Profitable business ideas are what all of us would like to find - after all, there’s not much point in an unprofitable one, is there! But just how do you tell beforehand if a business idea is going to be profitable?
The short answer is that you can’t be absolutely certain. All kinds of circumstances can trip up even the best idea, from health issues to hurricanes to hype. However, you can take steps to evaluate the profitability of an idea you’re considering, in order to compare it with others and to see if it meets your business goals.
In a nutshell:
profit = income - expenses
Where income is all the incoming money (sales, interest earnings, commissions, etc) and expenses is ALL the expenses (labour, materials, services needed, taxes, information, everything you spend money on). The interesting part is finding the numbers which best describe the income and expenses, and making sure you haven’t forgotten any!
The tool you need is a “pro-forma (or projected) profit and loss (or income) statement“, which is typically part of a business plan but is extremely important even if you don’t intend to make a formal business plan. You can see some examples here:
Any business plan book, software package or online tool will help you create a simple statement like this. The difficult part is getting reasonable numbers to plug into it. Only you can work out what the numbers are for your specific business idea, but a couple of points are very important:
be pessimistic, not optimistic in your projections
include all the expenses you can think if - and research to discover the expenses you don’t yet know about.
The HBIME training program helps you evaluate ideas against your personal and business goals in this and many other ways.
There are a couple of main points of view on this. One is: the more ideas the better, as it increases the odds that you’ll come up with a really good one. The other is: too many ideas causes distraction, indecision and loss of focus.
As I see it, these two views really aren’t in opposition, even though they seem to be. That’s because they apply to different stages in the creation of a new business.
During the time before you start your business, when you are working out what you want to do and looking for your best business idea, then the more ideas you have access to, the better. More ideas means that you can combine them, use them to spark better ones, investigate areas you might otherwise never have thought of, and generally improve the chances that the idea you settle on in the end will be one which has a good chance of success for you.
Once you’ve started work on your business, though, new ideas for different businesses are indeed a distraction. Focused action is what you need at this stage - you have an idea, you have a plan, and acting on the plan is the number one priority. While it’s pretty much guaranteed that you will indeed have new ideas during this time, writing them down and setting them aside for consideration later is a good strategy. You can keep your creative brain happy by scheduling yourself a regular “new ideas” time when you go through the notes of inspiration and consider which could be worked into your plans, which have good future potential, and which can be filed in your “someday - maybe” file for later (maybe much later… maybe never!). The important thing is not to be distracted by the newest shiny idea, but to give your planned idea enough time and action to bear fruit up to its potential.
Why should we bother to evaluate a home business idea if it grabs us, inspires us, and sounds really good? Shouldn’t we follow the idea “do what you love and the money will follow”?
What I’ve found in 25 years of self employment is that, while the money does follow when I do what I love, it doesn’t necessarily do so in a large enough amount to make a full time living at, or even to make the venture worthwhile. It’s pretty disappointing when working out the $/hr over a year’s intense efforts gives a result below $2/hr.
Evaluating your idea will not save you from all failed ideas, nor can it guarantee success. What it can do, though, is weed out the ideas which never could succeed, and warn you where the danger areas are that you need to pay attention to for the ideas which could possibly succeed.
Home Business Ideas Made Easy helps you learn to evaluate your ideas against two sets of factors - personal and business. Personal factors include such questions as whether you’re an introvert or an extrovert, how much of a self-starter you are, and how risk-averse (personality traits); what life, work or business experience you’ve had; and what your skills are. Business factors include the size and accessibility of your target market, resources needed to launch the business, laws and regulations which may affect you, and whether the idea is capable of growing to produce the income you need.
Here’s a short video I made showing you where to look on ebay Pulse to find new business ideas.
One thing to bear in mind here is that you need to think laterally, not just literally. For example, at one point we see a screen where there are several auctions for sewing machines among the “most watched” items.
Does this mean you ought to set up a business selling sewing machines on eBay? Well, maybe, if that’s something that fires you up - but you might also use that to spin off other possibilities like…
selling sewing machine accessories and embroidery patterns (online or offline)
sewing machine repair service
sewing machine review and comparison website
used sewing machine classified ad service or buy-sell-trade service
information products on how to maintain, use, and get the most out of your machine
…and that’s just staying within the field of home sewing machines. Whatever connections your brain makes when it sees “sewing machine” will cause you to come up with even more ideas which might be completely unconnected to sewing machines. Write them down, go with the flow, and keep getting ideas.
In the current economic situation, more and more people not only want but NEED to earn money from home. Some just need a bit of extra money, others need to earn a full time living. But actually getting to that point seems like a real struggle. Finding the right idea is a big stumbling block and for many people, it’s a complete showstopper.
But you still have that dream to work for yourself instead of Big Faceless Company or Small Dysfunctional Company.
That perfect home business idea is certainly an elusive beast. There are hundreds… thousands… even millions of business ideas out there in the world. Most of them wouldn’t work for you - even if they might for someone else - because they wouldn’t fit your circumstances, needs and personality.
Most “business idea” books simply list ideas, including more or less detailed information about the ideas, but most make very little attempt to match ideas to you.
Most “start a business” books assume that you already have the idea and head straight into the nitty-gritty details of setting things up.
Home Business Ideas Made Easy is different.
I’m creating a training program that laser-targets the gap between “an idea” and “YOUR idea” and teaches you how to create your own custom ideas, as many as you like, and how to evaluate them against your own personal criteria to discover the best idea for you personally.
Over the next few weeks I’ll be sharing business ideas with you here, and showing you ways to get started creating your own. To begin with, sign up for my email notification list below. I’ll send you my report “120 Business Ideas” completely free, and I’ll keep you updated with additions here on the site as we progress towards the launch of Home Business Ideas Made Easy.
