It’s exciting to have a great idea for a new business, right? You feel passionate. And your hope is that scores of customers and potential customers will feel the same as you—and they just might.
But hold up. Beyond that aha! moment and passion, that great idea of yours needs ‘legs’ in order to carry it into a sustainable, profitable company that produces revenue.
With so many businesses that barely make it through their first year—research suggesting business failure rates as low as 30% and as high as 95%, depending on the number of years, industry, and criteria for what is deemed failure—more entrepreneurs need to think about whether they have a good business idea or a winning business idea.
There are statistics that say that there are about four people in the world thinking of the exact same business idea that you are thinking about right now. Remember that there are millions of ideas worth thinking—and worth making into a business—but the drive, the money and the ability to really make your idea into a business is a whole other subject.
When I started my online invoicing company there were 30+ other companies just like mine. I had to stand out and make my business a winner.
To provide a framework for determining what defines a winning business idea over just an okay business idea, here are a few factors that you can use as a baseline:
- Solves a specific problem for a sizable consumer or business segment: Consumers and businesses are primarily interested in those products or services that can fix something for them. For example, your idea has to solve some type of problem where the result is that the customer will now have the ability to save money or time, or the product or service makes life or work easier and more convenient. It doesn’t necessarily have to be a global-sized problem to be a winning idea. Most highly successful businesses recently have involved a fairly simple problem that just happened to be really important to the many people who have that particular need. Companies like Airbnb, found a solution for alternative accommodations for travelers that also helps homeowners make extra income. This is a prime example.
- Offers enough value that people will actually pay for it: In an environment where consumers and businesses have raised their expectations to new heights, the appetite for “more or better” can be difficult to satiate. One of your toughest factors to achieve will be proving your product or service has value in the eyes of your target audience. Will your customers actually be willing and even excited to pay for the business you have come up with? While it seems like we would all just keep making coffee at home, Starbucks has proved that we will willingly pay a significant amount for a cup of coffee or tea.
- Attracts interest from investors and talent who want to be a part of it: No one wants to be part of something that they see failing, so when you find investors, business partners, and talent that are eager to jump on board with your business idea, that’s a good sign. Your new business just might be a winner. When you have people who are passionate about your idea and what you want to do, this helps improve speed, and adds efficiency in bringing that business idea to market and building out your idea into a company.
- Passes many tests with flying colors with strangers—through focus groups, trade shows, or some other public forum: You need to test out your product or service with strangers, not just people who already know you and believe in you. Strangers will give you a more objective picture of whether you can really do something extraordinary with your business idea. You can create a focus group or take your idea to a trade show to get the kind of feedback you need. Here’s the biggest and hardest suggestion—if people at the trade shows or focus group don’t like your idea, can’t understand what you are talking about, or see zero need for your product or service —stop. It hurts, but stop there.
- Delivers something new that no one else is doing or does it in a way that others have not thought of: Your research should include patent research to ensure no one has the market cornered on your idea and that no one is in the process of already developing what you just dreamed up. Look at the entire competitive landscape to see if you have something truly disruptive that can surpass what others have already delivered in terms of a product or service. You many even want to take the time to try out what the competition has to offer and see how good their product is and if you can beat it. Go to industry trade shows and get a feel for what people are making and thinking about. Begin addressing the marketplace to help gauge the viability of your own business idea. Many companies had made cellphones before, but nobody made a cellphone quite like Apple did, and the competition certainly didn’t have The Fruit’s innovative advertising or presentation of products.
- Is the product or service easy to understand and use in terms of its functionality: If you can explain what your product or service does in the simplest terms and base that description on what it can do for the user, then you have won half the battle in selling it to your target audience. However, if you can’t explain it to your audience simply and easily? Maybe your business idea is too complicated and will never resonate with your new customers, which means it won’t sell.
- Has the ability to go the distance with a fickle audience: Your product or service has to be more than just a novelty item in order to make all the effort and money that goes into creating a business worth it. While your idea and product may be made to solve a problem, consider something that will be an ongoing need. Will a customer want to keep buying what you are offering for years to come? This question relates to the perceived value mentioned above.
- Shows signs of sustainable profitability: Determine the costs to bring this idea to market and the costs to continue making this item. What will the pricing of your product or service need to be? Is this product or service scalable? Is your idea in alignment to be able to yield a sustainable profitability for you? You will need to ask others who make and sell something similar to your business idea to get the financial guidelines to help you determine if you will be able to achieve the profit margins that define a winning business idea.
Remember the winning business idea is just the beginning. The harder work is yet to come to ensure that you can make it with your great business idea and that you will be able to achieve all of the suggestions on the above mentioned checklist. If this idea doesn’t fly right now, don’t consider yourself a failure.
You are destined for success because you have taken the time to research, understand, and thoughtfully consider an idea to make sure it’s a winner. This process will serve you well with every good business idea you have until you find the one that works.
John Rampton is an entrepreneur, author and contributing writer for Forbes, Entrepreneur.com, Inc., and The Huffington Post. Don’t miss his recent post on our beloved former CEO, Dave Goldberg on Business.com.
Reach out to John with questions here or leave a comment below!