these weaknesses isn’t a bad thing—it helps you plan for how to overcome them, like seeking funding through small business loans or enrolling in a business management course.
External Factors: Opportunities and Threats
Opportunities are external factors that you can take advantage of to grow your business. For example, South Africa has a growing focus on sustainability, creating opportunities for eco-friendly businesses. If you want to start a business selling reusable shopping bags or solar-powered devices, this trend works in your favor. Another opportunity might be in underserved areas—imagine starting a delivery service in a township where options are limited. A gap in the market is a great opportunity to position your business as a solution.
Threats are external challenges that might impact your business. For example, if you’re starting a small poultry farm, rising feed costs or stricter health regulations could be threats. Similarly, competition is a common threat—if you want to open a corner shop in an area where several spaza shops already exist, you’ll need to find ways to stand out. Another example of a threat could be economic instability, which might reduce people’s disposable income, affecting demand for your product or service.
Putting It All Together with Examples
Once you’ve identified your strengths, weaknesses, opportunities, and threats, the next step is to use this information to make smarter decisions. Let’s say you want to start a mobile beauty service in South Africa:
- Strengths: You have a cosmetology qualification and already own basic equipment.
- Weaknesses: You don’t have much experience in marketing or setting prices.
- Opportunities: There’s growing demand for at-home beauty services, especially in urban areas like Johannesburg and Cape Town.
- Threats: Established salons in your area offer similar services, and high fuel costs could impact your mobile service.
With this information, you could decide to take an online marketing course to address your weakness, offer unique promotions to stand out from competitors, and carefully calculate travel costs to ensure your pricing is profitable.
Another example: If you’re opening a small coffee shop:
- Strengths: You have a strong passion for coffee and access to quality local suppliers.
- Weaknesses: You’ve never managed a business before.
- Opportunities: Your area has a growing demand for independent coffee shops.
- Threats: There’s a large franchise nearby with established customer loyalty.
Here, you could focus on creating a cozy, community-driven atmosphere to differentiate yourself from the franchise, and seek mentorship or training to build your management skills.
By applying a SWOT analysis and thinking through real-world examples, you’ll set your business up for success. This process not only gives you clarity about where you stand but also helps you take practical steps to strengthen your business idea. If your analysis shows you have the strengths to make the most of opportunities and address weaknesses or threats, you’re ready to move on to creating a business plan and bringing your dream to life!
