How to Pick a Business Idea

Ideas are not worth much. Software is not worth much. Blogs are not worth much. Don’t get emotional about the idea vetting process. You shouldn’t include any ideas that sound miserable on your list, but you shouldn’t jump at an idea because it feels exciting and fun. That feeling usually wears off.

The following is my idea funnel. If an idea passes each of these tests, you have a worthy pursuit. You can then sort those ideas by your priorities and answers to questions like, “Which has the most profit potential?” or “Which can I get started the quickest?”

You like the technology

Ignore this step if you plan to outsource the technology.

Mind you, this doesn’t mean it is a technical challenge. This is just a check that you are happy working with the best technology stack available to solve the problems you have to. Bingo Card Creator is not an incredible achievement of software, but A/Bingo is a pretty nice, reusable piece of software built on a stack that most people can get excited about (Rails). BCC spawned A/Bingo and other interesting pieces of automation and optimization. Don’t forget about those pieces.

You like the business challenge

The business challenge of BCC is much larger than creating a web-based random number generator. If you don’t want to optimize selling to teachers, don’t create a product for them. If you don’t like SEM, don’t pick an idea that leaves you without any other avenues to customers. Likewise, don’t put yourself in a market where high-touch sales and in-person time is required if you don’t want that to be a part of your life.

You like the people in the market

If you hate war, weapons, and consider it all a waste I would strongly suggest that you should avoid creating products for the defense industry. Find an industry that interests you. Don’t create software for hunters if you are morally opposed to killing animals. Don’t create software for hunters if you think they’re all slack-jawed yokels. It’s not going to work.

You have access to people in the market

SEM, SEO, phone calls, emails, conventions, meetups, local media, Facebook, Twitter, friends, podcasts, YouTube, iTunes, Joint Ventures, direct mail, LinkedIn, forums, community sites, newsgroups

Find a repeatable way to connect to the market and get customers. Pick a market and channel that you enjoy. I haven’t logged into Facebook in three years or more. I won’t be starting a Facebook app business. Keep in mind that this step will require some research. Those channels will reach people, but it might not be best if you start out with the plan to be #1 on Google for ‘project management software’ quickly and with a limited budget. This is a place where competition should figure into your reckoning.

You can solve a problem in the market

Talk to the people in your market and discover their largest problems (See: Lean Startup, Steve Blank, Eric Ries). Determine if you can solve those problems.

Can you do it profitably? Is the technology workable? What would it cost? What is the marketing cost? What is the best channel? What is your expected conversion rate? How long until you can make a sale? Etc.

Most of those questions are not answerable. Not without a lot more information than you have or can collect reasonably, but you can still give them some thought and make estimates. Risk can (probably) be thoughtfully minimized.

The people in the market that you have access to have money

Teachers don’t have money (for the purposes of this discussion). Make sure your market has money. Look a government statistics. Look at magazines. Look at SEM on keywords in your niche. Are people making money from this market? What is the pricing like? Does that support your lifestyle? What does the support burden look like? (Hint: higher prices often come attached to better customers for startups)

Those people will buy from you

Hunters do have money, but they usually want gadgets they can use this year. Very few of them want software that helps them potentially improve the quality of the deer herd using time and resource intensive methods that their neighbors can spoil. Hunters wouldn’t buy Whitetail Scout even if all of the above was true for me.

Hunt Clubs will pay for exactly that to attract more and better hunters and to improve things for their kids, etc. Most hunters are conservationists at heart.

Make sure you are targeting the right buyer with your offering, then test them out for a purchase. Whether you make a webpage that asks them to click a ‘Buy Now’ button or you ask for money in person during interviews, just make sure you ask. If you’re not excited with some pre-sales in hand, you should pick another idea…now.

What now?

You need to talk to customers and test your hypotheses about the market and the idea. If you started this process with an actual idea for a product and didn’t talk to customers for step 5 then you need to go back and do remedial work to validate that the idea is a real problem for the customers.

If you enjoyed this post, you should get your free tips on cold calling your customers.

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