It’s said that business ideas are worthless and execution is everything. While that’s true to an extent, we can’t disregard the power of the right business idea. The right business will help you grow faster, reduce obstacles, connect with your target audience, and help you achieve more success.
The challenge is trying to settle on the right idea. There are many factors that come into play such as market conditions, technology, personal aptitudes, etc. In this guide, I’ll break down the factors to consider when trying to select the right idea for a new brand. That way, you can save months or even years of your time.
Start with your own skill set and interests
The best place to start looking for a business idea is within yourself – not the forums or the blogs. This is because, in the end, your ability to grow a business depends on personal aptitudes and interests. There are multiple things you can look at and questions you can ask to narrow down your choices.
What do people say you’re good at?
What do your friends, family, colleagues, etc. tell you that you’re good on a regular basis? At this point, it may not seem like it’s directly related to a business idea but it’s still an important point to consider. You can use the process of elimination to narrow the options down after compiling the list.
If you can’t think of anything yourself then ask around. Your family and friends will be able to find at least a few things that you’re good at – even if you don’t know yourself.
What do you know you’re good at?
This one requires a bit of introspection on your part. There should be a few obvious things that you’re good at and can easily pinpoint. Don’t only focus on skills that are on the surface, also consider some of the hidden skills you may not use as often. Even if it doesn’t seem useful, write it down.
For example, are you good at connecting people are solving complex problems? These can all be the foundation of exceptional brands if you apply those skills in a new and interesting way.
Take as much time as you need for this exercise and write down whatever comes to mind. Again, don’t worry if it doesn’t feel like it can translate directly into a business idea at this point. Even if they don’t, you may uncover useful soft skills that can help you while growing your business.
What do people ask you advice about?
This is similar to what people say you’re good at but is slightly different. You may not be acknowledged as being good at these skills but people seek you out nonetheless. This may be due to your position within an organization, the course you studied in school, etc.
This can reveal your domain expertise which is important when you want to start a successful business. Having expertise in a field will help you avoid common mistakes that people make when trying to break into a niche. Don’t take this exercise for granted.
Once you’ve written down the skills or aptitudes you have, think about which of them can be turned into a potential business. At this point, no idea is foolish. Focus on the volume of ideas and not the quality. You can also add in niches you have an interest in at this point because they’ll be useful in the next section.
What’s trending right now?
While you never want to build a business on a fad, you should be sensitive to the current trends in the market. This will help you establish your brand with less effort.
At the beginning of 2021, Bitcoin started to boom and many altcoins (tokens) were launched. These tokens were able to quickly gain a market cap of millions of dollars.
Why was that?
Because they were able to catch the beginning of the trend wave and capitalize on it. There are many ways to identify trends early and jump on them before they get saturated. Here are just a few:
Social listening is the process of monitoring social media platforms for mentions of your brand, related keywords, competitors, etc. It allows you to better understand the sentiment related to the content you’re monitoring.
How is it relevant to business ideas?
It gives you a deeper grasp of whether or not the potential business ideas you identified in the first section have potential. Are people on social media talking about it? Is it trending up or down? What kind of people are talking about it? What’s the general sentiment?
For each potential business idea, monitor how it’s being talked about and give it a score of 1 – 10 based on the following parameters:
- Growth in mentions over the past year
Shortlist the potential business ideas with the highest scores.
Conversations with industry experts
After narrowing the ideas down using social listening, go out and talk to industry experts. This exercise will help you identify underserved areas in the market and may give you insights into the niche you can focus on initially.
For example, if you’re interested in the fitness niche, it would be hard to break into. There are billion-dollar companies competing with you. If, on the other hand, you spoke to industry experts and realized that fitness for the elderly is underserved, that could be a great option to start.
You’ll have to do your own research to find industry experts but it’s not hard once you settle on a general idea or niche. Also, don’t be afraid to pay for their time. If they’re true experts, they’ll value their time and countless people will want to pick their brains for free. Take as much time as you need here and be as thorough as possible.
While speaking with industry experts and doing research into specific niches, you’ll inevitably bump up against interesting technology. Emerging technology can provide opportunities you would have never considered.
For example, GPT-3 is an AI that writes text similar to a human being. Conversion.ai took advantage of this and developed Jarvis. Jarvis is a product that helps customers create content for landing pages, blog posts, ads, etc.
Of course, using emerging technology is usually a combination of chance and experience. That doesn’t mean you shouldn’t take it into consideration when doing your research.
