Your Hub


Forgot password?

Register for ANZ Biz Hub

You'll get easy registration for workshops offered in your area.

Find out more

Staying passionate and profitable print Print

  • 3.5 out of 5 stars
  • from 47 ratings

Entrepreneurship isn’t just about spotting a gap in the market and taking advantage. It’s as much to do with passion and having dedication to what you deliver to your customers. The head does not always rule the heart.

However, basing all your business decisions on passion is a dangerous game. It takes your business decision-making further away from calculated risk and closer to chance.

If you can learn to follow your passions while reducing and mitigating the risks, your business is much more likely to be profitable as well as pleasurable to run.

Feasibility testing

Feasibility testing is the first thing you should do in the pre start-up phase, even before writing a business plan. Establishing the potential profitability of your business on day one means you minimise the chances of throwing your money, time and energy down the drain with a business idea which isn't going to be financially sustainable.

Before following your passions into business, test the feasibility of your business concept by researching the costs, the market and the potential revenue in detail.

Research the market to establish your target markets first. Every business concept will appeal to certain types of customers more than others, and if you position your business around these targets you'll go some way towards maximising the profitability of your business idea.

Go online to Statistics New Zealand and find other demographic information to establish the size of your market, the number of competitors in it and the total value of the market. This will give you an idea of the slice of the market your business could take and what that will actually mean in terms of revenue.

You'll also need to know the market's pricing tolerance - how much the target market will be willing to pay for your product or service in comparison to the competition.

With this information to hand, drill down into the costs and margins of your business idea by building a cash flow forecast and carrying out break-even calculations to establish your likely return on investment (ROI).

If you carry out a feasibility test right at the beginning and find your costs and pricing options don't provide you with big enough profit margins, you can still go back to the drawing board at minimal expense. 

Talking to the target market

Whether you're just starting out or you've been in business for years, it doesn't matter - you should never lose touch with your target markets. Tastes and requirements change, no market ever remains the same. So this means regular market research is a requirement to make sure your business is positioned for maximum profit within the marketplace.

One of the hallmarks of passion-based businesses can be the absence of market research. Entrepreneurs often strike upon an idea which lets them follow their unique passions or solves a problem unique to their experience or situation.

However, only successful entrepreneurs bother to check if there's a market for their unique product or service before they spend any resources on developing their idea.

Whatever you do, don't assume everyone else is like you or even thinks in the same way as you. Survey your target markets, conduct focus groups if you have a prototype you can test and talk to professional consultants with experience in your sector so you can accurately estimate your potential markets.

Maintaining margins

It's never a good idea to let temptation get the better of you, especially when you're looking at the stock you plan to sell or the services you plan to provide.

It doesn't matter what your area of industry or sector of business is, you will always be presented with stock and asset purchase choices that appeal to your heart over your head. These will typically be premium options that fit your ideals.

You may sell interior furnishings and have the opportunity to buy-in a high-end design classic that reflects all your personal tastes. Or you may be a garage owner presented with the chance to buy the latest engine diagnostic tools that'll let you tune the classic cars you've always loved working on.
Whatever the situation is, you must estimate how these purchases will affect your bottom line before you invest.

Stock plans need to be designed around focusing on the products that deliver the biggest margins to your business, while asset choices must always be measured by their rate of return.

Learn to adapt

Times change and if you consistently take the pulse of your target markets you will inevitably find that the appeal of your original business concept wanes. New developments will take place reducing the innovation of your idea, while new competitors will also enter the market on your coat tails to further diminish your unique selling points (USPs).

The only answer is to build in room to manoeuvre as early as possible. Always be on the look-out for new markets with better long-term profit potential than your existing markets, and ways you can enter them with related products or services adapted from your current offering.

It sounds easy, but the hard bit can be accepting that your original business concept needs to change to keep up with the times. It's much easier to do this when the time comes if you've accepted this requirement in the early stages and built some manoeuvrability into your business concept.


Rate this article:

  • 12345 Click on the stars to rate

Share this: