Finding business ideas and generating business is one of the most stimulating, rewarding, challenging and fun things a person can do and not only is entrepreneurship very beneficial for oneself but it is also the very foundation that wealth and prosperity rests on. Yet the process of finding and developing business ideas that works for a specific person is a sometimes complex and demanding process that can be hard to understand and cope with.
Below I will share some of my thoughts and experiences about how to find good business ideas, how to approach them, how to analyze them and some common mistakes aspiring entrepreneurs often make.
This article was updated on December 4th 2017 with paragraphs about how to use competitive- and consumer-intelligence to find new business ideas.
Finding a business idea is something that many aspiring entrepreneurs struggle with. The dream of becoming a successful entrepreneur is very common in our society as entrepreneurship is not only associated with wealth and individual freedom but the entrepreneurs have also become heroes in the contemporary society, role models for millions of people and are being perceived as being in the front line trenches of civilisation development. The numbers of successful entrepreneurs are seen as the difference between successful and less successful societies.
The process of finding good business idea can take many forms. Some people study other companies and try to mirror them or copy their idea on a new market. Others look at trends in societies and the changing demands and wishes of the populations in these societies. There are also opportunities available by looking at successful, unsuccessful companies too, and try to find ways to do what they do but only a little bit better.
Below follows a more detailed analysis of how business ideas can be found and developed.
Disrupting an existing market has so far proven to be one of the best paths to success and fortune. By changing the value proposition for an entire market the opportunity to amass a great fortune is enormous.
By disrupting a market your business should provide solutions that are groundbreaking and address the challenges faced by customers in a totally new way, a way that will disrupt the ways of the market and have a major impact on the current actors on that market.
Finding out which industry is the most ready to be disrupted is a challenge that aspiring entrepreneurs struggle with all the time. After all, finding a business idea that disrupts the market will make you superrich.
Many of the Internet giants have achieved success by building new online businesses that are very disruptive and place information and services previously time consuming to find or use right at our fingertips. The old argument that everything interesting has already been created has been proven wrong time after time. Suggestions for new online businesses therefore always include anything that disrupts the supply chain and make goods and services cheaper to deliver and consume, Amazon is an excellent example of such a venture.
The size of the market you address is something investors will pay a lot of attention to. The potential market size is what determines the potential of your business idea and the potential number of customers? Needless to say is that the more customers you can reach the better it is.
Further, it is not easy to build processes and organizations that have a capacity to be truly global, which increase the potential of your business – if you manage to overcome the many hurdles that stand in the way for a truly global organization. Different countries have different regulations, cultural and wealth differences and you must adapt to these differences to be successful.
Scaling a business basically means that the more units you produce the cheaper the production of the last unit produced will be. This means that businesses that produce many units at an ever lower marginal cost have a much greater chance of building value for its customers – by being able to lower the sales price – and for its investors by providing a larger and larger profit for each unit produced.
Scale economics is a chief challenge to businesses in the service industry. Surely they can create support systems, knowledge databases and centres of excellence to lower the production cost but it only goes so far. Factories can build larger and larger production lines and increase their purchasing power to reach large scaling capacity but they also face fixed costs that are hard to scale; research and development being one, capital costs another.
The current leaders in production of scale are the Internet based companies. Adding one more user presents an extremely low cost – the servers – which mean that Internet based companies can expand fast without suffering from the investment needs in production, which historically has challenged businesses. Add to that the opportunity to go global without hampering regulations - but for government censorship in a few authoritarian countries - and you have a near perfect economy of scale. These factors put together are the reasons so many of the richest persons today own Internet based companies.
The list could be expanded by many more examples. One thing they have in common is that they changed the logistics of a market, a product or a service while at the same time taking advantage of economics of scale. We can say with certainty that the new wave of entrepreneurship will only continue to grow in strength.
If you find it hard to come up with a business idea of your own or want to lower the risk when you start a business you might want to consider a franchise. There are many benefits of owning a franchise instead of operating your own business.
Some of the benefits to owning a franchise compared with a regular start-up typically are:
How much it cost to start a franchise varies greatly, many franchises have very high starting fees and require large up-front investments but there are many low cost franchises too. Many small franchises are possible to have as a side business and they can make as much as $1,000 to 2,000 per month once they are up and running.
One of the best things with starting a franchise is that you can find extensive material about them and from the material you can decide what are the best franchises to own depending on your interest. There are enormous amounts of websites dedicated to listing and reviewing franchises and they are all very easy to find.
My own company, Fryday, operates as a low fee event franchise – fees range from $20 to $100 per month - where the franchisee has the exclusive rights to his or her city and manage Fryday’s events there.
