The steps of selecting the best business idea among several business ideas
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Question
What are the steps of selecting the best business idea among several business ideas
Answer
Not all business ideas will provide equally good outcomes. Therefore, it is essential that potential ideas are assessed to ensure the optional idea is selected. The first stage is to determine the desired outcome, as this will be used to evaluate the different ideas (Bierman and Smidt, 2012). While businesses may desire profitable ideas, there may be other concerns. For example, minimising the payback period or capital requirements, maximising the return on investment, or supporting other projects/products of the firm(Kotler and Keller, 2011). After determining the criteria against which the project will be assessed, the ideas may be evaluated.
The ideas may then be considered individually in terms of their viability. This will include looking at whether there is already a market for the idea, and the size and growth trends of that market. Generally smaller or shrinking markets will be less attractive compared to growth markets (Hooley, Saunders and Piercy, 2011). The next consideration is the ability of the ideas to satisfy market needs; examining who the target market are the potential of the idea to meet their requirements in a manner not provided, or superior to, competing products/services on the market (Shaw, 2012).
The final stage is the assessment of the firm and the internal aspects of the idea. This includes looking at the firms’ resources/ability to create the product/service, and the potential financial outcomes (Bierman and Smidt, 2012). This may include assessment not only of the capital required, but the returns, for example, the net present value (NPV), the internal rate of return (IRR), the payback period (Bodie, Kane and Marcus, 2014), and the impact the idea may have on the sale of other products/services such as supporting or cannibalisation. The information may then be used to determine the optimal investment based on the chosen selection criteria.
References
Bierman, H., and Smidt, S., 2012. The Capital Budgeting Decision; Economic Analysis of Investment Projects. Abingdon: Routledge.
Bodie, Z.,, Kane, A., and Marcus, A.J., 2014. Investments. Maidenhead: McGraw-Hill.
Hooley, G.J.,, Saunders, J.A., and Piercy, N.F., 2011. Marketing Strategy and Competition Positioning. Harlow: Prentice Hall.
Kotler, P., and Keller, K., 2011. Marketing Management. 14th ed. Harlow: Prentice Hall.
Shaw, E.H., 2012. Marketing strategy: From the origin of the concept to the development of a conceptual framework. Journal of Historical Research in Marketing, 4(1), pp.30–55.
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