People generally have 2 issues that prevent them from starting their business: finding a great business idea, and not knowing if their business idea is good enough. Is a great business idea really necessary to succeed though?
I’ve heard from a lot of people that they don’t know whether their business idea is great enough, and it’s one of the bigger problems that they face when starting a business. In fact, it’s so paralysing that it prevents them from actually moving forward. Well, it doesn’t have to be the case.
First of all the good news: No one knows when an idea will be a great business idea. And even if it is a great business idea, you might not have a great team or your execution might be off. These are much more important components to scale up your business, and in a CBInsight study that surveyed 101 startup failure post-mortems, startups faced at least 19 other reasons why they failed. So there’s a lot of variables in determining whether a business succeeds, and it’s not just dependent on the business idea.
Now the bad news: while not having a great business idea isn’t the deal-breaker for businesses, there must also be a certain level of hygiene. It doesn’t mean that any business idea will cut it. You’ll still need to make sure that your idea makes sense. What do I mean by that, and how do you know if an idea makes sense? To me, a great business idea typically has a few components: 1) Target Audience, 2) Unique Selling Point, and 3) Profitability.
1. Target Audience
This is an idea of who your ideal buyer demographic is. Let me give you an example: If you’re selling pants, targeting males and females from the age of 6 years old to 80 years old might seem like a really good idea to you, because you know that all these people can potentially buy pants. After all, the more, the merrier, isn’t it?
Here’s the thing though: it’s actually a really terrible way because it’s such a broad range that you don’t have a focus at all. When you don’t have a focus, you’re not remarkable at all to your target market. You’ll become invisible to them, and there’s no reason for them to choose to buy from you over anybody else.
If I were to sell pants, I would make sure that I have a very specific set of people that I want to appeal to. If I target the mass majority, there are so many different kinds of people that I’m going to face a whole myriad of varying preferences.
Think about it: people who are 6 to 80 years old will like pants that are skinny, baggy, made of denim, made of cotton, and so on. It’s a mind-boggling amount of options to cater for, so that’s not a demographic that I want to target when I first start my pants business.
What I’d do is to find some targeted segment – say, fashion-conscious young males from 20-years-old to 35-years-old who have an office job and go to the gym. That’s a very specific market, and you know that when you speak to this group of people, you can have a very targeted message to them because you know who they are, what they’re going through, what they look out for, what is important to them, and so on.
And this leads us to our next point.
2. Unique Selling Point
If your plan was to sell pants that look good at a good price, then I think it isn’t a very good business idea. There’s nothing that differentiates you from another competitor. Almost every company that is selling slacks, jeans, and all other kinds of pants have a plan that fits that description. What is going to be your unique selling point that makes you stand out from all these people?
A much better differentiation is to identify the needs of your target audience. For example, let’s go back to our target audience of fashion-conscious young males who have an office job and go to the gym. If you’re targeting this group of people, then perhaps your differentiation is good-looking pants, tailored to the wearer’s exact dimensions, that uses a material that supports someone’s active lifestyle. You’re not going to want to have baggy bags made out of denim, you’re going to want breathable, stretchy material that won’t look out of place in an office. This creates a difference for your business and sets you apart from most other people who sell pants.
This is known as your business’ unique selling point. This is especially important when you consider the next component of a great business idea.
The third factor to consider is profitability. The price that you sell your products for must be something that people are willing to pay for. At that price, it must also be profitable for you, after deducting all your expenses. The market will not pay more for something that they can get cheaper elsewhere for the same perceived value. That’s why a unique selling point is so crucial.
If you’re selling a commodity, then people have a certain threshold of how much they’re willing to pay. The only way that you can command a premium is if people obtain a corresponding increase in value. A great example of market pricing is what happened with mobile phones. When Nokia sold its phones, people had a price point that they were comfortable with, which was around $500 per phone. However, Apple has since then completely revolutionised the market and introduced smartphones. And people were willing to pay a lot more for smartphones. These days, smartphones go for more than $2000.
Make sure that the market would be willing to pay the price that you’re going to need in order for your business to be profitable. Otherwise, your business will not survive.
Do You Have A Great Business Idea?
While you don’t need to have a great business idea, you do need to take note of these 3 components in order to ensure that your business has a good chance of succeeding. If you have your customer in mind, this is much easier to achieve. Find out exactly what their pain points are and provide a solution to a real existing problem, and you’ll have a much higher chance of success.
Let’s continue to have discussions through the comment section down below. I’d love to hear your thoughts and answer any questions that you might have.
- How To Sell Your Business: Copy The Precise Steps I Took To Exit With $30M
- Built To Sell Book Summary
- 5 Astonishingly Simple Steps On How To Find a Business Idea
- How To Write Mission And Vision Statements For A Company (With 6 Inspiring Examples)
- How To Scale a Business Fast By Focusing On The 3 Proven Fundamentals