The short answer is: if you would have to spend the rest of your life regretting never having pursued one specific idea, go ahead, and start your business because life is too short for regrets. Unfortunately, not every decision is as straight forward because sometimes the thing you would be regretting the most is never having tried any of your ideas and there is no specific idea that you have set your heart on at the moment. Here are five ways to find out whether your business idea is a yay or a nay.
1. What Do Competitors Advertise?
You can go around and ask potential competitors what they think their strengths are. The issue with that is two-fold: a) they might not respond at all and b) what they say might not correspond to what their numbers are saying. One easy way to find out what sells for them is to check out their online ads. Whatever makes them most competitive in their given market is 99 percent of the time literally spelled out in their online text ads.
2. Can You Make it a Purple Cow?
The idea behind the purple-cow-concept is to offer your product and service in a way that would make it so remarkable as if it was a limited edition. Remarkable is a great term here because it is defined as “worthy of attention.” If you cannot make a remarkable version of what you are offering, I would say to cross this business idea of the list because if you do not stand out, nobody will buy. If you are asking for a concrete example of implementing the purple cow concept, take at Tim Ferriss’ 4-Hour-Work-Week book cover as an example. He split tested the cover by putting the book next to other books with a variety of covers, watched what people ignored and what they picked up, and then made a decision of what the book cover would look like. He chose what was “worthy of attention.” He also split tested different titles of the book with Google AdWords ads and chose the one with the highest click-through-rate which is a common technique to split test business names.
3. Competitive and Perceptual Positioning
It is time to go back to the drawing board. Use a competitive positioning matrix to figure out where your brand or business would rank compared in the current industry. The traditional perceptual positioning metric looks at how a brand is perceived, not how companies are perceived. This differentiation is extremely important because a company can carry more than one brand that are perceived very differently from each other. If you only carry one brand, then you can, of course, use the perceptual positioning metrics for the company as well. If you have a hard time thinking of the respective perceptions for your perceptual positioning matrix, think of the five biggest players in the market and find one word for each that best describes how you think people feel about the brand. If feelings are not your thing, think of a typical item that you associate with the company. For instance, for Nike it would be the running shoes, for Starbucks it would be coffee in a paper cup and so on. Then find terms that customers would use to describe the item. These are just examples to illustrate the concept, the perceptions of the matrix change based on what industry or brands you are looking at and of course based on what you are planning on offering.
4. Likelihood of Successful Execution: Based on your analysis from point 1-3, how likely is it that you will be able to make your business idea a reality? There are several things to consider when determining the chances of success.
Aspects to consider include but are not limited to:
a) Up-front costs
b) Funding needed yes/no/how much/when
c) Time commitment
d) Core competency needed
e) Dependency on others
f) Market size
g) Level of competition
There are very few niches nowadays where the level of competition is low. One of the things I feel is most overlooked is the question of why the level of competition is high. It is not enough to figure that you are competitive and able to handle the competition. Handling the competition is not the game. The game of entrepreneurship – or at least part of it – is beating the competition. To be more successful than others, you first need to know how the industry works. One of the ways to find out is by using Michael Porter’s Five Forces. The easiest way to understand this model is with examples. Think of it as a microenvironment that surrounds the company, almost like an ecosystem that the business lives in.
If you are launching a protein product that is targeted at people who are going to the gym, there is an enormous threat of new entrants. Hundreds of new protein products come out daily. You can also use this model in relation to the perceptual positioning matrix. The threat of substitute products or services can be the perceived level of product differentiation. Think of bottled water for instance. The water in the bottle is the same everywhere, it’s clean drinking water. Nonetheless, you will surely never see your dad pick up a bottle of Skinny girl water because the perception is different than from, let’s say, Evian. If you were to launch bottled water for athletic women ages 15-25, you would be a substitute threat to the Skinny girl brand. The bargaining power of customers refers to price sensitivity among other things. As seen in the example with the online shoe store, buyers can be extremely sensitive to prices and simply go for the lowest price. This is one of the characteristics companies like Walmart count on for instance.
5. Impact Your Lifestyle: Great business ideas have the ability to take over your life. The trouble with being a passionate entrepreneur is that you do not really mind. Beware of what I call golden cage syndrome. The golden cage is a profitable business that you cannot get out of because, well, a cage requires the bird, and you are that bird. It is a good cage to be in because the business is making money, but it requires you to be there all the time and is not worth a whole lot without the bird in it. It is difficult to be bought at this point because the business does not work without you. You cannot change the world in a cage anyway, so why start building one in the first place? Making a difference and living the life you want are not mutually exclusive, so go for what is best considering your personal happiness also.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath