As well as having the necessary enthusiasm and skill base to set up your chosen business, it is also imperative that the economic factors are on your side if the venture is to be a success. Even if financial gain is not your primary reason for buying a business, it is still important that your chosen business is, at the very least, solvent.
There are certain economic factors that affect all businesses, such as inflation or interest rate rises, or greater consumer confidence. Although these should be borne in mind when starting a business, they do not necessarily guide you in terms of which business to choose.
Some businesses are more affected than others by general economic conditions. For example, the luxury market, i.e. designer clothes, health and beauty treatments are generally harder hit if inflation rises, than the essential markets such as food and basic clothes.
When it comes to your choice of business, the conditions affecting that individual market will be a vital part of the decision process. Very simply put, a business is likely to be successful when the demand for the product or service is greater than the supply. Therefore, two key factors need to be considered when assessing the potential of a business: supply and demand.
Supply is relatively easy to assess as you just have to check out the competition. How many other businesses are already doing the same as you are planning and how will you set yourself apart from your competitors? What prices are they charging and are these prices compatible with your business plan?
Demand is slightly trickier to determine, particularly if you are considering an entirely fresh concept or business idea. If there is no similar business in existence, it is well worth considering whether the absence is deliberate and there actually is insufficient demand for your product or service.
Complete thorough market research to assess demand. Ask friends, family and anyone else from whom you can elicit an honest response for their thoughts about your business plans. Ensure they are completely honest and not simply placating you. The more people you can ask the better. Try to make sure that you ask a cross-section of the population, as it is likely that your friends will be similar minded to you and, therefore, may have similar ideas. So, spread your net a little wider to get a broader view of the potential success of your venture.
Money is, of course, fundamental to your business decisions and detailed economic analysis should be carried out;
make sure that you are aware of the general economic climate such as the current level of inflation and the likely economic changes for the foreseeable future;
consider in more depth the economic factors that affect your individual business plan; and
make sure that you conduct detailed and varied market research to ascertain, accurately, the likely supply and demand in your chosen market.