They say prevention is better then cure. When it comes to business ideas, this most definitely applies.
Take a good hard look at yourself in the mirror. Ask yourself these tough questions. They’ll save you time. They’ll save your heartache.
1. How will it make money?
This may seem like a simple question, but some people don’t think about this one. If you’re creating a business, it has to make money. Whether directly or indirectly.
Ask yourself how will your business make money, secondly when will it make money? You’re better of focusing on business ideas that make money from day one. As much as we’d all like to create the next Facebook, your business needs a money making model from day one.
Do you drive traffic to your site and earn money from Ads? Do you charge a people a monthly subscription? Do you charge for app downloads on the App Store? Or is it a combination of revenue streams? Ask yourself how it will make money and write it down. It will help you to truly think through your business idea.
2. Is this a passive or active business idea?
Ask yourself, will I need to be ‘on call’ for this business to work? Do I need to be at my desk 8 hours a day to keep things running? Answering calls and sending emails for this business to work?
I tend to shy away from active business ideas. I’m often working on site for other people. Or I can’t devote my time during the day to run a business.
Launching an ‘active’ business is not a bad thing. But you need to consider how much time in your day you can devote to run this business.
A great example of a passive business is my site UpResume. After a time-consuming initial setup, it practically runs itself. I spend maybe 4–6 hours a month on it.
In the short term, active businesses often make more money than passive businesses. It comes down to lifestyle preferences. It’s something you have to think about up front and commit to it.
Once this new business is up and running, you don’t want to let your customers down by not being around to run it.
3. Is there a demand for this business?
Sounds simple right? But man, do people make this mistake. Myself included. How do I know if there is a demand for my business you ask? One of the simplest ways is to see if there is already existing, successful businesses out there. If there’s not, it’s usually a good indication there is little to no demand for it out there.
Another, more data driven approach to gauge demand is to see how many people are actively searching for your business or product.
For example, before starting my site UpResume, I did keyword research using Google Adwords. I confirmed a whopping 100k-1M people were searching for ‘resume templates’ worldwide each month— that’s a lot of people!
Do some keyword research. Neil Patel has an awesome, free keyword research tool. You can even target your location and see just how many people are searching for your product or service in your country.
If only 100–1000 are searching for your product or service each month, I don’t think it’s worth pursuing. Unless they’re your 1000 true fans, the demand is just not large enough. I would scrap the idea.
4. How badly do people need it?
Often referred to as the ‘hair on fire’ factor. Ask yourself, how badly do people need your business or product? For example, people need accommodation. This is a hair on fire factor 10/10. People don’t really need another photo sharing app.
Yes, their are exceptions to this rule. But it’s always a good idea to ask yourself this question as ideally you’re to serve a real need and create a viable, long term business.
5. Who are your customers?
I could never work in hospitality. I like eating out. But I don’t have the patience to deal with customers in that space. Ask yourself, who are the customers your business will serve? Are they the type of people you like? Could you picture yourself working with everyday?
It’s important to know who your customers will be. You will be making a commitment to work with them long term.
6. Do you have access to your customers?
Once you’ve decided on who your customer is, ask yourself do I have access to these people? For example, maybe you’re creating an app that helps people workout at the gym. If you’re a regular user of the gym, better yet a personal trainer. You have access to your customers.
Another example. You could be creating a kids game for smartphones. If you’re a parent, you could very well have direct access to your customers and other customers within your social circle.
You don’t always have to have direct access to your customers, but it does help especially when you’re starting up.
7. What’s your unfair advantage?
Ask yourself, when it comes to this business idea – what is my unfair advantage? For example, my unfair advantage is I’m a website designer. When it comes to creating an online business I can design the website myself. I don’t have to pay another person to do so. So I have an unfair advantage.
What’s your expertise? Maybe you’re an amazing networker on LinkedIn. A great writer. Or highly skilled when it comes to photography. Having an unfair advantage is not mandatory, but it can really make a difference when it comes down to executing your business idea.
8. How will you market this business?
Marketing is hard. Especially online. You can play the long game and opt for an SEO strategy, or you can burn a hole in your pocket with short term paid advertising.
Either way, you have to think about how you’re going to market your business. Pick something you like doing or are good at.
Like writing? Maybe content marketing is for you. Persuasive with copy? Maybe search or online advertising is for you.
The key is to compare the cost of your product or service against the cost of marketing. You can’t spend $20 per click on paid advertising if your product cost $10.
When you’re starting out, you will have to try a bunch of options, but it’s worth considering how you are going to market your business from day one.
9. Can this business be easily copied?
I once started a business selling domain names paired with logos. It was a great business idea. It suited my skills beautifully. I love thinking up brand names. I’m also a logo designer.
The problem was this business idea was really easy to reproduce. Buy a domain name cheaply. Create a simple logo or pay someone else to create a logo for you. Boom! There’s your product.
I soon discovered there were a lot of other people doing this very business.
Creating a business that is not easy to copy can be tough. You can either create a business that has a huge community that can’t be copied. Or you can create a product that is unique to you. An eBook is a great example of a product that can’t be copied.
Ask yourself, can this business be easily copied? If yes, beware as you will have stiff some competition on your hands.
It’s not a deal breaker as often you can put your own unique spin on it, but it’s something to consider.
10. Is this a long term business?
Jeff Bezo’s famously thinks long term. One example is that he focuses on things that don’t change. For example, customers will always want their deliveries in the shortest possible time. So Amazon focuses on shortening delivery times.
One way to answer the question of, is this a long term business idea or something trendy? Is to ask Google Trends.
For example ‘Calendar’ is one of the most searched for terms in the world. According to Google Trends, people have been consistently searching for calendars for the last 15 years. This is an example of a long term business.
Another example, Nintendo’s Pokemen Go. It was hugely popular for a month or so. Then quickly declined. This is an example of a short term business.
Ask yourself, is my business idea a short trend? Or something more long term? As much as we’d love to create the next Flappy Bird, it’s wise to think of the long term demand for your business.
11. Can this business be sold?
Another way of generating income is through the sale of your business. Before you begin, you need to consider if the business you create can easily be passed onto someone else. Is what you plan to create transferable?
This is not a mandatory, but it‘s something to consider from the start. Even the great Neil Patel admits when it comes to naming your business it’s wise not to use your own name.
Secondly your business should never be intrinsically linked to yourself as it’s not something easily transferable to another owner.
12. How much competition is there?
We’ve all been there. You have this killer idea. You get infront of your computer and do a quick search, shit! Someone else has already done it. And not just one person, loads of people.
All is not lost. You do need to consider just how hard it’s going to be to compete with them. Yes, it is validation that your business idea has a customer base. But it does make things tough when starting out.
You can always differentiate yourself by tweaking your offer or create better branding but it’s always important to at least guage the competition in the marketplace before proceeding with your business idea.
13. Will you be proud of this business?
We’ve all created something we’re not proud of.
When someone asks me the question, what do you do? I would love to say ‘I created Kickstarter’.
Ask yourself, is this business something I would proudly tell people I created. If the answer is no, you may want to consider it.
If you do have the good fortune of creating something that is pumping out money that’s all well and good. At the end of the day you have to be proud of what you have created. Maybe it’s one in the same thing? It’s up to your and your gut to decide this one.
There is no substitute for action. Asking yourself these questions is action in itself. It’s not about overthinking it. Getting frozen in ‘analysis paralysis’.
It’s about having a framework in place to make the best, informed decisions before you commit.
Go grab your best ideas and ask yourself these questions. The ones that make it through in tact, are the ones to go with.