Owning a business is an exciting and rewarding venture but it requires careful consideration and planning. Using a new business I am starting as a case study, I will step you through the 4 step checklist I use when deciding whether a business idea is right for me. This checklist includes:
Checking my fit for the business
Checking the business’ fit for its market
Calculating the possible return
The end goal
Before I start it’ll help to give you some background on what my business idea is; the general concept is simple, it is a platform that connects gym goers to personal trainers. Now you have a better understanding of the business and the industry it is in, lets get going with the business idea checklist.
Let’s go.
The first thing I want to check when deciding if a business idea is the right business idea to start is my fit for the idea. To do this I ask myself 4 key questions:
I’ll answer these in chronological order.
In conclusion, I am a good fit for this business idea!
Is there a gap in the market for this type of business? If you did a quick Google search you might be inclined to say no. There are already quite a few platforms that provide the exact same service out there. However, I believe this service can be improved and that I can bring a different angle to the market.
I definitely have a target audience. The other businesses out there doing the same thing helps to prove that. Secondly, while doing my own research (to double check there is a target audience), I have come across countless forums including Facebook groups with personal trainers asking how to get more customers. In addition, there are loads of gym goers out there who aren’t seeing the results they want because their training isn’t tailored to their body type. They might not realise they need a personal trainer just yet but once they do, my platform will be the one for them to find theirs!
In short, this business idea has a target audience and solves an industry problem so definitely has a fit for the market. The existing competition is a good sign validating this. However, the competition isn’t a concern as my business idea has a unique selling point (USP) which will differentiate it from these other companies.
How much money will this business idea make if it is successful? It could make £2.3 million pounds a year…not bad for a platform built almost for free using Google’s suite of tools and that runs itself! (23,000 personal trainers all paying an annual subscription of £100).
Coming back down to earth, to answer this question as accurately as possible you need to set some key metrics/factors. For this business these include: where will the business operate, what is its estimated market share and what monetising model will it use.
This business will initially be purely UK based and I have set an estimated market share of 10%. It will also use a straight forward monetising model where I will only charge the personal trainers. This fee will be an annual fee of £100 for being registered with Fitness Fullstop and to receive leads.
Using these metrics and the total number of personal trainers in the UK, I am able to calculate my Total Available Market (TAM), my Serviceable Available Market (SAM) and finally my Serviceable Obtainable Market (SOM).
Total Available Market (TAM)
In the UK there are approximately 23,000 personal trainers. This gives the business idea a TAM of £2.3 million (23,000 *£100).
Serviceable Available Market (SAM)
It is unlikely every personal trainer will want to sign up to the platform. In addition, the business will initially launch in the South of the UK (where I am based), also limiting the total number of serviceable personal trainers. Based of this and by making a few assumptions I anticipate the serviceable available market to be 10,000 personal trainers. This gives a SAM of £1 million (10,000 *£100).
Serviceable Obtainable Market (SOM)
As I mentioned I estimate that this business would have a market share of 10% giving the business a SOM of £100,000 (£1 million *10%).
These numbers are only ballpark figures and massively depended on the monetising method. I have made some big assumptions here and I wouldn’t blame you if you didn’t think that was a particularly attractive return. However, the monetising model I have used here as an example is not the model I will be using. I have omitted it as that is part of my platform’s USP. Regardless, this gives you a good idea of the assumptions and calculations you will need to make for your own business idea.
Based on my actual figures, I am confident that this business will provide enough of a return to make it worthwhile.
What is my end goal for my business and does this business idea meet these requirements? This question isn’t so important for me as I’m building this business as a little bit of fun and I am not too concerned about where it ends up. However, the best case end goal for me would be to either eventually sell the business or merge it with my existing lead generation business, building up a holding company of lead generation businesses in the process. These “end goals” are more than achievable with this business idea so the business idea ticks this box for me!
There you have it. A complete work through and case study of my business idea checklist! As you can see, it isn’t difficult to check whether your business idea is the right idea for you. You just have to methodically work through a series of questions and then analyse the answers you generate to them.
If you would like a guide stepping you through this process in more detail, you can download my business idea checklist! This checklist will go through these 4 steps with you and help you find the information you need to answer these questions!
Now we’ve confirmed this business idea is a goer, we can start the business set up process. Step one is to name the business! Thats a blog for another time….If you have any questions about anything you’ve read in this blog, just drop me an email at lawrence@thesmallbusinesstoolbox.co.uk I am always happy to talk!
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