How Can I Tell Whether My Business Ideas Are Good or Bad?
These four questions can help you nail down whether your new business idea really offers you a competitive advantage.
With an estimated 100 million new businesses launched globally each year, the chances of coming up with an entirely unique business idea literally become slimmer by the second. However, even if a similar product or service, you can still offer a unique experience that gives you an edge over your competitors.
Today's challenges have forced businesses big and small to pivot and appeal to the new needs of their customers. Businesses that fail to clearly demonstrate value to their target consumers are destined to have short shelf lives. And in the economic downturn, reduced spending power means a business idea that might have worked a year ago may be less successful, or vice versa.
Rich Vogel, founding partner and CFO of Loeb.nyc believes aspiring founders need to find a balance between catering to consumers during the crisis and making sure their product will still be valuable five years from now. "New entrepreneurs should think about whether they are just starting a business for the problems of today, or whether the product will extend beyond the crisis. They have to understand the long term potential of their business."
These four questions can help you assess if you truly have a lasting edge, and how best to use it to gain a definitive advantage over your competitors.
1. Am I solving a new problem?
As market dynamics change, you want to concentrate on where consumer needs are heading. Essentially, to use a hockey metaphor, you want to be skating toward where the puck is going, not to where the puck is right now. One of the perks of being a startup is that you're more agile — you can pivot faster than big companies and shadow the movements of the puck more easily.
According to Accenture, consumer trends surfacing at the moment include people shopping more consciously, buying from local retailers and using digital tools to connect with one another. With these in mind, think about what difficulties customers might face — perhaps the cost of sustainable goods is too high, maybe local retailers don't offer home deliveries or people have new doubts about privacy online.
To determine whether or not your product can offer a solution to one of these new problems, test yourself: Can you clearly explain your business idea and why it's valuable in today's market? If you're struggling to articulate the value of your product, it might be because you haven't yet made it fit snugly into a defined niche.
You can refine your business proposal by putting yourself in the shoes of your target market. Empathize with your potential customers, consider how your idea would improve their lives and whether people would miss it if it stopped existing. When it comes to articulating your business's value to others, don't be afraid to draw from your personal experience. You might want to explain your own journey and how the product has helped you through certain scenarios.
"Some of the best businesses were founded by people who really suffered a problem," says Richard Singh, Executive Director of Growth at Loeb.nyc. "They ran into a wall and found a way around it."
2. Am I solving an existing problem in a new way?
Some companies will gain a competitive advantage by tackling an existing problem with a novel approach. Many consumer problems that were around pre-quarantine still need to be addressed, but the way they expect businesses to do so may have changed.
For example, most consumers believe they will now have to reduce their spending on most goods. Pricing is a time-old pain point; you could solve this problem in a new way by bringing lower or more flexible pricing to the market without compromising on product quality. Already during the pandemic, pricing has been used to establish an advantage across multiple industries. Microsoft Office 365 E1 is free for six months, CTO Academy has reduced its annual subscription by over 80 percent and HubSpot cut package prices by up to 50 percent.
These discounts are boosting companies' subscribers and positive exposure. While you may not be in a position to offer cheaper prices than your competitors so early on, you can set yourself apart by tiering prices or having "buffet style" options, where consumers get unlimited use of your product for a set amount.
Alternatively, you could switch up your business proposal and strategy to offer customers added value. You could move a traditionally offline product online or make your manufacturing and delivery processes more hygienic. An ethical approach is effective too: You could focus on renewable materials or supporting local SMEs in danger of going bust.
For business-to-business products, choosing who you pitch your solution to can be key to demonstrating its value. Multiple people are involved in a buying decision, and each may view the problem through a very different lens.
"Ask yourself who you're solving the problem for," says CEO of Straight Talk Consulting, Dan Wheatley. "The ultimate decision-maker may not be exposed to the same user problems as a mid-level executive, so consider reaching out to them separately."
3. Do I have a head start?
Just because you have a solution doesn't mean you have a head start against your competitors. You need to be able to pioneer your idea and, importantly, avoid others duplicating your model. It can mean becoming a market leader while everyone else is still figuring out a strategy.
Can your competitors easily catch up with your product, or will you be the only one with a working model for several months? If your core competitors are big, well-funded businesses, the development time will be much shorter, so you should focus your resources on refining development and production. Whatever the playing field looks like, you'll want to protect your idea legally with an IP or trademark.
The longer you've been developing your idea, the better you can tailor it to be relevant, especially in the new normal. Vogel believes that adaptation is best implemented early on. He says, "You may find that while developing your product you realize that the world doesn't need another X. The sooner you realize this, the more time it gives you to pivot."
You should embrace the importance of continually validating results and garnering feedback (especially negative feedback) from the very start of your journey. Maybe you'll gather enough data to discover that the solution you had for stay-at-home moms is also great for middle-aged men living under lockdown. Whatever research you have built up over time will become your best weapon in finding product/market fit in ever-changing waters.
4. Am I bringing something new to the table?
You — your network, personal journey and background — have unique value that your other competitors lack. If you need to draw out what gives you an edge, first ask yourself: Why am I the best person to bring this idea to life? What has prepared me for this moment?
Look at the experience, connections and resources you've built up over the years. Make a list of the people and tools you have that your rivals don't. Start a conversation with them, update them about your product and harness their expertise to find the best way to break the mold and really innovate in the industry.
Tom Foster, CEO of plant-based protein company Beyond Meat, grew up on a farm and was familiar with suppliers and agriculture business. He also knew that climate was one of the biggest problems facing the world. Using his personal network and understanding of agricultural processes, he made vegan meat available on a mass scale. In less than 10 years, Beyond Meat was valued at over $10 billion.
Entrepreneurs who launch before fully recognizing their competitive advantage will struggle to gain real momentum. Start your journey by determining the unique value that only you can bring to consumers.
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