Guest post by Vincent Serpico, CEO of Founders Workshop in Phoenix, Arizona
Entrepreneurship is strong around the world and will continue to grow, especially in the United States. Even during the current COVID-19 crisis and economic recession, many enterprising entrepreneurs are finding and pursuing new business opportunities.
Does that describe you, right now?
Do you have an idea (or several ideas) and wonder, “Is this a good business idea that is worth pursuing?”
I have had the privilege of working directly with hundreds of entrepreneurs over the past 20 years as a software developer, technology leader, business owner, and angel investor. I have seen ideas that look bad on paper make a fortune, while other ideas that looked great on paper completely flop.
What is the difference between business ideas that succeed and those that don’t make it?
Based on my direct experience with hundreds of tech start-ups, I have concluded that the most important factors in turning a good idea into a great business are these five criteria:
- You can reach a market
- that has a problem
- that is willing to pay
- you
- for the solution
Let’s break each of those down.
1. You can reach a market
Our company can personally reach the tech startup founder market in Phoenix, but I would have a very hard time reaching the government, military, or large enterprise market. So, while I may have a great idea for Fortune 500 CFO’s, I have no way (as of now) to reach them.
When my idea is related to the market that I understand and have access to, it is much more likely to succeed. I know how to reach the startup founder community; it’s a community that I have deep ties with via my business, my relationships, and even my investing. That means I also understand and “get” tech founders, which makes the market accessible for me to reach.
So, ask yourself: “What market do I have access to and what market do I know?” If you can’t reach the market, your better mousetrap won’t turn into a real business.
2. that has a problem
You may be able to reach your market, but if those potential customers don’t have a real problem, then your solution is just noise.
Where do you look to find a real problem? Usually, you find them where no one else is looking. The obvious problems are being solved by everyone. The problems people don’t know they have been being solved by visionaries.
To quote Steve Jobs (who also quoted Henry Ford): “Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, “A faster horse!”’ People don’t know what they want until you show it to them.”
3. that is willing to pay
Asking someone… anyone… to give you money is a big deal. You are effectively asking, “Limit your future opportunities by giving me some of your purchasing power now.” Consumers respond to your request based on “lizard brain” emotions.
For example, I would not be willing to spend $200 on a lamp, even though that lamp will provide essential lighting for years to come… but I am willing to spend $200 on a dinner for my family, even though that dinner will last 1 hour and there are other alternatives to feeding my family.
Understanding the predictable irrationality of why people buy is a life-long, fascinating study in it of itself; but suffice for this article, the takeaway is that most people buy for reasons that are not rational, and usually are seeded deep in the “lizard brain”.
4. you
Why would someone be willing to buy from you versus your competitor? Or, if you have no competition, why would they buy from you at all? Will they buy from you based on reputation and referrals? Will they buy from you because you have created a compelling argument via great marketing? This list goes on… but consider WHY someone would buy from YOU?
This is related to the “Can you reach the market?” question. Being a domain expert in a market creates credibility and, by extension, helps create access to the market. Where are you a recognized domain expert where you have market ties and credibility with your target customers?
5. for the solution
How does your product or service solve the problem better, faster, cheaper, or with higher quality than existing solutions? Play devil’s advocate and try to sell your customer an existing solution or work-around. If you can make a compelling argument for an existing solution or workaround, you may want to rethink your own solution.
Apply these five questions to your business idea:
- Can you reach your market? If not, what do you need to reach and/or understand your market better?
- Does the market have a problem, either one they are aware of or not? If your market has a problem that they are not aware of, your solution will be perceived as a paradigm shift
- Is your market willing to pay? Some markets are more cash-flush than others, while some markets have deeper problems that need solving than others, and are willing to pay to solve their problem.
- Can “you” be perceived as a creditable and trusted source to sell your market the solution to their problem? What traits does your market value for when buying from someone?
- Do you have a better solution than the existing solutions? So much better that your market would be willing to at least try your solution over the way they already solve their problem?
Once you can answer all of these questions, you will be solidly on your way to bringing your idea to life.
One of the great things about being a founder is seeing your idea come to life, and change the lives of those that benefit from you and your vision. A truly visionary idea can change the course of history and spawn entirely new industries.