I meet with a lot of folks who want to do a startup. They tell me they have ideas every day and they wonder….”Which idea should I pick?” Luckily, I have the same problem and am constantly thinking of businesses whenever I encounter issues.
Recently, I’ve developed a three question approach to narrowing down ideas into potential business opportunities. Obviously, some might argue that there are other questions to be asked, but these three are my go-to when the “Eureka!” moment happens:1) Does it solve a real problem?
There are two questions in this short but paramout question. Number one is, will the idea actually solve a problem. Most businesses that are founded on “Wouldn’t it be cool if…” do not end up surviving (of course there are many exceptions). Number two is whether it solves a REAL problem…that is to say, what are the alternative solutions to the problem you are trying to solve? Is the problem a real pain point for a certain audience? If the answer to both of these questions is yes, you may have something on your hands. If not, your idea may just end up being a glorified hobby.2) How does it make money?
People would criticize me for bringing up this point, but it is absolutely crucial for a business to …make money. Otherwise, by definition, it’s not a business. Too many entrepreneurs (especially younger/less experienced ones) bank on making something cool and hope to figure out the revenue model later without considering what kind of revenue model their business will have. To me, this is totally paradoxical. I’ve judged pitching competitions where revenue models are left out and talked to entrepreneurs who don’t have basic monetization strategies. The bottom line is this: if your idea won’t generate cash, it’s likely not worth it (unless you’re ok eating ramen forever).3) Will you be passionate about it 5 years from now?
A couple of weeks ago, I was parking my car in my parking garage and accidentally scratched it by moving too close to these divider poles that are all over urban parking garages. When I went to get an estimate, the autoshop guy told me to not freak out…he sees these kind of scratches All. The. Time. Bingo! Business idea: develop foam pads that would go over urban parking garage dividers to prevent cars from getting scratched. Is it solving a real problem? Absolutely. Will it make money? Of course! But do I really care to solve this issue? ….not really. Herein lies the rub: when you start a company, you live/breathe/repeat the value proposition countless times for years on end. You don’t necessarily have to be passionate about the product, but you do have to be passionate about the problem you’re solving, or the business itself. Otherwise, you will run out of steam before your first foam pad leaves the factory. In my case, I find it instructive to imagine myself running the business I’m imagining five years from now: Am I happy? Am I achieving my goals? Am I leading a fulfilling life? In the case of foam car pads…probably not.Photo credit