In business, ideas are like seeds. They are the blueprints for new ideas. A business idea is a prototype of a potential product and/or service that a business may market, a plan that can be executed into a viable business.
Business ideas can come in many forms. The best idea is one that solves a problem that people wish they had an answer for. These ideas can come from real life experiences or from your imagination. Your imagination is your greatest business tool.
Here are four steps to help you decide on a business idea:
1. Know Your Strengths
2. Know Your Weaknesses
3. Research Your Competitors
4. Know Your Market
1. Know Your Strengths
“Knowledge is strength. But knowledge with wisdom is strength with wisdom. With knowledge, we can become strong, but with wisdom, we live.”
— Socrates
The difference between knowing something and knowing that you do not know something is that when you know something, you at least have an idea of how to answer. When you do not know something, you either have no in-depth knowledge, or you do not care enough to figure it out.
You can know your strengths by asking yourself the following questions:
Do you enjoy working alone?
Are you good with numbers?
Do you like teaching people?
Are you good with details?
Do you enjoy working with people?
Are you a good listener?
Are you good at organizing?
Are you good at making decisions?
Now, let’s break each of these down.
Do you enjoy working alone?
You can pick a business that personally appeals to you. These can range from flooring companies to plumbers to tax preparation services. They can be online businesses, or offline.
However, if you really want to work alone, you may want to start a business online. You can start a website to promote a product or a service, or you can sell e-books or some other digital product.
Are you good with numbers?
There are many different businesses you can start, all related to numbers. If you are interested in how people spend their money, you can probably start your own business of helping people with their taxes, or starting your own tax service. You could start your own banking service, or your own fashion business – all related to numbers.
Do you like teaching people?
There are many businesses where you can start teaching people. You can teach people how to make crafts, or you could teach people how to dance.
Tutoring students comes to mind as does teaching yoga classes, or teaching people how to garden.
Your dance idea could even take wings by starting a dance class by posting videos online.
You can teach people anything they value and are willing to spend their limited resources on in order to learn.
Are you good with details?
You can become a dog groomer, a clothing designer, a personal stylist, a hair stylist, a nail technician, a hotel concierge, a dog walker, a travel agent, a home stager, a personal assistant, a receptionist, a waiter a computer technician, or a wedding planner.
After being involved in one of these detail oriented jobs for a while, you could find the right opportunity to turn any of these into a business.
How do you do that?
Know your market. Know what people want, what they value. Know what people are willing to pay for. We explore this further below.
Do you enjoy working with people?
If you’re good with people, you already have the traits that make people trust and enjoy the products and services that you provide.
If you’re good with people, you understand how to help them get what they need. You listen. You help. You care.
If you are good with people, you are good for people.
Are you a good listener?
Find a business that is struggling with customer support and offer your services. Get to know their products and services well. Perhaps you are also a customer.
A business that deals with customer service is an excellent place to start. You can make money while helping people out. All you have to do is be on the phone and listen to their problems. A listening ear is a valuable business tool.
And structured correctly, you can take a worry off of a company that will be glad to pay you for your time and expertise to do something they clearly were not very good at, or was not their main focus.
Are you good at organizing?
If you are good at organizing, you can open a business organizing other businesses. Get into automation, workflow, and physical setup for other businesses.
Efficiency improvement in a business can affect their bottom line. Charge a percentage of what you save them due to your exceptional organizational skills.
Are you good at making decisions?
You could start a consulting business. You would help people make decisions on things such as investments, acquisitions, and other business related decisions.
You would make money by taking a percentage of the profits made by the decisions you helped people make.
2. Know Your Weaknesses
Having a good understanding of your weaknesses and the weaknesses of your competitors is crucial to your business success.
Weaknesses are things that can stop you from succeeding and opportunities are things that can propel you to success.
Some people find they assume certain qualities or traits that they possess, which they do not, or that can be overcome. Because of this, they limit themselves and often ignore certain areas in their business or personal life.
These areas can be very productive and beneficial, if properly exploited.
For example, a person who is shy might think she could never be a business owner. The fact is, as she applies herself and dives into her passion, shyness may be overcome. She may find that her passion has cured her of her shyness.
By contrast, a person who is very tall might assume that he is a natural leader. Even though the person is very tall, this does not mean he is a naturally born leader.
In like manner, a person who is very athletic might think he is disciplined in all areas of his life, but this does not guarantee it. Being athletic does not mean being disciplined.
Business weaknesses are internal weaknesses. These flaws prevent it from winning or expanding. They can make your business vulnerable to competitors.
To fix a weakness, you must identify it. Then, change or eliminate the behavior or practice that caused it.
The problems always seem to be the same.
Lack of revenue.
Lack of Sales.
Insufficient capital.
Poor management.
