I recently got a call from a man in Fort Worth, Texas who wanted to know what I thought would be a good business idea for him. He’s a good salesman, and he wants to be an entrepreneur, but his last couple of business ideas went south.

I started describing what he should do to make a good decision on a business idea, and I realized that what I was describing also applies to business owners who want to add new products or services to their existing business. I thought it would be a good idea to share my thoughts, so here goes…

Acid Test Your Business Idea

Test # 1 – Believe in what you are selling

The first test for a business idea overall is to do or sell something that you are passionate about, and that you can have fun with. Being in business for yourself demands an investment of time, money, the risks and rewards of responsibility, and 100% liability for the business.

Whatever you sell, you have to believe in it. That means really believing in the benefits that the product or service can deliver to your customers or patients. It isn’t enough to get excited about the prospect of making high profits. A high potential profit on zero sales is zero dollars in profit.

If you don’t believe there is lots of benefit for the consumer in whatever you are selling, you won’t be able to sell much and they won’t be willing to buy. Consumers are smart. They can tell if you are sincerely interested in them and what they want, or if you just see them as a wallet you want to get into.

Test # 2 – Check on whether the product or service is in demand

One of the easiest ways to check on the demand of a product or service is to do some keyword research on the internet to see how many people are searching on the topic. High search numbers on relevant keywords and keyword phrases means high interest by consumers. One of the premier search tools is Google’s Keyword Tool and there are many others on the internet to double check your idea.

As of11/16/2011 there are 264,000 local people in the U.S. who search on the term anti-aging each month.

Ask lots of people; friends, family, neighbors, business associates, and people you are standing next to in line at the movies or the grocery store. You’re not asking for their permission to start a business, you’re asking them about their interest in and willingness to purchase specific products or services. For example, “anti-aging” is a hot keyword. So if you are thinking about selling or adding on a line of anti-aging products, that’s what you ask about: have they ever purchased them, have they considered purchasing them, where do they purchase them (in a store or online).

You need to know that it is a product people will buy.

Test # 3 – Run the numbers to see if there is enough profit in it

If you are adding the product to an existing business then the profit margin is easier to calculate because you already know what your overhead is costing you. If this is a new venture then it takes a lot more figuring to see, after expenses, if there is going to be adequate profit to pay yourself a decent wage. All this would be based on the number of the product you think you can sell.

Another good thing to do is to figure out how many of the product(s) you would have to sell to do better than break even. It’s no fun to make just enough to pay your suppliers and make them wealthy and not make enough yourself to reach your financial goals.

I highly recommend that any business owner give themselves a much better than average chance to really prosper financially in their business by purchasing the e-book The Business Checklist To Increase Profits.

Test # 4 – If you can’t answer this one you are in trouble

Okay, so you make a decision and start a business or add to your existing business. The next question you should answer for yourself is, “How am I going to market this?”

There are many ways to market and promote a product or service, word-of-mouth referrals, off-line through print, radio, TV, on-line through video ads, articles, blogs, mobile phone texts, websites, podcasts, and more. The big question is do you have the money to promote like you should because if not then your potential customers will never know that can buy from you.

Yes, I teach business owners to manage their money correctly so they can reach all their financial goals. But, I know that promotion plays a HUGE part in driving enough sales traffic to make it in business. So for my clients it is mandatory to budget money every week to spend on promotion. I never let them make the fatal mistake of failing to promote adequately, because they would lose momentum and their competitors will be promoting and getting the customers if they stop promoting.

For the first half of my career I had the privilege of working with some of the advertising gurus and one-for-one they lived by the motto, “When times are good, promote! When times are bad, promote even more!” Trust me when I tell you that you better live by this motto yourself if you hope to make it. However, the other key thing you have to know how to do is figure out what your ROI is (Return on Investment) on every form of promotion and promotional message.

Wasting your hard-earned dollars on promotional stuff that doesn’t work is NOT fun and can send you into despair. So test what you are doing, keep doing what works, and whatever isn’t working – ditch it fast! Now the one exception is that internet marketing takes a while to gain traction, so give it a fair test. You’ll know in a matter of days or weeks if a postcard promotion is going to bring in lots of business. Internet marketing is slower. It often takes a few months to know if what you are doing is going to work, or if you need to add to it, change it, etc. The internet changes constantly so you have to change with it.

In Summary: So there you have it – acid test every idea. Have a passion for what you are doing and be able to have fun doing it. Believe in what you are selling. Check the demand to see if enough customers will want it before you dive in and make a big commitment. Run the numbers to see if there is enough profit in it. And answer the question on how you will be able to market it adequately to get the sales you need to have enough profit to pay yourself a LOT of money.

I wish you the best success in whatever business idea you decide to pursue. Leave me a comment and let me know about what you decided from reading this article.

I often get asked by my business and practice owner clients for good ideas for marketing to attract new patients and customers.

I am a huge proponent of promoting because, done correctly, it drives up patient and customer counts, and drives up income. Here are my thoughts and ideas.

