Note: This post is the second in a series of posts about starting your own on-line business. To see other posts in this series, see the Entrepreneurship category of this blog.
One important aspect of starting a successful business is picking a product or service that fills a need. Yes, it is possible to create something for which there is little or no interest, then try to convince people they have a problem, and proceed to sell them your solution. But it’s so much easier if you are creating a solution to a problem that already exists, and that people are already aware of, since they will be looking for a solution anyway.
That said, there are billions of people in this world. And chances are if you create something that fills even a small need, in your own eyes, someone else out there will probably find it useful as well. You may just have to be more creative in how you get the word out to them.
Narrow Your Niche
Keep in mind that while creating a product that “everyone” needs is a grand goal, if you try to sell to everyone, you’re more likely to end up selling to no one, and wasting a lot of money in the process. You need to identify who really wants your product or service, why, and how you can reach them.
Tim Ferris suggests in his book The Four Hour Work Week, that you pick a niche that’s small, but that has enough people to bring in the income you’re looking for. Here’s what he said:
“If you start off aiming to sell a product to dog- or car-lovers, stop. It’s expensive to advertise to such a broad market, and you are competing with too many products and too much free information. If you focus on how to train German shepherds or a restoration product for antique Fords, on the other hand, the market and competition shrink, making it less expensive to reach your customers and easier to charge premium pricing.”
Don’t try to compete with the big boys. With small business, it’s better to be a sand castle in a child’s sandbox, than a grain of sand in the Sahara. Remember, you don’t need to make millions of dollars per year to live like a millionaire. There are enough people in almost any market to support whatever kind of lifestyle you want to live. Finding a niche business that targets a specific group of people (in my case, private music teachers) is a more efficient and direct way to get customers than marketing a product to “anyone who wants it.”
Stick With What You Know
So, how do you pick a good niche for your business? I recommend that you start with something you’re already interested in, and experienced with. For example, I know very little about rock climbing. I only know a few rock climbers, and don’t have a strong interest in doing it myself (although I’m impressed with those who can do it well). For me to start some kind of business around rock climbing right now, would be pretty foolish. Rather, as a private music teacher, creating a product for music teachers was a much better choice for me.
There are a few reasons I recommend starting with something you already know a lot about.
- You save a lot of time in the research process
- You have a head start in knowing your customers and their needs (since you’re included)
- You already speak the lingo, and can do a better job marketing
- It will be easier to maintain interest and a desire to keep going (easier to feed your “Driving Force“)
What hobbies do you have? What are you passionate about? Think about things that frustrate you in life, and think if there may be other people who are as frustrated about it as you. Can you figure out a way to solve the problem for you, that could also solve the problem for someone else? Brainstorming these ideas can be a great place to start.
Figure Out Your Number of Potential Customers
Once you have an idea of what you’d like to do, I recommend doing some good research before you get too far into choosing your product or service, to make sure that there is enough interest to make it worth your while to continue pursuing. This is where a lot of businesses go wrong. They think up an idea that sounds great to them, and then they go for it, without doing much planning or research first. They end up wasting a lot of money and eventually failing, because they never took the time to find out if it could be successful in the first place.
You’ll hear a lot of gurus tell you to use some of the free on-line tools that are available to help gauge how much interest there is in a product or service. Google Adwords usually ranks among the top, which lets you put ads on the side and top of Google searches (and on web pages all over the Internet), and you pay a few cents each time someone clicks your ad. You can use this to test your marketing message and see how many people might be interested, even before you start to sell. Google Trends is also a decent place to test out certain keywords, and see how much traffic they might generate (and it’s free). There are several other great sites like this with excellent data.
I think these tools are wonderful! But in honesty, I didn’t really know much about them when I started, and therefore, I didn’t use them much at first. Yes, I was inexperienced, kind of stupid, and pretty lucky. But you don’t have to learn the hard way.
Your Ideal Lifestyle Costs How Much??
This kind of delves into another topic, but it would be a good idea to decide how much money you would need to make each month to live your ideal lifestyle. Then determine how many customers you’d need at what price to reach that mark.
To make it even more effective, don’t just guess, but actually take some time and write down what you want to do with your life. How much would that new house cost you each month, that $100,000 in savings, or that 6-month international vacation every year? Write down specific items and their cost, and see what monthly amount you come up with, on top of your current expenses. Let’s say you figure that $20,000/month is enough to live your dream lifestyle. Your actual number may be much lower or much higher, but let’s use it as an example.
To make $20,000/month, you would need to have 1,000 customers paying $20/month. Or 400 customers at $50/month. Or 100 customers at $200/month. How hard is it to get 400 people to pay you $50/month for something? It’s really not that hard if you’re truly providing value that’s worth it to them, and if you know how to reach them. And it’s especially nice if there are already marketing channels in place to help reach your audience (for me, that includes national and state music teacher organizations, magazines, websites, and more). If I had used all my resources better from the beginning, I probably would have reached the point I’m at now, years ago.
Yes, there are expenses you have to factor in as well. For an on-line business, though, these aren’t very high. Doing these little calculations like the one above can help make your goal a lot less intimidating, and seem more reachable.
Sell Before You Create
But unless you’re a programmer, like me, and can do all the work yourself, don’t go ahead and start throwing lots of money and time at creating your product until you’ve already proven that it will be successful. Yes, do run a simple Adwords campaign, and see what happens. Go ahead and create a simple landing page that tells about your [future] product and gives a short signup form where people can put their first name and e-mail address to get on your mailing list. (You could probably find someone in the Philippines to do this for you for less than $50 on www.odesk.com). If there’s enough interest from you [my readers], I may even write some detailed instructions on how to do this yourself. It’s pretty easy.
Once you’ve seen that people are actually interested in what you’re offering, you’ll be able to better gauge how long it might take you to reach your goals. If you’re getting a good number of interested prospects in a timely manner from Adwords alone, that’s a good sign. There are lots of other marketing methods you can use to increase your prospects once you’re ready to go full force. So based on how quickly your mailing list is growing, and the excitement level of those who have signed up, if it looks like you’ll be able to achieve your goal in a reasonable timeframe, then go ahead and create the product! The people who signed up on your mailing list will be thrilled when your product is available, and most will be anxious to try it out.
I don’t consider myself an expert on landing pages or product launches. My experience is more in growing more slowly and steadily, just taking it a little at a time, but having little or no upfront costs. But I believe using these other methods can bring results much more quickly, and it’s how I’d go about if I were to create another product.