Before you continue to the next section, add each of the major keywords related to your chosen niche into Google Trends. Make sure that the interest is holding steady or increasing. If it’s declining then that may be a sign it’s not a good choice.
At this point, you should have further narrowed down the options for your business idea. Five options is a good number to have at this point because you’ll need to do deeper research into each one.
Factors to consider when choosing a business idea
You should have a list of ideas that interest you and have potential when it comes to popularity and growth. Now, it’s time to drill deeper into specific factors that can make or break your business before you even start.
When you look at market size, there are multiple things to take into consideration. First, the absolute number of potential customers. This will give you an idea of how large a business can get if it has a monopoly.
The second thing to look at is the purchasing power of the customers. This is arguably the most important thing. If you have one hundred million potential customers but each one can only buy something worth $10 then it’s not as profitable as a niche with ten million potential customers that have a purchasing power of $1,000.
A good thing to think of at this point is the average order value, the order frequency, and the lifetime value of each customer. Even though they’ll be educated guesses at this point, it’ll still be helpful.
The absolute market size doesn’t mean much. In reality, the most important thing is how large of a company you want to build. Can the market size support the kind of business you want to build?
After you know the total size of the market and potential revenue, look at how consolidated or fragmented it is. Are there countless competitors that each have a small market share or are there a few behemoths that own most of the market share?
This is an important consideration because if there are only a few large companies then that may be due to high barriers to entry.
For example, the waste management space is monopolized by a single company. There are large barriers to entry due to finances and government regulation. It would be a difficult niche to enter. The webinar software space, on the other hand, is fragmented. There are many smaller players which may be the result of a lower barrier to entry.
No matter the business you choose, you need a certain level of domain expertise to be successful. The business itself will determine how much expertise is required. For example, a consulting firm would need more domain expertise than a lifestyle blog.
Look around at competitors in your business and how they differentiate themselves from others. Is domain expertise a big part of their value proposition or are the products themselves the driving force of the business?
After getting a clear idea of this for each of the potential ideas, ask yourself whether you have enough domain expertise. If you don’t, can you acquire domain expertise by hiring someone or getting the prerequisite training?
If you don’t meet the standard then you can remove it from your list now.
Barriers to entry
Even though there were assumptions about barriers to entry when looking at competition, they may have been wrong. Here, you want to look at the specific things a business needs to get started and how difficult it would be to accomplish each one.
Each business has different startup needs. For example, a brewery needs a factory, warehouse space, licenses, specialized employees, etc. A blog needs a website and a few pieces of software. Obviously, the barrier to entry for a blog is much lower so there’s room for more competition.
Take the time to figure out all the things you’d need in order to start the business you’re interested in. Everything from office supplies to your workspace should be considered.
If the barriers to entry are within reason then you can continue to investigate it and eventually choose it. If the barriers to entry aren’t something you can easily handle then it may be best to choose a different business idea right now.
How to determine if it’s a good business idea?
At this point, you should have narrowed your list down to a few promising businesses. You have a genuine interest in it, it has a good trend curve, the market size is large enough, the competition isn’t overwhelming, and the barriers to entry are within reason.
Now, there are a few other things to consider before making a final choice.
- It solves a real problem – Is it medicine or a vitamin supplement? If people have to make tough choices about whether or not to keep your product/service, will they choose to keep it or cut it at an unnecessary expense?
- There’s room for growth in the market as a whole – If it’s a mature market then you may have to find a sub segment to grow within. For example, fitness is a mature market but with some clever targeting, you’ll be able to grow a successful business there. But a growing market is ideal because even if you’re not as well-funded or agile as competitors, you can still grow quickly.
- There are multiple price points in the market – Instead of being limited to a single type of product, can you sell items across the spectrum? For example, a lifestyle brand can sell clothes, books, training, and much more.
- You can do it for an extended period of time – People say you should be passionate about a business but I disagree to an extent. The business you choose, as long as it’s successful, will eventually make you passionate about it. The more important thing is being able to stick with it day in and day out for years. If you can do that then you’ll eventually achieve a decent level of success.
Coming up with business ideas is easy. Analyzing that business idea and determining whether it’s a good fit for you is much more difficult. This guide has walked you through how to brainstorm ideas and then how to break them down to see if they’re right for you.
Once you’ve selected an idea you’re confident in, check out our guide on how to launch a business.
Daniel Ndukwu is the CoFounder of Growth Boost and the Founder of KyLeads. He brings extensive digital marketing experience to the table and enjoys helping people on their entrepreneurial journey. When not creating internet-first brands, he spends as much time as he can with his family.