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Home Funding How to Know If a Business Is a Worthwhile Investment
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How to Know If a Business Is a Worthwhile Investment

By
Chris Lewis
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August 15, 2018
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    How to Know If a Business Is a Worthwhile Investment

    When you are considering going into business for yourself, one of the things nagging at the back of your mind is probably whether or not it would be a worthwhile investment. Most often you will be giving up more than your time and effort. Unless you start small in your spare time, you may be giving up your full time job to start your own company and that means you will need to stay financially solvent throughout the early growing pains. Yes, you can get unsecured small business loans and that is great to know, but even the lender will want to know if your ideas are potentially profitable. Here is some of what you must consider.

    Does Your Business Meet a Need or Fix a Problem?

    While you may have an utterly fantastic idea, the thing to keep in mind is whether there will be a market for your product or service. Perhaps there are already a ton of companies putting out the very same product line but just because the competition is stiff, it doesn’t mean your product won’t sell! Have you fixed issues inherent in other products similar to yours on the market? Perhaps your digital device is much faster and more efficient. Perhaps you have developed a green product which will enable the consumer to save a lot of money operating it. If you feel you have fixed a problem or are meeting a need previously unmet in your market, then perhaps your business is a worthwhile investment.

    What Is Your Target Audience?

    Next on the list would be an honest assessment of your target audience. Consider the above when questioning whether or not your product will work within this audience. Is it something they need and does research show it will be something they would be willing to spend money on? If so, the next question is also infinitely important. Does your target audience have the financial wherewithal to afford your product or service? For example, everyone would probably love to have a solid gold ornament, but can they afford it? If you can price your product line within the average means of your target audience, then probably you are looking at a worthwhile investment.

    A Realistic Look at ROI

    There is just so much bookkeeping that goes into determining a return on your investment, but the thing to keep in mind is determining the cost of production. Next, if you compare that side-by-side with what your audience may be willing or able to spend, you can get a good idea as to the potential ROI. Without actually being in business yet and having statistical evidence on your side, there is no way to truly know unless you consider the first two points. If you’ve met a need or fixed an issue and if you have accurately identified a target audience able to buy your products, then you can probably assume you will realize a decent ROI.

    In the end, if you believe in what you are doing, and you feel that there is a market able to buy what you are offering, you just might be onto something great. Can you honestly say it’s something you would buy? If so, then it’s a worthwhile investment of time, effort and financial resources. That’s what counts.

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