What does it take to come up with great business ideas?
There has never been a better time to be an entrepreneur. According to the Small Business Administration (SBA), there were 27.9 million small business in the US.
Every business starts with an idea, but most ideas, even great business ideas, never turn into a business.
The idea phase of starting a business is the most fun.
Because ideas are easy.
Most people never get beyond the idea phase. Ideas shouldn’t be confused with daydreaming or magic. Even this exciting part of starting a business requires a method if you are going to do it right. I recommend that you read The Business Idea Factory: A World-Class System for Creating Successful Business Ideas.
Right at the start let’s consider the incorrect ways to think about business ideas:
- Mystery – There is nothing mysterious about great business ideas. If you think that there is magic involved, it is unlikely that you will come up with one.
- Revolutionary – If you look some of the most recognized brands, most of them are improvements of already existing ideas. Revolutionary ideas only exist in the vocabulary of marketers. Instead of trying to be revolutionary, be different than your competition. Strive for small incremental improvements.
- First to market – You don’t have to be the first to market to make your business idea work. Can you improve something that’s already out there?
- Born in a moment of inspiration – Successful entrepreneurs will tell you that they have evaluated many business ideas before they have settled on one.
- It must be that one idea – If you ask successful entrepreneurs, they will tell you that they have several ideas for other business. Developing business ideas is a skill that you can develop.
- You still need great execution – Many businesses built on great ideas still fail. Business ideas a cheap. While it is important to have an idea, execution is what really makes a business.
- The secret is not – Rookie entrepreneurs love to keep their ideas secret. They want everybody to sign a Non-Disclosure Agreement (NDA). The value is almost never in the idea. It is what you can do with the idea.
Now, let’s look at the right way to think about your business ideas:
- Think evolution, not revolution – Most great business ideas are not revolutionary. Look at the market. Can you improve an already popular product? Starbucks didn’t invent coffee, but they improved the experience of consuming coffee. Google didn’t invent the search engine, they improved the experience by providing more accurate results.
- Fill a gap – Your product could fill a gap between products or combine products together.
- Ask for advice – Reach out to experienced entrepreneurs and discuss your business idea with them. Get their input. Learn from their advice. They will most likely ask you a lot of questions you haven’t even thought about.
- Stay objective – Don’t fall in love with your business idea. I know you think that you have a “great business idea“, but try to depersonalize it. Think, what if someone else came to you with the same idea, what questions would you ask?
- There are always other business ideas – There are many reasons your idea might not work. Don’t panic. If you take the right steps, you will be able to come up with several viable business ideas.
How to come up with your business idea?
List your skills.
You don’t have to be an expert to have skills in an area. You have a unique set of skills you can build on.
Consider the following as you build your skill list:
- What is it that you would enjoy doing even if you didn’t get paid for it?
- What do you enjoy doing, at work and during your free time?
- What do you wish you could be doing?
- What tasks do you dislike and why?
- What topics do you enjoy learning about?
- Do people come to for advice about certain topics?
Here are some important skills that will help you succeed in business:
- Planning – You don’t have to come up with a hundred page business plan, but you have to be able and willing to make plans.
- Finance – You have to know, at least a little, about business financials. If you don’t know what a P & L is, learn about it. If you don’t know about cash flow management, read up on it.
- Tech – You don’t have to be a tech whiz, but you can’t do business without some basic computer, software, and social media skills.
- Marketing – Creating awareness about your brand profitably is one of the requirements to succeed in business.
- Sales – Even if you are not a born salesperson – no one is a born salesperson -, it is tough to succeed in business without sales skills.
- Management – Even if you are alone in your business, you still need management skills. You have to manage time, money, vendors, freelancers and everything that makes your business run.
- Communication – Communication is important internally within your business and externally, dealing with your customers, prospects, and vendors.
- Negotiation – If you are a great negotiator, you can use it as a competitive advantage. For example, you might be able to negotiate a lower lease on office space than your competition. The lower rent will help you operate more profitably.
You don’t have to be an expert, but you have to be willing to become one.