Cases where people came up with a unique business idea all by themselves are extremely rare if they exist at all. If you think about it most businesses are working with services and products that existed before but are done better and more efficient now or they solve the same or a similar challenge for clients. You might object and say that airplanes, cell phones and computers were total novelties when they came around but actually they were furthering needs that humans had throughout history: Transportation, communication and calculation. The new ways of solving these challenges were just better.
The question of where you can find a good business idea has been asked as long as humans have been doing business, the answers how to get that idea have been many and some has produced great results while others have been less successful. First you can hit the Internet and search for “good business ideas”. This is of course an obvious answer to a complicated question but nevertheless a good way to go about it.
Second, you can look for company statistics and try to find companies that are growing fast, are working in new ways, and are extremely good at marketing, sales or other core parts of any business.
Third, look up success stories and try to find out how those companies started and what was their initial advantage. Companies that are already huge are looked upon with aw but how did they really take off? Did they take off by themselves or did they get help from government regulations, monopolies or other “cheats”. If you can identify companies that took off in a way you identify as possible for you to address that is a great comfort.
Fourth, the simplest way to find a good business idea is to copy somebody else’s business and do it better.
Fifth, travel to foreign countries and look at the society there. What do they buy? How do they live? What is important for people there in terms of comfort and status? Can any of these observations be translated into business in your home country?
Sixth, find companies in your own market that are doing good or bad. What might be the reasons these companies are doing good or bad? Can you do it better?
Competitive intelligence, CI, is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers in strategic decision making for an organization.
When you are looking for business ideas it can be very useful to use competitive intelligence as a tool to find these ideas. By looking at other companies, organisations, countries, persons, cultures and breaking down their strengths, weaknesses, innovations, tastes, development etc you can find products and services that might interest consumers at your home market as well as many products and services better produced in the foreign market than on your own.
Further analysis of the products and services you find to be most interesting should make it possible for you to find at least a few qualified business ideas that you can develop further.
Speak with friends and colleagues. Invite people for focus group sessions.
Using consumer intelligence to find a business idea is very similar to using competitive intelligence. Start with speaking with friends, family and colleagues and ask them how they perceive their daily life, what they spend time and money on and what they would like to improve in their life in terms of services and products. Once you have gathered some opinions and information you can add a bit of your own analysis and creativity and surely you will come up with a few directions of new ideas.
When you have few seeds to new ideas you can act in a more formal way and invite a group of average citizens to a focus group where you can ask them about their preferences related to the areas of the business ideas you are considering. The focus group will most likely help you move forward with your idea generation process and you might even get as far as being able to make a decision on what business idea to pursue.
Focus groups are often used by established companies in their market research when they are trying to understand how new consumer products will be accepted on the market and what prices these consumer products should have.
When you have some good business ideas you need to analyze them to see if they fit you and your market.
What are the actual challenges faced by people and companies where you are located? Can you provide certain goods or services cheaper? Will the business ideas you have add something entirely new to the market? Is there are craving for luxury goods? Are people actually willing to pay more for goods and services they already have because they are better or more comfortable? Can you produce something in your home country and be competitive on a foreign market due to quality or price? Are you looking for a way to make you rich or to have a nice lifestyle and being in control over your life?
How much do you have to spend to produce the new product or service? Do you need a business partner? How will you find a good business partner? Will it take forever to develop the product and cost more than you can possibly afford or get investors for? Are you willing to live like a Spartan for years while bootstrapping your company? Are you bringing something onto the market that will require enormous marketing to change the behaviours and feelings amongst your presumptive customers? Some things that work well in one country can be a total disaster in another market as people might not have the spending power, knowledge or there is a lack of infrastructure. It is hard to sell sand in Sahara so to say.
Finally and often forgotten when looking at business ideas: How do you really earn money from this business? You are not creating a business for charity after all but should be able to make a living from it, pay employees and deliver profit to the owners. Starting a company is rather easy, developing the product or service harder, finding clients much harder and making a profit from this complicated system of organization, product development, marketing and sales is by far the hardest part. Every single detail has to be in place and it has to be in place every day for a long time.
It is great fun to be in business and it is a great feeling to dream about success. Waking up on a Monday morning and spend your week trying to solve what appears to be unsolvable problems while at the same time being haunted by grumpy employees and customers is, on the other hand, something that can drain anybody.
But with the right spirit and a long-term perspective the dream of freedom, riches, recognition and a brilliant lifestyle make it totally worth going for. And that dream comes closer and closer for every Monday morning you go to work with a big smile and the confidence that you will make it because that’s just the way it is.
There are many ways to build a small fortune in a secure way and it is most often achieved by addressing a local market and improving something there, adding a product or service not yet present and – most important – working all those long hours that are required to enter and succeed on that market.
Maybe this is not so groundbreaking but it is a sure way to get small-time rich if you are willing to put in the hours. Most businesses are actually built this way and in time some of them become really successful.
