Entrepreneurship How to Choose a Winning Business Idea
Mar 03, 2013 15 Comments 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.
Brandon Pearce
Brandon is a location independent entrepreneur, musician, worldschooling father, and the principal author of this blog. He's all about reaching his potential and enjoying life to the fullest in each moment.
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This is such great advice. I tried for a long time to find a unique or exciting idea for a business (with residual income) and was just never inspired by anything. Not that I didn’t have talents or skills or even some good ideas – just nothing that I cared enough about to invest my time, money and soul into…
The answer for me was find a product that someone ELSE is making, which I’m passionate about, and create residual income educating others on its benefits so they want it as well. It’s working out great and just this week I just cut my hours at my “day job” back by half so I can devote more time to the business I’m so passionate about. Woohoo! Goal is to be full time MY business (instead of helping build someone else’s business) before the year is over. And to have the time and financial resources to follow my son and his family around the globe to experience the wonderful life they’re creating.
This new business only works for me because it’s a product that I absolutely love and am passionate about, other people want it – and the company behind it is stable, competent and built with integrity. I’m simply having the time of my life… I do love my doTERRA essential oils :)
Yay!!! Your enthusiasm and excitement is strongly felt and reciprocated from my end. :) I feel very happy to read this. :D
A big part of it really does seem to be choosing something that you are energized enough about following through with, which usually requires lots of persistence hard work. At least that’s what I’ve witnessed from watching you, especially in the beginning. Another thing I’ve noticed from watching you is that it’s about working smart too, not just hard. You’re always thinking of ways to improve the process as you go along. You kind of have to have that drive behind any ideas and goals in life, really, whether you’re choosing to make money with them or not. Great thoughts, thank you. :)
Great article. One thng I have noticed is the businesses that do well are the ones that see a problem and find a way to fix it. The comment “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” really illustrates what we need to do as aspiring business owners.
Another thing I have noticed as far as why people are reluctant to go out on their own is that they think they don’t know enough about their field to start a business because their boss know so much more than they do. The thinking is “I’d better learn more than them before I start a busines”. The problem with this thinking is that the people you want to serve don’t need you to know that much, just know enough to help your potential customer.
As a tax and accounting guy, I don’t know enough to go head to head with a big accounting firm when talking about accounting procedures about big corporation finance, but I know enough to help the shop down the street organize their finances. I just go with what I know!
Thanks for the great article, and many blessings to your family!
Hey Chris,
I love your thought of “go with what you know”. On the other hand don’t you think that a boss might seem to know much more because they already took the leap a while back and learned so much as a result.
I think I like to trust that if you make an educated decision to go for it all the experience and more in-depth knowledge will follow.
Yes, Philipp, I agree with you. What I was trying to say is that people get scared to take that leap. They don’t realize that the boss did take that leap. People just need to just get over the fear and start.
Thank you for writing this. It’s great general advice but most people that want to consult with me want a specific answer. I can’t give them an idea and have them be motivated by it. Starting a business is takes immense dedication and focus and the motivation has to come from within.
Most ask “How do I make money online?”. My general answer of “create value. fill a need.” Then they are defeated since that means work on their part. Well, duh.
Lazy thinkers don’t start businesses.
Next.
Stumbled on your blog tonight…..just wanted to say excellent article! Reading this created an excitement in me and inspired me to do some further thinking on ideas that have been put on the back burner.
Any advice for someone who has an idea for a smartphone app that doesn’t exist, but has no idea how to create the app or where to even start looking for help?
Yeah, start drawing thumbnail pencil sketches and plan out the app. Once you’ve got it how you want, give your designs to someone who can create it for you. Or you could make it yourself at sites like http://ibuildapp.com/ or http://www.appmakr.com/
Awesome….thanks for the tip!
Hello Mr. Pearce,
Hard work and persistence are definitely the way to success however even if someone is passion it does not mean there are other people that really need the product/service and that it would be possible to make living from it.
Just looking for something someone is passionate about and starting a business on that is not the best way to go. The path with the highest probability of success is to find a desire that many have and which has an impact over millions of individuals than you may charge few cents and make a live from the business cash-flow, however a totally free-running passive business does not work without periodic new ideas inputs and continuos improvement once the concurrence and market will try to reach the some status quo in the long run.
Kind Regards,
David Wilde
http://www.stocksmetrics.com
Invest like a Real investor!
PS.: Skiing the slopes in ischgl.com, you should try it!
It depends on the kind of business you want to create. Creating a product that millions of people want to use and getting the word out to them is generally a path that requires more funding and resources than most entrepreneurs have, and therefore greater risk. I’m not saying don’t test your market. But if your income goal is to make only $5,000/month, you don’t need a mass market product and millions of customers in order to reach it. Just 100 people paying $50/month, and they’ll be cheaper and easier to reach because your addressing a more specific need.
Hi Brandon!,
Excellent article!. You were a programmer, so I thing you created the most important part of your site, or not?
When you launched the product, you outsourced the programming, design, support, etc…
I’d like to know how did you do to be able to explain your business idea to others with the confidence that the job would be done correctly, ontime and without problems of stealing ideas… I think this is the greater problem for me and many others… What are your sources of professionals?
Thanks!
BR. Manuel.
I did everything myself (programming, design, support, marketing, etc.) until several years into it when it was making enough to bring on extra help. When I did, I micromanaged a lot and reviewed everything they did. But then I grew to trust the people I’d hired, and have written manuals detailing what I expect of them. Check out The E-Myth Revisited for some help with that. I never worried about stolen ideas. Ideas are a dime a dozen. It’s how well you execute and market the product that will make the biggest difference.
Thanks for the quick response Brandon!. I’ll follow your suggestions!.