- When Insurance Will (and Will Not) Cover Your Side Hustle Property - October 11, 2018
- Beyond Facebook and LinkedIn: Social Media Strategies for Your Business - June 6, 2018
- What Goes In to Market Research and How Much Does it Cost? - April 13, 2018
A good idea and entrepreneurial spirit are certainly required if you want to establish a new business. But many entrepreneurs find out the hard way that the most critical success factor is opportunity. Great ideas arise all the time, but as a potential business owner, you must be able to translate your idea into a venture that satisfies a need and does so at a profitable price. Here’s a closer look at when good ideas translate into good business.
Turning your good idea into a good business
A good business idea is a concept with the potential to make money. It involves a product, service or combination of the two that can be delivered to customers in a way that is feasible and, eventually, profitable. Every successful business was sparked by an idea. Note that the idea need not be all that original or even be thought up by the erstwhile entrepreneur. Whether you or someone else is the source of the inspiration, the business idea forms the foundation of an operating business.
At inception, business ideas have no commercial value. They are often abstract, fuzzy and sometimes hare-brained. Other times they are very specific. Whatever the size and scope of the idea, you have no guarantee it will generate a profit in the rough and tumble world of business competition.
It thus falls upon the entrepreneur to evaluate a business idea for feasibility. To do so, you should be familiar with the important characteristics of an idea that has the potential to drive a profitable business:
- Relevancy: A good idea must be relevant to solving a problem or satisfying a need. Sometimes it fills a need that customers don‘t yet know they have, and part of the entrepreneur‘s challenge is to communicate that fact to the marketplace.
- Innovation: Something about an offering must be different from the fare already available in the marketplace. The innovative quality might be a better, cheaper or easier way to accomplish a task. A disruptive idea is one that is so innovative, it produces a new paradigm that threatens or creates whole industries.
- Uniqueness: What differentiates your offering from others? If your idea is too close to an existing product or service, you have to ask yourself how you would steal another company‘s market share. An existing business earned its slice of the market with its own ideas and has a head start in solving all the operational and financial problems that must be overcome to turn a profit.
- Focus: Will the market understand and accept your offering? You must be able to focus the market‘s attention on why it wants what you‘re selling. That means you must offer benefits that are easy to understand and appealing to a market of sufficient size to generate a profit.
- Profitable: The idea is not viable if it doesn‘t result in a profitable business. You need to understand how to monetize your idea and how much money it will generate. There are several roads to profit, including better solutions to existing problems, cheaper products or services, and higher quality or more prestigious offerings.
A good opportunity exists if your idea can be translated into an ongoing business that generates income and, eventually, profits. Budding entrepreneurs must research how to build and deliver their offerings such that the launch of a new venture has a reasonable opportunity to succeed. You must understand the market—supply and demand—for your offering, the costs for creating your solutions and the income you‘ll need to generate.
When good ideas don’t guarantee good business
Let‘s assume you‘ve come up with a great idea—a better mousetrap, a breakthrough concept, a lower-cost alternative to existing offerings, or some other inspiration that you think could be the basis of a successful business. If you want to get serious, you must first understand the differences between a good idea and a good business.
Your idea assumes that there will be sufficient interest in your offering to make the effort worthwhile. However, it might not make for a good business if:
- There isn’t a sufficient market for your offering
- There is a sufficient market, but existing competitors can quickly copy your idea and grab the market share you need to make your business work
- The demand for your offering is initially strong but, for various reasons, soon diminishes below the point at which you can operate profitably
- The demand for your offering is seasonal, and cannot drive a business year-round
- You can‘t produce your offering at a cost that’s low enough to be able to price it competitively
- Technological, regulatory or management obstacles prevent you from producing your offering with sufficient quality and reliability to maintain market share
- You lack the temperament, knowledge, skill or interest in running an enterprise—the business might be good, but not good for you
- You can‘t or won‘t delegate sufficient authority to keep the business from overwhelming your time and/or energy
- You cannot secure sufficient funding to launch your business, or to keep it running as you build toward profitability
- The business is vulnerable to too many risks to ensure long-term survival
Together, these drawbacks add up to a lot of cold water to throw on a good business idea. But if the idea is solid, and and you think you can overcome the obstacles, the business can still fly. After all, America was largely built by entrepreneurs who started small but made it big.