How to Pick the right New Business Idea

When someone says to me that they want to start a new business I always tell them to go away and think about it because starting a new business is tough. They need to know that it is something they really want to do.

I probably do this a few times. If they keep coming back then I say to myself they are serious. So what's next?

Well usually they have some great idea about something (<insert product or service here>) that they think they can sell. They might have a number of ideas. But almost always whilst it might be a great idea or ideas they haven't really tested the idea to see it if will actually work and if they have multiple ideas they are having trouble settling on one.

I have a simple process then for getting someone to pick what is the right new business idea for them. It does require some homework though. In brief here are the steps...

Step 1: What am I good at?

Go away and come up with a list of 10 ideas of things you are good at and would like to do. Good at usually means you've done "it" before or something similar and other people (not yourself) have said you are good at it. Take your time and force yourself to come up with 10 ideas. More often than not there will be one idea that you will really like from the outset but you need to come up with a number of ideas so you can compare and contrast what you are about to get yourself into.

Step 2: Is there Market Demand?

There is no point in providing a product or service unless there is some proof that someone will buy it. It's at this point that you apply some basic math whether you like math or not. Take the top 3 or 4 ideas from Step 1 and test them against this basic equation...

Amount I can sell per year X the $ value I'll get for each item or service - the cost of operating the business each year > the money I want to make each year.

Point being is there enough of a market for what ever you want to do to make the money you want to make (what every amount of money that is)? I've see lots of great ideas fall flat because there are not enough people or businesses that would be interested in buying the product or service you want to sell and/ or because people's income expectations are too high.

Step 3: What's the Market Competition?

All products and services go through a cycle. Someone comes up with a great idea and begins to sell it, they become successful, other people see that success and begin sell they same product or service. Eventually what was a new market becomes a saturated market and the price is driven down. The strong survive and the weak perish. Evenly a poorly run business can make a lot of money before it perish's if they are a new market entrant.

So go out and find out whom your competition is. Look long and hard even if you think you've got a truly new idea because they number of truly new ideas out there is few and far between.

Conclusion

Often when someone goes through the above process they find that the idea for a new business that they thought was the best idea in the world really isn't or they totally change their idea of what business they want to go with and come up with a completely new idea. Point being whether you end up in the same spot you started out in at the beginning of this process or not it, it is important you get into it with your eyes wide open. What every business you end up getting into there are lots of things you can do to make yourself more successful. But it helps if you pick the right business for you in the first place!