Poor advertising.
Poor sales.
Lack of revenue
The reasons for this lack of revenue can be due to lack of planning, lack of focus on revenue generation, lack of follow-through, or lack of interest in generating revenue. Many times it is a combination of these.
To overcome the weakness of lack of revenue, think through the causes for this, then think creatively to generate new sources of revenue.
In the early stages of growth, a company usually has many weaknesses. For example, you may lack product quality, sales channels, talent, or money.
In this case, do not rely solely on customer acquisition to solve the problem, because customer acquisition costs money, which will be your weakness.
So, the key is to find new sources of revenue, such as helping solve customer problems, and receiving a service fee.
Incoming revenue can then be allocated for further customer acquisition.
Lack of Sales
Being in business is tough. Sales are your bread and butter and without them, your business will not survive.
There are a lot of reasons why your sales may be low. Some of these reasons may be beyond your control, but there are steps you can take to improve your sales.
Delivering good products is an essential part of business. If your customers receive a quality product in a timely fashion, they’ll likely be satisfied. This is important because satisfied customers are more likely to do business with you again. One way to get customers to come back is to offer them a discount or loyalty card. A loyalty card is a discount that is offered to customers after they have made a purchase.
If you want to sell more products and make more money, focus on providing consistently good products, and on delivering them on time. Your customers should be able to count on you to:
a) deliver what they ordered;
b) deliver it on time;
c) deliver what they ordered, on time, reliably.
If they have confidence that your company will fulfill their needs, they will be willing to order more and tell their friends about you. This will increase your sales.
When you deliver quality products and amazing services consistently, you will see your sales increase.
Insufficient capital
Insufficient capital is a major problem for many entrepreneurs.
Most entrepreneurs, even those who have a lot of money, experience capital problems at some point, usually at the beginning of the business.
The ways to overcome the problem of insufficient capital is to take on loans or find investors.
A loan is a money that is given for the purpose of starting a business, investing, or buying an asset.
An unsecured loan is when no collateral is required and the borrower pays a higher interest rate than a secured loan.
Investors are people who have money who want to grow their money. To do this, they lend money to business owners and charge interest on the loan.
This has gotten much easier. You can find internet sites of hard money lenders, people who lend their money to businesses no matter how long they have been in business or what their credit score looks like. They will charge a higher interest rate, but it may be just what a business owner needs to acquire capital.
A variety of capital acquisition methods may need to be employed in order to stay in business.
Poor management
Poor management refers to a lack of proper or effective leadership.
By definition, the management chain is weakest at the lowest level of the organization, closest to the problems, and responsible for solving these problems.
Consequently, when management is poor at the lower levels of the organization, it is most noticeable.
In such a situation, there is a lack of emphasis on improving performance.
Managers at all levels, including upper management, are not held accountable for poor performance. Instead, the focus is on keeping the internal appearance of the organization intact.
Poor advertising
Poor advertising is a problem for any business. The most successful companies spend a significant amount of money on advertising. Most businesses try to save money in this area, which can be a mistake.
Here are a few ways to overcome this weakness.
You need to first understand what you do. Sometimes it is hard to explain what you do in a meaningful way. There are two key points here: (a) Understand what you do in terms of the value you provide. (b) Understand the value you provide to your target audience.
A good advertising agency would help in overcoming poor advertising, but the statement is a bit dated and a bit misleading.
Advertising agencies specialize in particular disciplines. For example, if you are a business that is making a product, you will want to work with a marketing agency to develop a marketing strategy and then delegate the advertising part to a creative agency.
What is more, if you want to address your specific target audience, you should develop an advertising campaign that would appeal to them and then delegate the actual production of the advertising to a production agency.
When you assess the advertising choices, you’ll see that there are many places to advertise. You can get advice, free of charge, from many different places.
Ask friends and family who have also opened a new business. Talk to your banker, accountant, lawyer and real estate agent about your advertising needs and how to get the best results for your money.
Be aware that there are many types of advertising and the media you choose may depend on your budget or the products and services that you sell. You can choose local print and radio, internet, television and billboards.
Poor sales
To turn around poor sales, you need to investigate why they are lackluster. What mistakes have been made in campaign planning?
Here are some typical mistakes you can make.
You may not know what you do – in other words, you don’t have a clear definition of your value proposition.
You may not understand your target audience – in other words, you don’t know how your target audience will benefit from your value proposition.
Your value proposition may be valid in theory, but you may have failed to communicate it effectively.
Revise your planning with a solid understanding of these concepts and then test with a new campaign. See what the difference is with a clear understanding of the value you provide, who your target audience should be, and a clear message.
Once you have successful tests, you can rinse and repeat with your other offerings.
3. Research Your Competitors
Understand what is working well with your competition.
