3 Crucial Questions to 'Fail Proof' Your New Business Idea
Risk is inherent but minimizing it is pretty much common sense, when you stop to think about it.
Starting a successful business is hard, but let’s not presume that entrepreneurship itself is intrinsically riskier than other things that popular culture deems as “acceptable.”
You’ll never be able to completely avoid risk, either in your personal or professional life, but you can mitigate it significantly by having a solid game plan in place. You need a proven system that will help you determine which ideas are worth pursuing so that you don’t become a statistic of America, Inc.
You want to be as certain as possible that your business will succeed before you launch. In other words, you need to “fail proof” it. Luckily for you, I’ve developed a process to get you as close to 100 percent sure as humanly possible.
I call this process “Three Question Validation.”
At it’s core, Three Question Validation involves answering three pivotal questions to determine if your business idea is viable and likely to succeed. It’s a compact method to test if your idea holds water before you waste the time, energy and money on something that isn’t going to work.
If you can say “yes” to all three of them, you have an idea that’s likely to do very well. If you can’t say “yes” to all of them, it’s time to go back to the drawing board.
Related: Five Hacks For A Fail-Proof Business
1. “Is there competition in my space?”
Contrary to popular belief, you want competitors in your space. If you find a market that’s 100 percent unoccupied you’re either the first one there (risky in that nothing has been tested) or you didn’t get the memo (other people have tried unsuccessfully and abandoned the market).
Being the first isn’t horrible, but there’s less of a roadmap to follow. Being last doesn’t mean that you can’t find a way to make your idea work in the marketplace...but that will take considerably more work.
Remember, the purpose of this freelance business doesn’t have to be finding the #1 thing you want to do for the rest of your life. It’s a bridge to freedom. It’s a tool to earn some more money as you get the rest of your life in order. Over time, you may find other things you like more. That’s totally OK.
For now, let’s try to pick something that has a high probability of succeeding so that you can build your confidence, business savvy and skill set.
Pick something where there appear to be many other people doing what you’d like to do. If you can answer “yes” to this question, it’s time to move on to the next question.
2. “Are my competitors making money?”
A bit of a no-brainer, but very important to consider: even if there are people doing what you want to do, you need to make sure they have enough clients and are making the type of money you’d like to make.
This step will ensure that it’s worth your time to invest in your idea. There are a bunch of different ways to tell how well your competition is doing. You could look on their website for testimonials and client success stories. Browse through their portfolio if they have one.
You could stop in (if they are local) and talk to them, or give them a call over the phone. Ask about rates, schedule and typical client experience. (Obviously, don’t tell them why you’re doing the research.)
I love looking at unbiased third party sites like Yelp to see what their rating is, and what customers have to say. You don’t need to get exact revenue numbers. The point here is just to get a general sense for how they’re doing. If other people are successfully getting clients and customers, so can you.
3. “Can I do my product/service/idea differently and/or better?”
This is the question that ties everything together. You’ve found your competition. They appear to have some business. Now what?
It’s time to make your stand by standing out.
For customers to buy your idea instead of, or in addition to, another company’s, you must show why your product or service is different and/or better. If you can show why you’re unique, you’ll attract just the right customers who are perfect for your business. The type of clients who will buy from you time and again, and who will continually refer you to all their friends.
This point of difference between you and your competition is called a USP, short for “Unique Sales Proposition.” Here are five examples of how to stand out with a Unique Sales Position: better/lower price; convenience; better quality/aesthetic; better variety; better customer service or guarantee.
There's no "right" USP, and you don't only have to stick to one. Test your market. These are some ideas to get you started immediately.
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