Referrals Are Pure Gold

I know you have heard this before, and it is absolutely true. But equally important to asking for referrals, and running a referral program, is finding an inexpensive, easy way to show appreciation to those who refer patients or customers to you.

I have found this SOCProgram works great and I use it all the time to send appreciation cards and even small high quality but inexpensive gifts, right from my computer. Check it out and try it out in step 2 for free. You can mail 2 cards at no cost to you, so mail one to someone else and one to yourself to experience what it is like to get a card from this fantastic service. (more…)

I really love helping business owners with their money management and internet advertising, so I spend the majority of my days sitting at my desk working on the computer and phone. It seems that the work never ends. There are hundreds of thousands of small business owners out there who need help on their finance lines.

The sedentary working life isn’t good for my health, so Brian, my Chief Operating Officer and I like to get out and get some exercise. It makes us feel better and clears our heads; and that makes us more efficient when we are at our desks.

Yesterday it was cold in Florida, so instead of going for a long walk outside, Brian wanted to go to the gym and shoot hoops on the basketball court instead. Okay, I was game for something new, so I decided I’d go along and learn to shoot hoops and get my work out that way.

First thing I had to learn was how to hold the basketball and the basic technique of flipping my wrist to propel the ball up and toward the hoop. Once I had that down it was learning about where to look when I was shooting the ball so it would go through the hoop.

I quickly realized that if I aimed dead center at the rim of the hoop that I could be a little off to the left or right with my shot and it would still go through. Then it became how much energy I put into shooting the ball. Too little and the ball would not get up and over the rim. Too much and it would bounce off the backboard or just fly over the hoop.

I started thinking about business money management and promotion using internet advertising to increase income in relation to shooting hoops. Once you have the basic fundamentals down you can make the basket [get the customer sale] almost every shot.
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What do you do when you get your Profit & Loss Statement (P&L) from your accountant, or when you print one from your accounting software? Do you ignore it, or look at the total income and the bottom line net income and then toss it in a drawer or file folder without analyzing it? If that’s the case, then you are missing out on some potential opportunities to increase your sales and your profits.

Smart money management practices include staying in control of how your company’s income is being used and to make adjustments that are in the company’s best financial interest. There are many ways to analyze your P&L to identify some lost income opportunities; here are just a few.

1 – Pull last month’s P&L statement so you can compare it with the current month’s statement.

2 – Compare the Total Income figures and the bottom line Net Income figures. Whether you are up or down compared to the previous month, you can use the rest of the report to figure out why that may be the case. Financial management is easier when you do some analysis.

Cost of Goods Sold: Look at your cost of goods sold to see if your inventory was replenished fully or you were out of stock on some items that you could have sold.

Investigate whether the costs have gone up and you need to pass on the cost increases. You can lose sales by being out of stock as well as not passing on price increases from your suppliers. This would eliminate the strange sensation that you may have experienced when you are ‘selling more’ but ‘making less’.   And you think, “What the heck is going on here?”  So be sure to look this over with a critical eye.

If your suppliers have raised prices, you should increase your pricing structure on the products you are selling. This ensures the sales you make have an adequate profit margin built into them. Sometimes suppliers raise their costs and forget to inform you, or the announcement gets lost before it reaches your in-box, and you don’t notice the increase right away.  For example, some express parcel shippers tacked on a $20 fuel surcharge increase when gasoline prices surged to over $4 a gallon.  They did this because their prices increased, so they had to pass them on to you – their customer.

Tip: Get all of your suppliers to fax you their latest price sheets and compare these figures to the costs you have for the items in your accounting system. Then decide if you should raise your prices to pass any increased costs on to your customers.

Tip: It’s better to increase your prices a bit by bit over time, rather than increase them by a large amount all at once.  Notice how a well -known coffee shop raises its prices for coffee a nickel or a dime every 3 – 4 months and customers keep right on buying.

Advertising & Promotion: The first expense item(s) to look at are your marketing expenses. Did you cut back or increase promotion? Did you change your promotion and is working better or perhaps not working as well? Too many businesses cut back on promotion funding in tough times. That’s a big mistake. Deciding to cut back on talking to your current and potential customers can cause them to forget your company and to shop at your competitor who is still promoting.  Consumers have not stopped buying, they are just being more selective about what they buy and where they shop.

Other Expenses Lines: Compare each expense line to the matching expense from the previous month. Are expenses creeping up without you realizing it? If so you can decide where to cut back. Did previous cost cutting measures help the bottom line profit? If so, congratulate yourself.

Balance Sheet Items: If the bottom line Net Income is up, but you don’t have that cash sitting in a bank account where you can see it, it usually means that you paid out the profits to principal owed on debt. Your balance sheet shows you the credit debt (liabilities) you owe and paying those is not deductible except for the finance charges or interest.

For more of these business profit tips, check out our downloadable e-book Business Checklist to Increase Profits.  This checklist is the shortcut to an MBA on money management to generate more profits.  It costs a lot less that an MBA degree, and it’s easier to understand!

What have you learned from your P&L statement? Share it with our readers by submitting a comment.