How are your competitor’s products priced?
How and where do my competitors advertise?
What are the strategies that I can glean from knowing my competition better?
Understand what is working well with your competition.
Researching competitors, especially those who are bigger or more successful than you, can help you determine how to create a successful business.
You can better understand how the competition is doing things and how their products are priced. Your research can uncover how they are advertising, and where they are advertising. This helps you define your marketing strategy.
You can access the internet and search for your competitors by name. You can also find out what they are up to by reading their social media posts, and by searching for their domain name on the web.
You should also search for their contact details so that you can get in touch with them and see how they handle your inquiries. Much can be learned from the way your competitors handle and respond to customer inquiries.
How are your competitor’s products priced?
The best way to know if you are offering a great deal is to know what customers are paying for the same product or service from your competitors.
You can do this by taking surveys, looking at the business next door, reading web pages, and asking friends.
If you are setting up your own business, research the market and pricing of the competition. It is important to know how to price your products because the customer will expect to pay a certain amount for a given product. If they find that you provide a comparable product for a lower price, or with better service, you might persuade them to take on your brand.
How and where do my competitors advertise?
Advertising is a competitive business, and any business that is in direct competition with you should be your prime source for advertising information.
As a small business owner, you may think you have all the local advertising bases covered. After all, you have a website, a small ad in the local paper, a Facebook page and business cards. But do you know where your competitors are advertising? Do they have websites? Are they using social media? Do they have a blog? Answering these questions can help you learn about how your competition is advertising.
What are the strategies that I can glean from knowing my competition better?
In order to make a competitive strategy for your business, you will first need to carry out research about your business competitors that are in the same industry. You should check out every aspect of your competitors: from size, to location, to business structure, to their financial status and everything else.
Once you have gathered this information, you will be able to create a competitive strategy that will help you stand out in the market.
The best place to start your research is probably to look at your competitors’ website. Look for their About Us page, which is a great way to learn about any history they may have, such as how they started, what their mission is and what they’re trying to accomplish. You can also find out about their leadership, their values and even what their company culture is like.
4. Know Your Market
Knowing your market is very important for ensuring your long-term success in a business. When you know the needs and desires of your market, you can tailor your business to fill their needs. This increases competitiveness, customer loyalty, and profitability.
You need to know who you are targeting and what they expect from you and your product or service. Your audience should be clear in your mind before you start developing the answer to their concerns. And as you develop and produce your product or service you need to constantly be asking yourself ‘will my audience like this?’ – if the answer is yes, then carry on, if the answer is no then rethink what you are doing.
Put yourself in the shoes of that customer, and try to see things from their perspective.
What are their concerns?
What do they want?
What questions do they need answered?
What are they looking for?
Knowing your market will help you to:
Reach a specific audience.
Analyze what your customers want.
Understand how best to deliver your product or service.
Implement pricing that is profitable.
Reach a specific audience
Knowing your audience will help you reach the right people with your message or product.
Knowing your audience will help you to make smart decisions about who you want to reach and how you want to reach them.
The more you know about your audience, the better decisions you can make.
Analyze what your customers want
Online reviews – and especially the negative ones – are important, but they’re often difficult to find, and it’s easy to assume that these reviews are unrepresentative of your customers’ actual opinions.
You can use Net Promoter Score (NPS) data to easily identify customers who are unhappy, and then you can use these customers as a focus group to ask why they were unhappy. (NPS asks, on a 0-10 scale, how likely a customer is to refer their purchased product or service to someone else.)
It’s a lot easier to change the way you do things if you stop making assumptions about what your customers want, and instead, you can use the data from NPS surveys to learn, and then improve from there.
Understand how best to deliver your product or service
With the advent of the internet, things have changed dramatically for companies that need to deliver a product or service to customers.
For example, a few years ago it was not uncommon for software companies to sell a CD with software on it that was then delivered by the post office to a customer.
Today, companies deliver software over the internet. It is delivered via download links, which means they don’t have to buy CD’s or seal boxes of CD’s and put them in the post office. They do not pay for the postage to the customer.
Implement pricing that is profitable
Setting prices is a trickier proposition than most people think, especially when it comes to retail. A good retailer should be aware of what their competitors are charging, and compare themselves to the competition.
However, setting prices too low might not create the profit the store is looking for. There’s a saying that “Low Price, Low Profit, High Price, High Profit”.
The ideal retail price is the “sweet spot”, which should be set at the maximum price that attracts more customers.
Conclusion
There’s no one-size-fits-all approach to picking a business idea.
But taking the four steps of knowing your strengths, knowing your weaknesses, researching your competitors, and knowing your market can help aspiring entrepreneurs narrow their focus, identify whether an idea is feasible, and understand what kind of work is involved in running a small business.