2.01 – Recognising the Power of a Good Idea
Almost all successful businesses begin with a good idea. This idea might involve a brand-new product or service, or it could introduce an existing product or service into a new niche. Great business ideas are born when someone finds a better way to make something or to provide customers with what they need or want. These ideas don’t need to be groundbreaking but must appeal to customers to succeed.
Writing a business plan is a crucial step in shaping an idea and putting it to its first test. The process helps identify the strengths and weaknesses of an idea, enabling necessary adjustments to make it as robust as possible. This lesson will provide tips and tools for evaluating personal resources, seeking advice, brainstorming ideas, conducting reality checks, and assessing the potential for investment, customer interest, and colleague support.
Recognising the Power of a Good Idea
Many successful companies started with a simple yet powerful idea. Facebook, Whole Foods, Toyota with its hybrid engine, Apple with its touch screen devices, Tesla, and Google all began this way. Even simpler concepts, like a website connecting people with accommodations to those seeking rentals, can grow into billion-dollar businesses.
Great ideas aren’t limited to major corporations. A young couple opening a doggy day care in a commuter town, a home brewer creating a popular local ale, or a caterer expanding to a fleet of food trucks can all turn their ideas into profitable ventures.
When developing a business idea, keep these five key characteristics in mind:
- A good business idea meets a real need or desire.
- It offers something new or at least a little different.
- It's grounded in reality, not wishful thinking.
- It can generate money.
- It's something you genuinely want to do.
Read on to start developing and fine-tuning your business idea to ensure it can withstand the marketplace’s harsh realities.
Knowing the Difference Between Passion and Profitability
Many profitable businesses owe their success to personal passion. A baker starting a successful bakery, a musician opening a recording studio, or a teacher launching a nonprofit tutoring service all share a common enthusiasm for their craft. While excitement and confidence are crucial for success, a realistic approach is also necessary.
Being excited about an idea doesn’t guarantee success. Personal passion can sometimes blind you to the hard realities of running a business in a competitive world. The bottom line for any for-profit business is profit. If you want to turn a personal passion into a successful business, you need to ask: Can it make a profit?
Use the following questions to test your idea:
- Does the idea meet a real need or desire?
- What’s new or different about the idea?
- Who are your likely customers?
- What do you offer that no one else does?
- How much are customers willing to pay?
- Who are your competitors?
- What’s the best aspect of the idea?
- What’s its biggest weakness?
- What will be the biggest challenge in turning the idea into reality?
- How long will it take to get the business up and running?
- Is this idea scalable, and if so, how?
- Is this something you really want to do?
Turning a Side Gig into a Business
Many people dream of turning their side interests into profitable businesses. However, it takes more than passion to start a successful business. Often, the surprise for new entrepreneurs is how little they know about the nuts and bolts of operating a business.
Consider the example of a home baker who started a successful bakery. She knew the craft and the equipment needed for commercial baking, but she wasn’t prepared for managing a staff, which almost derailed her business.
If you’re thinking of turning something you love into a business, ask yourself some basic but important questions:
- What is your product or service? Be specific.
- How will you make money? Be creative and specific.
- How will you reach your customers or clients?
- Where will you conduct your business?
- Will you need employees? How many? What jobs will they do?
- What equipment will you need to get started?
- How much money will you need to get up and running?
- What are your monthly operating expenses likely to be?
- How much money will you need to earn each month to be successful?
- What are your biggest strengths for starting this business?
- What are your greatest weaknesses?
- How can you turn those weaknesses into strengths or work around them?
- Who are your competitors? What are their strengths and weaknesses?
- What potential risks does this business face? How can you minimise the risks?
Planning Ahead: Great Ideas Take Time
Most ideas require time to take off. Musicians need to find gigs, accountants need to set up an office and find clients, and inventors need to arrange for manufacturing, distribution, and marketing. These processes take time, and while the clock ticks, expenses continue, often without any revenue.
Being realistic about how much time your idea will take and how much you’ll need to spend before revenue starts is crucial. Detail your goals and the major steps you’ll need to take, often referred to as mileposts, to achieve success. Then establish a timeline for reaching each one, creating a runway diagram for your business.
Checking Out the Competition
Most new businesses face existing competition. One way to test your idea is to see how similar businesses are doing. You can gather information by:
- Checking websites of similar businesses for product and service information, including pricing. Online customer reviews can offer invaluable insights.
- Searching for business articles about your planned business. Ensure the information is current.
- Investigating how similar businesses market their goods or services. Analyse their online and media presence.
- Exploring local business organisations like Chambers of Commerce for information about your business sector, its major players, current conditions, and untapped opportunities.
- Talking to prospective customers to understand their needs and preferences. If planning a retail business, observe customer behaviour in similar stores.
By following these steps, you can ensure your business idea is well-founded and has a higher chance of success.