Can you improve it?
In your own personal and professional life, you might already have several ideas. You might be using products daily that could be improved. What’s bugging you? Are you frustrated with a product or service?
Here are some practical examples:
- You might be using a product that is less than perfect. Can you make it better?
- You might live in an area where a certain service is not yet offered.
- Have you looked for a product or service for yourself that you would have paid for but no one was selling?
- What products your friends, family members, or coworkers complain about? Can you improve it?
Are you listening?
I mean are you really listening? If you do then, you must be able to come up with a list of products and services that need to be improved. Develop an awareness of your environment. Listen to people talking about what frustrates them.
Is it something you would enjoy?
Be honest with yourself. Just because you have a great business idea it doesn’t mean that it’s a good fit for you.
You might be an excellent software developer, but what you really enjoy is meeting people instead of staring at a computer monitor all day.
Part of owning your business is to do what you love. The desire for freedom is a common characteristic among entrepreneurs. Don’t choose an idea that you would not truly enjoy.
Is it moral and ethical?
You want to be able to sleep at night, I know I do. And, even if your business idea is legal but morally wrong you shouldn’t do it. If you are not proud of it, pass on your business idea.
Are there businesses making money doing this?
A major flaw of wantrepreneurs is that they fail to look at the profitability of an idea. You might have a really unique solution to a problem, but if people are not willing to pay for it the idea has no value. Check to see what businesses are offering similar products. If there are no businesses selling anything like it, you have to test the market. It’s not enough if your friends like your product.
The question is: “Are people willing to pay for it?”
The best way to find out is to pre-sell.
Can you beat the competition?
The only way to beat your competitors is to know your competitors. Study companies that you are going to compete against. Learn from them. Find out how they do business. Learn what differentiates them from others?
You can find out many important things by studying your competition:
- How many are there? – Every business has competition. Before you decide on your idea you should know the number of competitors in your space.
- What is their size? – If there are many huge competitors, it might make competition difficult. Big companies can outspend you. They can afford to operate at a loss for a lot longer than you will. Does this mean that you can’t compete against large companies? Of course, not. But, it is a factor you can’t ignore.
- What do their customers say about them? – Seek out the customers of your competitors. You can read reviews, listen on social media, visit customer forums. Listen to their complaints and praises too.
- What keywords do they target? – Tools like SEMrush and KeywordSpy help you find out what keywords your competitors are targeting.
- Where do they advertise? – Use tools like WhatRunsWhere to monitor where your competitors advertise.
- Who is linking to their website? – A tool like Open Site Explorer can show you who is linking to your competitor’s website.
- What is their Alexa Traffic Rank? – Alexa tracks websites and it will help you benchmark your site against your competition. I also recommend SimilarWeb for similar reasons.
- What do people say and write about them? – Use Google Alerts to find out what is being said and written about your competition.
- What do they blog about? – Subscribe to their blogs and become a regular reader.
- How do they do email marketing? – Sign up for the email list and learn how they do email marketing.
- How do they behave on social media? – Like their Facebook page, follow them on Twitter and see what they are talking about.
- What did their website look like? Check their websites through The Wayback Machine, you might learn something.
Is there a real need for this?
The only way to find out is to ask. Entrepreneurs who fail make many assumptions. There is no need to assume anything because you can ask your customers. Talk with people who would use your product. Ask them if they would use it, and why would they use it. Don’t try to sell it to them. Listen to what they have to say. Don’t resist their feedback. If they don’t like it or find it difficult to understand, it is a clue that you have to pivot.
Get out of your comfort zone.
Take your mind to unusual places. Read about topics you wouldn’t normally read. Take your mind out of the usual. Drive home taking an alternate route. Take a vacation. Go to some meetups to find people with different interests. Strike up a conversation with people who have different views.
Does your idea require investors? Building a business with other peoples’ money sounds easy, but there are tremendous pressures involved. How long will it take to turn your idea into a business? If it takes too long you might run out of cash. What happens if you do? Will you walk away from your dream? What will happen to your family? There are many risks involved in any business. Your job is to minimize risk as much as you can.
