Aspiring entrepreneurs have two big questions:
- How do I come up with a good business idea?
- How do I know if my idea will make a successful business?
In addition to this, most new entrepreneurs expect their first business idea to be a great one.
I did too!
However, now I know that in my journey as an entrepreneur, it has taken creating and evaluating hundreds of ideas and then executing a few, for me to develop my skills to the point where I can create and recognise ideas that will make successful businesses.
So how do you begin that journey as someone wanting to start your first business?
In the University Entrepreneurship program I teach, we have a whole subject for each of the questions above them. So I am going to give you an overview to those questions here and then expand on them in future posts.
How to become a business idea machine
Great entrepreneurs have trained themselves to be really good at spotting opportunities, connecting information and creating alternatives.
And really, it’s a matter of practice!
The idea is to create routines to practise coming up with ideas. Keeping an Opportuity Journal is a good practice. Write down all the ideas that cross your mind in as much detail as you can.
Do this regularly.
Set yourself the challenge of creating one idea a day. Soon you will find that you are creating more and better quality ideas because you are training yourself to notice them.
And you will have a whole notebook full of ideas you can go back to for inspiration.
There are lots of creative thinking techniques you can use to generate ideas and to train your brain to spot opportunities more readily.
Some techniques that you might like to research include:
- 6 thinking hats – Edward de Bono
- mind mapping – Tony Buzan
- Idea box
- brainstorming – including using association or random words to trigger ideas
- spotting trends
- Find a problem to solve
How to find an idea that customers want
My favourite technique to spot business ideas is to listen to people talking and identify what problems they have.
People will often complain about little things that niggle them. That is our cue as entrepreneurs to identify an opportunity.
Successful entrepreneurs solve problems for people. Eg. Problem: “I wish I knew when this taxi would get here.” Opportunity: An iPhone app that tracks taxis and shows you where the closest ones to you are.
So, will this great idea be a profitable opportunity ?
Once you feel you have found a problem which is worth solving, then you need to take it through an evaluation process to see if it is feasible (and profitable) as a business.
A lot of people run into problems in business because they have an idea and launch without conducting this kind of analysis. That’s why I am an evangelist for doing an Opportunity Evaluation – because I feel it is absolutely critical to a successful business.
A lot of problems can be avoided by doing this right at the beginning – so don’t miss this step!
Opportunity Evaluation involves
- asking strategic questions
- getting real data and customer feedback to answer them
- validating your assumptions.
Some of the questions that are important to answer include:
- What problem are you trying to solve?
- What is your solution?
- Who is your target market?
- What is their compelling need to buy?
- What is the value proposition you are offering them?
- How can you reach them?
- What is happening in the external environment your business will operate in?
- What is the competitive environment like?
- Who are your competitors?
- How much power do your customers and suppliers have?
- What will your business model be?
- what will you keep in house? outsource?
- how will you make sales? pricing? costs?
- how can you stop others copying what you are doing?
- What risks do you face and how can you mitigate them?
- What will your exit strategy be?
Get real data
Answering these questions (plus a few others) will give you a good idea whether your idea will be worth pursuing as a business or not.
Your answers should be based on solid market research. Gut feel is a good place to start, but you want to back that up with solid data before you invest your time and money. (Getting an MVP out there can be part of this process.)
With the feedback you get, make your idea even better
The magic is, that in the process of finding the data and interacting with your potential market, you will discover great strategies to tweak the original idea to make it even better and more profitable.
Having this thorough knowledge of the industry behind you will also give you a lot of confidence as you move towards launch.
Although this looks like a long list, it doesn’t have to take a long time.
Once you have run a few ideas through the opportunity evaluation process, you will find you do it quite quickly and are coming up with better and better ideas.
Is the idea a good fit for you?
The final thing to look at is whether the opportunity is a good fit for you personally with your current skills, resources, time, contacts and interests. Some ideas may be great ideas but not good for you.
I had this experience several years ago.
I was working on a business opportunity to help accountants outsource their basic bookkeeping tasks. I eventually realised, that although it was a reasonable opportunity, it was not a good fit for my skills and personality.
The opportunity evaluation process also showed me that the target market was not ready for this idea in Australia and I wouldn’t be able to grow the business to the size I wanted to.
So I moved onto the next idea after spending minimal time and money.
So why is it good if the idea turns out to be a dud?
Running an idea through an opportunity evaluation process and deciding not to execute it, is a good outcome.
You have saved time and money which might have been wasted developing a product or service that people don’t want.
You get to move on to another idea that has higher potential as quickly as possible.
You will also have learnt a LOT about what makes a good business and your next ideas will be even better.
If you’ve found this helpful, you’ll love my video series on how to use my proven process to create great business ideas that give you an unfair advantage. Click on the banner below to get access.
Good post Susan….the other good thing about having bad business ideas is that you don’t get so caught up trying to find the one great idea before giving it a go!
I find that most people I speak to looking to leave full time employment and work for themselves are trying that ONE great idea to get them out of the rutt. Try lots of things, just give yourself plenty of time (and have a full time job whilst you go….it helps the cash flow!).
You are so right Nathan!
Aspiring entrepreneurs really need to look at 100 ideas to find one that is viable and will be a good fit for them. That way they get a lot of practise sorting good and bad ideas and learn what a good one looks like.
And I definitely recommend having another income stream while you are starting up. The lead time to having to close your doors is too short otherwise.
I found your site through Twitter and I want to thank you for sharing such valuable info in your posts. I am a writer by profession but I have always wanted to start a craft business. My ‘problem’ is that I like too many crafts and I am reasonably good at many things.
