How do I know a business idea may generate income?

Since the target audience of this blog is people from middle-class and below, income generation is an important requirement of a business idea. How does a person make an educated guess that a business idea may bring in the money? There is a few condiitons to be met before attempting to execute a business idea:

• There must be existing demand for the proposed product or service


• Current supply is at or below current demand


• You have competitive advantages to meet the demand

The first question is how do I know there is demand? Based on your personal experience or worst, personal opinion is not enough in most cases to make an educated guess on a business idea. An exception is there is already a few potential customers expressing their interests when you mentioned the business idea to them. To gauge demand, you can try to use search engine keyword tool, e.g. Google keyword tool. You can enter the keyword releated to a business idea. For example, if you are thinking about organic food business, enter "organic food". Below is global demand and supply related to organic food as of September 2006 according to Google search engine:


As you can see, there is demand for organic food, however competition is very keen.

Another tactic to gauge demand is to ask potential customers to comment on your business ideas. This tactic is crucial if the product or service is new to the target customers. Don't be afraid someone will steal your business ideas. Besides having good business idea, execution strategy is also important. Someone may adopt your business idea but they may not be the right people for the execution of business idea.

Second question is about supply. An ideal business idea produces a product or service which has limited supply but huge demand. You may wonder why the ideal business idea is that you should not be the only one who has such business idea. The reason is huge marketing cost related to finding and educating potential customers for a new product or service. To gauge supply, keyword tool can also be used as shown in the organic food example. Another tactic to gauge supply is to use search engines to find out existing direct and indirect competitors. For example, enter keyword "organic food" in Google search engine. After browsing through these web pages, you will get an understanding of your potential competitors and their strengths and weaknesses.

The third question is are you the right person to execute a business idea? Do you have a realistic execution plan? Do you have or have access to sufficient capital to execute the plan? Do you have or have access to right mix of marketing and technical skills? Having experience in the industry of a business idea is a good start. If you do not have certain skills, you can either spend time and money on learning the skills or hire specialists. During execution of a business idea, there will ups and downs due to mistakes and unforeseen circumstances. Having sufficient working capital to meet cash flow demand is crucial in execution of a business idea.