Five Ways to Evaluate a Small Business Idea

Small businesses are booming. In 2024, entrepreneurs submitted 430,000 applications per month – 50% more than five years ago.1 Perhaps you have a great idea and want to start your own business. What should you do next?

Research your small business idea to determine if it’s viable. Five steps will help to vet your concept with little to no expense.  

1. Start with online research.

   
   You can learn a lot about industry market trends, demand for your product or services and competitors online.

   • Search “[your business idea]” and “[your city]” to determine if businesses like yours are already in the area.

     
     For example, if you’re starting a catering company in Atlanta, you might enter the term “top catering companies in Atlanta.” This search will usually reveal a list of competitors with locations, phone numbers and links to websites. You’ll also see customer ratings and reviews, which are indicators of the companies’ reputations. Sites like Yelp also feature online business reviews.
     
     Also, research companies that may be indirect competitors or adjacent businesses — like bakeries or event planners in the example above — that may need your product or services. Semrush’s Market Explorer offers a free trial to gather competitor, audience and industry insights.

   • Check the U.S. Small Business Administration (SBA) and other organizations for ways to test small business ideas.

     
     SBDCNet, the SBA’s National Information Clearinghouse, offers a variety of reports on small businesses in all 50 states, as well as Puerto Rico and Guam. Among the many reports included are competitor lists, small business snapshots with trends and forecasts, tips on starting your business, patent and trademark information, and more. The U.S. Chamber of Commerce also offers recommendations on testing business concepts.
     
     Senior entrepreneurs interested in post-career ventures can turn to Public Private Strategies Small Business Resource Center for the 50+. This resource offers help with ideating, launching, managing and expanding small businesses.

   • Join industry LinkedIn or Facebook groups and forums to ask questions and view discussions on trends and recent issues.

     
     Social media groups and industry forums also offer opportunities to communicate with other small business leaders.
     
     Regularly read industry and local market reports to see which products or services are most popular, track innovations and review revenue forecasts.



2. Seek input from prospective customers.

   
   When you’ve formalized your concept, ask potential customers for feedback. Engaging in discussions, surveys and focus groups can provide valuable insights into needs and preferences, as well as gaps your products or services can fill.
   
   Start with basic questions like age, income and family structure, which reveal whether these consumers are truly your target audience. Then move into questions more specific to your small business idea, such as asking consumers to rank the importance of certain features of your product or service. Also ask what would prompt them to try a new product or service.
   
   Experian offers prospect lists that are customizable by region including new movers. Local chambers of commerce can also assist in developing prospect lists, as well as marketing opportunities.



3. Attend industry and community networking events.

   
   Trade associations and local chambers of commerce frequently host events. You can learn about the local market when you attend networking events that provide opportunities to meet industry peers and professionals, community leaders and other small business owners. Ask attendees about their experiences and follow up with an invitation for coffee or a thank you note.



4. Find and engage business mentors.

   
   Identify business owners or industry experts who understand the market you want to enter and ask for advice. The right mentors can help objectively evaluate your small business idea, as well as inform you of possible risks (e.g., regulations, etc.).
   
   Possible mentors might include community leaders, college professors, or owners of complementary businesses who will often gladly offer support, especially if your enterprise could also benefit theirs. You might also get tips from owners with small businesses like yours who have a different demographic. If, however, you are unable to find a mentor, non-profit SCORE can connect you with experts who volunteer with small businesses.



5. Avoid common pitfalls to starting your own business.

   
   Learning as much as possible before you start your own business can save time and money. These reminders will keep you on track.

   • Thoroughly evaluate the business opportunity.

     
     Understanding the market for your products and services is key. Thirty-four percent of small businesses fail because there is no fit in the market.2 Confirm that there is existing demand within your target audience, and that consumers will have the means to pay. Write a business plan that outlines how you will address the opportunity.

   • Stay informed of regulatory conditions.

     
     There are strict guidelines for collecting and storing payment data. This is just one regulatory requirement you’ll need to meet when you start your own business. Be sure you stay informed of state and local laws, as well as federal legislature that can impact your launch.

   • Develop a financial plan.

     
     Decide how you will fund your business before you open so you don’t run out of money at critical points in the venture. Your financial plan should include a launch budget, revenue projections, emergency funding and tax payments. If you’ll need to borrow, be sure you know the requirements to secure a small business loan.

   • Be prepared to change direction.

     
     The advantage of researching your small business idea before you launch is it reduces the potential for mistakes. For example, if your target audience extends beyond an intended locale, you’ll be able to adjust your market plan to reach those areas. Be flexible before and after launch to ensure you are effectively addressing market demand.

Ready to move forward with your small business idea?

If you’re ready to start your own business, there’s no time like now. As an SBA-preferred lender, Synovus helps small businesses go from great idea to reality. To learn about financial options, call 1-888-SYNOVUS (1-888-796-6887) or stop by one of our local branches.