A Familiar Phone Call
Have you ever had a friend who constantly calls you with the “best business idea ever”? It’s a running joke between Matt and me. Over the years, we’ve had countless conversations about potential business ideas. Some turned out to be decent, while others were nothing more than pipe dreams. But out of all those ideas, a select few stood out as truly great.
In this article, I want to share with you our process for vetting business ideas. While we may not be the world’s foremost authorities on the subject, our experience and expertise can provide valuable insights. So, if you’ve ever wondered how to determine if your business idea is pure gold or not worth pursuing, keep reading.
Step 1 – The Default Analysis
When you hear a new business idea, your mind naturally starts to evaluate if it’s something you would personally buy or use. This initial analysis is subjective and based on your own frame of reference as a consumer. While it’s a good starting point, it’s not enough to determine the true potential of an idea.
To go beyond this subjective analysis, we spend time observing market trends and consumer behavior. By understanding what people are buying and why, we gain a more objective perspective. This helps us weed out ideas that may seem great in theory but lack practicality. Only a small percentage of ideas make it past this stage.
Step 2 – Is the Idea a Great Idea for a Business?
Once an idea passes the initial screening, we shift our focus to evaluating if it has the potential to be a great business idea. Profitability is the ultimate measure of success for any business. While there are other goals to consider, profit is what attracts investors and sustains long-term growth.
To determine if an idea has the potential to be a great business, we ask a series of questions:
- Would people pay for this product or service?
- How much would they pay?
- What similar products or services are currently available?
- Is the idea different enough to make a splash in the market?
- Does it require people to radically change their habits to use it?
- Who would be the competitors?
- Is the industry innovative or stagnant?
- How easily can you communicate with prospective customers?
- Why hasn’t it been done before?
This deeper analysis helps us separate the truly great ideas from the rest. It requires critical thinking and informed decision-making. However, it’s important not to get too bogged down in operational and regulatory hurdles at this stage. Focus on the value and revenue potential rather than the obstacles.
Step 3 – Is This a Good Business Idea for Me?
The final step in evaluating a business idea is personal reflection. Just because it’s a great idea doesn’t mean it’s the right fit for you. Consider your own skills, expertise, and passion. Can you add value to the business idea? Do you truly want to run a company in that industry?
It’s essential to choose a business idea that aligns with your strengths and interests. If you’re not passionate about the idea or lack the necessary expertise, it may not be the right fit for you. Remember, running a business requires hard work and dedication, so choose wisely.
Putting it All Together
Vetting business ideas is a subjective and personal process. It requires a combination of objective analysis and personal reflection. Ideas are everywhere, but not all of them have the potential to become great businesses. By following these steps, you can identify the ideas that are worth pursuing and make informed decisions.
So, the next time your friend calls you with the “best business idea ever,” use these tools to evaluate its potential. And when you find that idea that truly excites you, take the leap and soar!
