A question I get asked very frequently by young entrepreneurs is:
“How do I know if my business idea is any good?”
I thought today I would share some of the advice that I usually give.
1) You Love It
Almost every famous entrepreneur that we’ve profiled said that if you go into business just for the money, you won’t make very much of it. You have to pick an industry that fascinates your endlessly. Money usually doesn’t come right away so if you don’t love what you’re doing it’s going to be hard to stick with it when the times are tough. Also, being an entrepreneur allows you to do whatever you choose – why not choose something you love to do?
2) You Have A Customer
The best way to start a business is around a paying customer. Too many new entrepreneurs start up with great ideas but no clients. Find a way to make money as soon as possible. Your vision will likely be way bigger than what you’re doing to start off but if you don’t have customers and money coming in then you won’t be around in business for very long. Paying customers also give you feedback on what to improve on which will help you get new ideas to grow your business.
3) It Doesn’t Cost Too Much To Set Up
Some businesses are very capital intensive while others don’t need as much to get going. Unless you’re already independently wealthy (which I’m assuming most startup entrepreneurs are not!) you don’t want to tie up too much of the money you have in starting up. A new business can quickly burn a massive hole in your wallet and the longer it takes you to get to profitability, the less likely you will be able to stick with it. If you’re planning on entering a capital intensive industry, find a way to start smaller by either outsourcing or offering a related service to build up your cash flow before making any large investments.
4) You Can Do It All Yourself Or Have A Team In Place
There’s nothing worse than starting a new business and not knowing how to succeed in your industry. I’ve seen countless entrepreneurs set up online businesses, for example, and not even know how to edit a website. You can’t have a hope at success unless you either know how to run your business or have people who can do it for you. Most startups don’t have the money to go out and hire people right away and, in my opinion, if you don’t know about the industry you’re getting into, you should learn about it first before diving head into starting a business. That’s why so many restaurants fail. People think it’s easy to be a restaurant owner, underestimate the costs and time involved, and end up folding.
5) You Have Something That Sets You Apart
If you’re selling the same product, the same way, to the same customers as your competition then you don’t have much of a chance of success. It’s difficult for new entrepreneurs to compete on price alone and it’s much harder to maintain price as a long term sustainable competitive advantage. You need to find another way to stand out and justify a respectible price for yoru customers. Are you providing extra service? Do you have a unique product nobody else sells? What makes you different from the rest? If you don’t have a good answer then you don’t have a good business idea.