What are the limitations of your idea?
Just because your idea is a solution to someone’s problem it doesn’t mean there is a real business there. You might stumble upon a small niche with too few paying customers. Before you give up on your idea, see if there is a way to sell your product to a broader market.
Is it realistic for you to execute on this idea?
Consider your skill set. Do you have the skills it would take to make your idea a reality? If you don’t have the skills required, can you learn? If not, can you partner with someone with the required skills? Can you outsource any part of it?
Is the market ready for it?
You can test your idea so many ways. You can run Facebook ads to target the exact demographics you are after. Very inexpensively, you can quickly find out the market response to your business idea. You should do this before you build your product. You don’t want to build something just to find out nobody wants it.
How many competitors are there? Can you take them on?
Can you differentiate from competitors?
How long would it take to get the business off the ground?
What do experts think?
Talk to people in the know. You might think that you have the solution to a problem until you talk with someone who is an expert in the field. Experts don’t know everything, but you’d be a fool not to ask their input.
Is it a trend?
Trends are dangerous because they are temporary. For example, gluten-free is a hot trend right now. The keyword is “right now”. What happens to your idea once the trend is replaced with something new? Don’t get me wrong there are many business opportunities around gluten-free. Keep in mind that your business has to change with evolving trends.
Here are some major trends that are only a shadow of their glorious past:
- Pet Rocks – More than a million people bought Pet Rocks as Christmas gifts in 1975, making Gary Dahl, the founder, a millionaire within a year.
- Miami Vice Fashion – Does anyone still dresses that way?
- Oxygen bars – Whoever thought those made any sense?
Will it scale?
The most successful businesses scale really well. Evaluate your business idea with automation in mind from the beginning even if you are not ready to automate. Think about how you can remove the bottlenecks from the business processes. If you can scale your business in a cost and time-effective way, you have a winner.
Can you stick with it?
Your first, second, third, or even 15th idea might not be the right idea. The sign of a successful entrepreneur is the ability to pivot. Just because your idea is not the “right business idea” it doesn’t mean you should give up. Think of it this way. You need to work your way through all those ideas to find your way to the idea that will work for you.
Give yourself time.
Ideas are the result of systematic thought. They are not the results of moments of inspiration. Don’t rush your brain. It will take time.
Are people willing to pay for it?
Don’t be afraid to ask for the sale. Entrepreneurs that fail leave sales to be one of the last things on their agendas. It is a fatal flaw. Sell early. It is not enough for people to tell you that they like your product. The ultimate test is getting the cash. Pre-sell your product before you invest money into making it. If for some reason, the business doesn’t work out you can give people their money back.
Here is how to effectively pre-sell your products:
- Involve your target market. Talk to people who are going to be buying your product.
- As you develop your product as a potential customer how much they would be willing to pay for your product.
- Tell potential customers that you are offering a limited number of customers the opportunity to purchase before everyone else. Early access could be something exciting to people who can’t wait to try your product.
- Offer a discount for people who are willing to buy in advance. If you have a SaaS product, offer and 30-50% discount for people who are willing to sign up now.
- Offer social proof evidence that your product is valuable. Show people what others have said about your product.
Can you do it profitably?
It is one thing to get paid, and it is an entirely different thing to run a profitable business. Unless you can prove that your idea can be executed as a profitable business you will fail, especially if you want investors to back you.
You have to do your homework to get a real picture of what it will cost to produce, market, and sell your product.
If your idea can’t be turned into a profitable business pick another idea or find creative ways to make it profitable.
Use this checklist to see the viability of your business idea:
- Does it solve a problem the market wants to be solved?
- Are people willing to pay for it?
- Is there enough margin for a profitable business?
- Can it be differentiated from the competition?
- Is it difficult to rip off?
- Is it scalable?
- Do you have the skills to go from idea to business?
- Are there strategic partnership opportunities?
Consider your finalists.
After taking all of the above into consideration you should have at least a couple of finalists.
Now, is your time to take action to go from business idea to entrepreneurship.