Every business should meet the needs of its target market because customers have specific needs and want specific products.
This means that every entrepreneur with a business idea should research how feasible the idea will be before spending a cent on developing his proposed enterprise.
But determining demand for the product is only the first step. Next the entrepreneur should decide on the product's appearance and appropriate materials to manufacture it.
Design is an important element in making the product appealing to customers.
These considerations must then be balanced against production costs, since the product must also make a profit for the business to survive.
As an entrepreneur, there are three important factors you should focus on.
The first concerns the components and materials you will use to manufacture the product. Establish their cost. Consider current and past price fluctuations of the raw material.
From this you will be able to tell if you can sustain your business. This is particularly important for a start-up because these businesses usually have limited funds and most businesses that fail tumble in their early stages.
Prices for raw materials such as gold, silver, silicon, plastic and other materials made from oil fluctuate often. These fluctuations can affect the price a business must charge and its profitability.
If the price of your raw materials are prone to wide swings, you must have a backup plan to sustain profits when production costs rise. You cannot afford to raise your price every time raw material costs rise - it would scare off your customers.
The price of fuel fluctuates regularly, but many other products stay in the same price range for a long time. You should consider these cycles from the beginning so you price your product to avoid trading at a loss when hard times hit.
You should also choose the mode and means of production for your product. For example, handmade products cost less in terms of equipment but take more time to produce, increasing the cost of labour.
Manufacturing your products mechanically will drastically lower the costs of production and massively increase potential output. But it will cost you more for equipment and its maintenance.
The method of manufacturing must be economical as well as profitable and competitive.
Many start-up manufacturing businesses opt for handwork, or small-scale production to save costs and then gradually expand to larger and more automated systems as sales pick up.
Carefully consider the price you charge for your products and compare it with prices of competing products.
Use the estimated profit to establish how much stock you must sell to break even - the stage where the business is not making a profit and is not making any losses.
Compare your estimates of how many items you must move to make a profit with the estimated sales figures to establish the potential success of your business.
Only once you have completed this exercise will you be able to see where your business will take you.
If the profit margins appear to be too low, consider another business, because you will be wasting money.
lInformation for this article came from www.bizhelp24.com