Thanks to you, I’ve found the Idea box technique and I can’t wait to try it out – I’ve tried out mind mapping for years and it works but I wanted to try something new – for product ideas.
I really like the Opportunity evaluation bit in this post – this is something I really need to sit down and think about.
I have an idea notebook too (I thought I was the only one who collected ideas!). My question is – how do I zoom in on a limited number of ideas – let’s say 5 ideas that I can evaluate? If I have maybe 200 ideas – how do I eliminate the fuzzy ones without having to try them out one by one? How will I know which ones are worth studying?
Thank you once again and sorry for the long rambling comment 🙂
Thanks for your kind words. I’m glad you are finding the content useful. You have raised a lot of important questions.
The idea box is a great technique. Give it a go, and if it’s not working for you the way you expect, let me know. There are a few little tweaks you can do to get the most out of it.
I can’t stress enough how important Opportunity Evaluation is. I have written and taught a comprehensive course about how to use this process to evaluate your ideas which I am planning to upload to the site. If you would like to roadtest it for me before I make it public, shoot me an email and I will send you a copy.
In regard to narrowing down your ideas, I wrote a post a while ago that you might find helpful called Why doing what you love is not enough. I look at it this way, to have a successful business you need an Idea + Market Opportunity + Execution (you doing stuff). The market opportunity is the part of the formula that people usually miss out. You really need to know if people will pay for what you do/make and if the return is enough the justify the hours you are going to spend. You might also want to think about which ideas would be a good fit for your lifestyle and current resources, ie. an idea that will take $100,000 to develop is no good if you only have a grand in the bank. I like ideas that I can test in the market for little money to see if there is a demand. Here are a couple of other posts you might find useful:
How do you know if you have a great business idea
6 Free (or low cost) ways to test your business idea
Keep learning. You are on the right track. Let me know how you go.
Hope that helps. You’ve inspired me to write a longer post to answer your questions. Watch out for it!
Susan, thank you for taking the time to reply to my many questions so patiently.
I am trying the Idea Box technique and I’ve got some ideas but I would still like for you to share your tips on the technique and those little tweaks you mentioned 🙂
I went through each of the posts you referred me to – I can’t decide which one is the most useful- all have very valid points in them.
What really sank in to me was the “Why doing what you love is not enough” post. I think I should rate at least some of my ideas for the 3 criteria – market, passion and skill – that should help me eliminate some without having to study each idea too much. I must admit that I have never researched market opportunity until now (I never thought it was necessary for a small handmade business but I think it is now as the handmade market is getting quite crowded!). And it does makes sense to test ideas for little money so I think I will be doing that – I’ll try a little bit of everything and see how each sells.
On a side note, I have used Survey Monkey before to understand what type of jewelry my customers preferred to wear and it was such an eye opener! (Here it is if you are interested in the questions http://www.surveymonkey.com/s/BQRV6GL )Very useful tool that Survey Monkey!
I have bookmarked your site and I am sure to return for more 🙂 Thank you again for all your help!
I definitely think it is worth doing a market evaluation for a handmade business, or else you might find yourself working for 50 cents an hour.
At the very least you need to think about how long it takes you to make, what the material costs are, what hourly rate you want to earn and what price you can sell it for. If those things don’t add up, you have a problem.
Great idea to survey your customers! It sounds like you got a lot of valuable information. It’s a great way to develop your products because you learn exactly what your customers want, including things you hadn’t thought of.
I would love to road test your course! Thank you for offering me this great opportunity! I’ve sent you an email 🙂
Cool. I’ll be in touch
hello all, i had always wanted to be independent financially, and not have to work for the man all the time. so i devised a plan to start a cart business at the mall. i decided to sell LED watches(those watches that glow to reveal the time) i bought some and wore them to work and all liked them and were curious, so i proceeded to borrow some funds to start. in all $8000.00. i started and to my surprise was selling just one watch per day and sometimes none in two straight days!!. i was trying everything possible to attract customers but none worked. i then finally realized that i made 2 very important mistakes- I HAD LIKENED ASIAN TREND TO AMERICAN TREND. YOU NEVER DO THAT!!!.WHAT WORKS IN ANOTHER CONTINENT MAY CERTAINLY NOT WORK IN YOURS. secondly, i quit my full time job instead of working around it. as i write this, i am at my cart making plans on how to dismantle my equipments and have started looking for another job. i must tell you- i felt very bad and disappointed at myself at the beginning but have realized that mistakes sometimes need to be made in order to get it right the next time. i am a practicing christian and know that God is with me all the way. ill keep trying and will never give up but this time ill keep my job while trying because that’s the only hurt i feel in my journey. may God give every honest thinking business minds out there his blessings and i hope that someone will learn from my mistakes as i have learnt from this forum -NEVER QUIT YOUR JOB UNTIL YOU ARE SURE YOUR PLAN IS WORKING.
Thanks for sharing your experience Michael. I hope you get back on track quickly. It sounds like you have learnt some very valuable lessons. And let me tell you, every entrepreneur that is successful has made HEAPS of mistakes.
Hi Susan, really great framework. Thank you for this post!
As an entreprenuer your job is to identify problems, create solutions and check whether you can build a sustainable business model on it. The key activity in two first steps is contacting people – listening to them and later getting feedback. It is tempting to deep dive into building fancy websites or building technology, instead of making sure that the problem is worth solving and your solution is really addressing the problem. But that’s not the right way.
BTW – I love Opportunity Journal name, I was calling it Ideas Icebox, yours is definitely much better 🙂
Glad it helps Wojtek. Btw, I think Ideas Icebox is a pretty cool name too.