Here is a short list of some business ideas for a person with limited capital:
First you should rest assured that you are not the only one who has faced this challenge. Many of the great businesses around today have been built from scraps and there is even a theory behind it called bootstrapping, and it has many advantages.
Bootstrapping means starting a business without external help or capital. Such start-ups fund the development of their company through internal cash flow and are cautious with their expenses. Many successful companies started with bootstrapping, examples include Apple, Microsoft and Dell.
Bootstrapped start-ups grow by reinvesting its own profits, this financing approach allows owners to maintain control of their business and the value created belongs to them alone.
Working with your own resources means that super-efficiency is necessary. You become more aware of the costs involved in the day-to-day running of the business and will operate your company on a ‘lean’ business model, become resourceful and develop a versatile skill set – all attributes of a successful business and a successful entrepreneur.
The founders of a bootstrapped company are their own bosses and are responsible for all crucial decisions in operating and growing the company. This can ensure that the business is moving in the right direction without any investor influence and investors and other external parties might have very short-term priorities that are not always good for the long-term prosperity of the company.
The fact that raising external finance – a task that can be very stressful and time-consuming - is not an issue for bootstrapped companies means they can concentrate on the core tasks of the business such as sales and product development, thereby increasing the likelihood of creating a profitable business.
Building the financial foundations of a business on your own is a huge attraction to future investors. Investors, such as banks and ventures companies are much more confident funding businesses that have a solid foundation and the total commitment from their owners. Bootstrapped companies run a 50-50 chance of going bankrupt during their first five years but once they pass that threshold they are likely to thrive for many years going forward.
To become a successful entrepreneur a person has to have many character traits that are not common among the general population and he must also be able to withstand some of the feelings and behaviours that are generally what society consider signs of success. Here is a link to an article that addresses some typical mistakes that can ruin your business if you are unlucky or not careful.
If you are afraid to put yourself in front of your potential clients by bringing your goods to the market you have already failed and if you need investors but are afraid they will reject you it will hamper your business’ growth and development. If you are risk averse you should probably avoid running a business altogether.
If you have to show off and express your success through luxuries and other symbols of status it will cost you resources you could have and probably should have invested in meeting the needs of your clients and this can cause your business to fail. Vanity is a deadly sin and it can break your business.
If you feel you are too important to deal with and work with the simpler tasks of your business operation and therefore hire people to do this work for you it will consume resources you could have and should have used to build the foundation of your business. You will also miss out on important knowledge about your business, which increase the likelihood of you making mistakes and these mistakes can cost you clients, effectiveness and efficiency.
Entrepreneurs who cannot decide on what to focus on but have side jobs, continuously start new projects and launch new products and services despite not yet making money on any of them will likely burn the capital they have before having operational profits and therefore they might risk bankruptcy due to a very bad cash flow. Doing everything half good is exactly the same as doing nothing really good at all.
It takes an enormous effort and usually much longer time than initially expected to build a successful business. The stories about immediate success that have become urban legends are based on cases so rare that there is a greater chance of becoming rich by buying a lottery ticket. Entrepreneurs who are unwilling or unable to work hard for a long time even when it feels like the business is about to go under are not likely to become successful but rather likely to lose speed and succumb due to inactivity.
Having a partner in a business can be a beautiful thing and make it possible to realise your dream much faster and better than you would have hoped for but there are also pit-falls.
What are the things you should look for in a potential business partner? Make a solid background check before you go into a partnership. There might be things there that you are not aware of with the potential partner. Does the person really have the knowledge he state he has, has the person had any entanglements with the law or with previous business partners? Does he or she have the same ambition and work ethic as you have?
Would you invest in a company without a proper due diligence? Probably not, so why take in a partner without looking into that persons past? Banks, investors, suppliers and clients might run for cover if they discover that your business partner has a questionable background. You need to find out before anybody else does or your mistake can cost you dearly and even ruin your business.
It is not a good idea to keep a business idea a secret. You need others input and your way of executing will make it very hard to copy your idea anyway. If this were not true there would almost never be any new ideas.
Secrecy is an often-discussed topic related to start-ups. Many aspiring entrepreneurs are dead afraid to share any information about their precious business idea with anybody out of fear that their brilliance will immediately be taken advantage and their plans will be put into action by other, evil, people.
In reality most people and companies couldn’t care less about you and your idea as long as you haven’t reached a single milestone or – crucially – communicated the idea to anybody. You need to share your idea with people to get their input and resources to launch and become a successful entrepreneur. Certainly you don’t need to blast out information about your most important methods, partnerships or coming launches but there will always be people who need to know where you are as they are stakeholders in your company and you need them. Without stakeholders there is no company after all.
Founder of Fryday, An International Network Of Professionals
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