Almost every time I give a speaking engagement, a wanna-be entrepreneur approaches me with their great idea for a new small business. Often, it’s a new product. Sometimes it’s a new kind of service or an innovative app. What they all have in common is the ‘this-can’t-fail’ enthusiasm of the person with the idea. But how do you know if your idea for a small business—or one day maybe a big business—is any good?
At an early stage, when you’re just fleshing out your brilliant idea, you certainly won’t have the information you need to know whether your small business idea can succeed or how much money you can reasonably expect to make. But by keeping the following five things in mind, you’ll get a better insight about whether your idea has what it takes to succeed:
1. An idea isn’t enough.
First, ideas aren’t businesses; they’re just ideas. Nobody pays the rent just by coming up with ideas. No matter how good your idea is, success is a matter of execution. Is your idea one that you can build a business on and are you willing and able to do so? Businesses take hard work, persistence, cash management, and all the other things that go into the day-to-day running of a business. Solid business operations beat great business ideas every day of the week. An idea is just an idea until you do something with it. Execution is key.
2. You don’t need a great new idea to be successful.
Lots of people who want to own a small business think they need a new idea. In fact, most good, profitable businesses are developed from existing, rather mundane ideas. Yes, it may have taken a Levi Strauss to invent blue jeans, but you can have a profitable online ecommerce store selling jeans without coming up with anything particularly new or exciting. Most of us don’t want huge, multi-national businesses. We just want solid, profitable companies.
3. Your idea can be too new.
“It’s easier to get a piece of an existing market than to create a new one.” That was the advice of my old friend and mentor, Eugene Kleiner—legendary venture capitalist, founder of Kleiner Perkins Caufield & Byers, and one of the “Traitorous Eight” considered the founders of Silicon Valley. Kleiner often preferred investing in companies that were ‘second’ because creating a new market is risky, difficult, time-consuming, and expensive. Remember, the person or company who first invents a new product or service spends a lot of time and money figuring it all out. They work out the kinks, find suppliers, build a market. You can take advantage or their experience—usually quite legally—by coming in after them, especially if you offer improvements. You’ll find it much easier and cheaper to get established if there’s already an “infrastructure”—such as suppliers, distributors, trade organizations, and so on.
4. “Make sure the dog will eat the dog food.”
That’s another ‘rule’ from Eugene Kleiner that’s often quoted when it comes to evaluating new ideas or new products. What Kleiner meant was that no matter how good your ideas appear to be, you have to make certain that customers actually want your product or service. Entrepreneurs, especially those creating new products or new technologies, often become so excited about the product that they aren’t focused on the realities of their market. Before sinking a fortune in a new endeavor, get out there and test whether customers respond.
5. A really bad idea is deadly.
While a good idea doesn’t guarantee success, a really bad idea is almost certain to lead to failure. Yet, some of these ideas do get launched, even raising millions in funding, such as the company that created Juicero, a pricey, Internet-connected juice press and delivered juice pouches to customers. No one wanted to shell out $400 for a gadget that just squeezed juice out of a packet, a job you could do as well with your hands. No matter how well you run a business, you can’t make money selling something people don’t want to buy. (But then again, Snuggies are a big hit. Go figure.)
There’s an old saying, “Success is 90% perspiration, and only 10% inspiration.” I’d say that’s giving inspiration too much credit.
Copyright, Rhonda Abrams, 2018
This article originally ran in USA Today on April 4, 2018
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