Is your business idea feasible?
Key points in this article
- Figure out how much you need to make
- Calculate your break even point
- Identify the market opportunity
So, you’ve got a great business idea... but will it fly? This article covers three steps to identify whether your idea is sound. And if so, how you can set up a business in one day.
These three steps will help you determine whether your idea is a sound basis for a business. And to finish, we’ll show you how ANZ Business Ready® powered by Honcho1, can help you turn your idea into reality quickly and easily by getting your business set up in one day.
As you work through the steps, if you need help developing your business plan, try this handy business plan template from the ANZ Small Business Hub.
Step one: what you need to make
First, get clear on how much money you need to make to:
- cover household basics e.g. food, bills, clothes
- put something away each month.
The ANZ cash flow forecast template can help you plan ahead to calculate the money you'll need for the good times and the bad. If your business idea can't deliver this, is it really right for you?
It’s tempting to reduce this amount to ‘fit’ a business idea you really love. Be realistic about what you need to earn and when you need business income to start flowing, so you know what your idea must deliver to support you day-to-day.
Calculating this figure accurately will be crucial to the success of your business
Step two: break even
Figure out your break even point (for which you'll need to estimate some business basics like your product, price scenarios, and the cost of production and supply).
Calculating your break even point is a vital step. Your business will reach its break even point when total costs are equal to total sales. Then if sales continue to climb, you’ll begin to make profit.
To work out your break even point, first work out your fixed and variable costs.
- Fixed costs – These costs don’t depend on the amount of goods or services your business produces. They can include rent, rates, power, phone, interest on debt, insurance, repairs and maintenance, stationery, and wages of permanent staff.
- Variable costs – Variable costs depend on the amount of products or services produced by your business, and fluctuate in proportion to the volume you produce or sell. They can typically include stock, supplies, freight, and wages of temporary staff.
- Price determination – What price might customers be prepared to pay for your offerings? Take into account the cost of producing and supplying your goods or services – then choose a couple of price scenarios. They could be prices that are ambitious, cautious and most likely.
Once you can reach your break even point, your business can move onto the next step of creating profit
Step three: market opportunity
To start judging whether your business idea could deliver and exceed your break even sales target, identify your target markets and assess their demand for your idea.
What type of customers will buy your products or services?
- Working parents
- Young adults
- Business people
Will you reach them exclusively in your area by selling direct, or will you go online or through distributors? How will your target market respond to your offerings?
Once you know who your customers are likely to be, begin to establish if there‘ll be enough of them and how often they’ll buy
Did your idea hold up? Great, here’s how you can set up a business in one day
Starting a new business is exciting, but there's a lot to think about and organise. With ANZ Business Ready® powered by Honcho1, you can turn your idea into reality quickly and easily.
In a few guided steps you can receive your ABN, register your business name, set up a website, business email address and bank accounts plus ongoing features and support, from as little as $26 per month.
Then once you're set up, ANZ Business Ready® powered by Honcho1, can help you keep your business running smoothly with a range of services like document storage, digital marketing and invoicing.
Video: Advice from small business owners on how to get that big idea off the ground.
Take the next step today
- Ask in an ANZ branch
- Call 1800 801 485
- Visit businessready.honcho.com.au
- Honcho is a business of Business Switch Pty Ltd ABN 83 134 235 304. To the extent permitted by law, Australia and New Zealand Banking Group Limited (“ANZ”) accepts no liability for any loss and/or damage (howsoever caused) as a result of your use of the Honcho website, tools or product offerings. ANZ Business Ready® and Be Business Ready® are registered trademarks of ANZ.