Recently, thanks to some articles I was highlighted in, I’ve been getting more consulting requests than usual. I’ve turned down many of these, partly because I only want to spend so much time on the phone and email each day, and also because the majority of the requests had the same difficult question: How do I choose a winning business idea?
I wrote an article about this several years ago called Pick a Need and Fill It. I still stand behind the principles I wrote there. But because this is such a hot question, I’m going to address it again here with the hopes that it will help out some aspiring entrepreneurs on this important step (while also saving them some consulting fees). :)
My simple answer to the question of how to pick a winning business idea is “I don’t know.” I have no magic formula to guarantee success. I have started two businesses, and have had success with both. But I think this is due more to hard work and persistence than it is to an amazing idea. I did no market research or planning before I started it. I just jumped in and created the product because I wanted to use it for myself.
But I think that’s a good key, right there. As a rule of thumb, if you and a handful of others you know personally would pay to use the product you’re going to create, then chances are, with the billions of people in the world, you can find another couple hundred or couple thousand who would pay to use it too. From what I’ve seen, you can make money doing just about anything if you’re willing to put in the effort. It’s just a matter of how much you want to make, how hard you want to work to make it, and how much you’ll enjoy the process.
For me, “success” was a lifestyle goal of being able to provide for my family without being dependent on an employer, and having more time for the things I wanted to do. I determined that $8,000/month of passive income was all I needed. If my goal was to make $10 million in 6 months, it would have been a completely different process for me, and a different business idea.
You don’t have to create a product you’d use personally, but I think it’s a good way to go. To brainstorm ideas, make a list of things that frustrate you in life, work, or as you go about your day. Then write down some possible solutions for each of these frustrations. After that, go for a walk or do something to clear your head, and see what stands out. Chances are you’ll have a few decent business ideas after this exercise.
If not, you could also sell information online, writing about how to deal with a challenge you’ve overcome in your life, or teaching others how to pursue a hobby you’re passionate about. If you still can’t come up with any ideas that interest you, then you could call up your friends, family, or colleagues, and “interview” them to ask what frustrates them, and what products they’d like to use, and see if you can envision some good solutions. For more ideas, check out Chris Guillebeau’s book The $100 Startup, which is full of great case studies in a broad range of industries.
Also, don’t rule out an idea just because it sounds dumb. You could probably make decent money selling orange siamese cat sweaters if you create a quality product and target the right people with the right message.
Just remember to keep your income goals in mind. If you want to make $10,000/month, for example, then you can either create a subscription product so valuable that people are willing to pay $1,000/month for it (and you’ll only need to find 10 customers!), or you can create a product for $10 and find 1,000 customers per month to buy it. Weigh the amount of work involved either way and see what makes sense for you.
You can use sites like LaunchRock.com to see how much interest there is in your product before creating it. Drive traffic there through Adwords or Facebook Ads for a few days or weeks to see what the response is like. If you pay $100 in ads and get 200 people to your site, and 10% of them show interest in your product, that’s 40 leads, or $2.50/lead. Let’s assume 10% of those leads (4 people) would actually pay for your product. If you charge $50/month for your product, that means you paid $100 to get 4 people to pay you $50/month. In other words, you spent $100 to make $200/month forever. If you can repeat that, you’ve found an incredible cash machine! Whatever money you put in doubles instantly, and keeps on paying!
Choosing a business idea is a personal decision that no one can make for you. But if you choose something you’re excited about pursuing, even when things get difficult, and if it looks like there is enough interest to meet your income goals for the amount of work you want to put into it, then it’s likely to be a winning business idea for you.