Most startups have one thing in common – they all have a killer business idea. Right? But in reality, just how good are these ideas? In this blog we discuss 5 ways to find out.
Let’s get started!
People have a tendency to get carried away and obsessive about their business idea.
Indeed, in many cases it can take hold of people, pluck them from their content and comfortable life of full-time employment and thrust them into a whirlpool of activity as a new start business owner. And all because they have become the guardians of a life changing and quite brilliant – yes, quite brilliant business idea!
So just what is happening out there. Are thousands of ordinary people swapping their humdrum lives every day and becoming business magnates, trading in their Ford Fiestas for Ferraris? Is it really that easy? So, where is my Lamborghini?
Well, Companies House official statistics tend to say otherwise. Every year over 700,000 new companies are incorporated and almost as many are dissolved annually. So just how many ideas are worth pursuing and how many are crackpot and don’t hold water?
Could it be that most are more dull than dazzling? And those who are hypnotised by the thought of great success and wealth – are drawn into a world of struggle and stress trying to make a business idea work.
Well, here’s 5 ways to find out if a business idea is really that good.
1. Does it solve a problem and serve a purpose?
Before launching into a Business Plan, in-depth financial analysis, and cashflow forecast, it is a good idea to cover a few bases with what is called a ‘lean plan.’
All products and services must solve a problem and serve a purpose – otherwise why would anyone buy them. Ask yourself, the following questions to create your lean plan:
- Can you identify who you are solving this problem for and how you will find them?
- Would you buy your service or product and pay what you need to charge?
- And last but not least, do you think you can make money?
This informal plan allows you to identify key assumptions and get your ideas out there. In other words, it will help you get it down on paper.
2. Don’t ask friends or family
One of the main dangers in the embryonic stage of any business is to ask friends and family what they think of your idea. Most will say it’s terrific. Few will say it sucks.
This is because most friends and acquaintances will want to maintain affable relations and don’t want to be seen as a spoil sport, or jealous.
Listening to people you know may have the effect of sparking a resignation from your job, followed by a headlong rush into self-employment and even the re-mortgaging your house – all on the strength of people being nice.
So, it’s vitally important to validate your idea by testing it on the public. That is – people you don’t know. This could be in the form of creating a user group, an online or face to face survey, building a prototype of your product, or even a test website, etc.
The truth is, people you know are generally too nice to tell you your idea is half-baked. People you trust cannot be trusted to tell you the truth – it’s as simple as that.
3. Seek advice from a business mentor
Try to find a mentor, to run your idea past. This is something Richard Branson did when he set up Virgin Atlantic. He turned to Freddie Laker who was able to draw on his experience with his own airline.
The mentor should not be a direct competitor but could be a local business leader. Don’t be shy in approaching people, most will be flattered if you ask them for advice.
You could also go to industry events and ask for advice from speakers and industry experts.
Explain your idea to them and see what they think of it. They may be able to see a hole in it that you had not considered. This may be a deal breaker or may be something you can fix to make your idea a stronger proposition.
4. Find your competition
If you have a truly unique idea and there are no competitors in your sector – that may not be such a great thing, as you are entering untested waters, which is risky. Or, you may be the last one there – all the others before you gave up. However, the overwhelming odds are that you do not have a unique business idea and you do have plenty of competition.
Most people would like to think they have something new and special; but from the customers’ point of view, the likelihood is they will see it as just another version of the ‘same old thing.’ After all Mark Twain famously said, ‘There is no such thing as a new idea.’
So, it’s vitally important to find your competition. Then use their services and products, and assess their pricing and value for money. Ask yourself, is my business idea better than the competition? Can I do it differently and/or better? If the answer is yes, you stand a good chance of creating a good business.
Finally, and so critical when assessing your competition – are they making money? In other words, is this a good sector to be in? It may be the sector is saturated with competition and there is a downward spiral of pricing. Or, it has had better days and the people who are left in it are struggling to make ends meet.
You can usually find out a lot by looking at the competition’s websites, premises, reviews, testimonials, and portfolios. Are they comfortable or fighting to make ends meet? Immerse yourself in their space for a while and imagine being in their shoes. How does it feel?
5. Do a business plan
So far we have carried out a lean plan, tested the idea on Joe Public, sought advice from a business mentor and had a look at the competition.
If your idea is still hanging together, it’s now time to get a little more committed by doing a Business Plan. Dead boring, right? Well, no it isn’t actually. If you’re excited about your new opportunity, a Business Plan will help you identify, describe and analyse the feasibility of it.
A Business Plan will:
- help prove to you and other parties that you are serious about your business idea.
- assist in giving you an understanding of your customers and your competition.
- help validate key assumptions, assess the feasibility of your venture, and create key milestones for your business journey.
- identify exactly how your business will make money and determine what funding you will need to make it through the various stages of your company’s business life.
And finally, a word of warning before we leave this topic – do not launch into a new venture without doing a proper Business Plan. That could prove to be the biggest mistake you will ever make and lead you down a painful road of stress and financial ruin. So please be careful…
So, there you have it
I hope this blog has been of some help in figuring out if a business idea is indeed a good one. However, if you have an idea and you find it’s not a good one, the rule is – do not persevere with a losing idea!
Know when to call it quits and move on. You must be able to balance your ‘never say die’ attitude with good commercial sense. Some people have to hit rock bottom before they will admit they have a problem. Don’t let that be you.
Remember, entrepreneurs are coming up with new ideas for their startups every day, as they attempt to turn their dreams into reality. The truth is, very few startups succeed and the key to long-term success as an entrepreneur is to keep coming up with new ideas, even after suffering failure.
So, try not to get too carried away with a new business idea. Keep your feet on the ground and run it through the steps described above.
If you have any questions about what we have covered today, please ask in the comments section below and we’ll get straight back to you.
Oh! And one more thing – good luck!