Is Your Great Idea A Real Biz?
We’ve all been there: drinking our morning coffee, reading the business section, washing our dogs, when–Bam!–an idea for a new gizmo or service that’s going to change the world comes crashing home. But before you liquidate your 401(k) for startup capital, step back and figure out whether your “great idea” truly translates into a money-making venture.
The first question you should ask: Do you have a compelling value proposition? This point is forever worth repeating: Great ideas are only great business ideas if you can convince people to pay for your product or service at a price above what it costs you to deliver it.
Next question: Is there a viable market for your new product or service? Professional investors (like venture capitalists) don’t want to write checks to launch companies with limited growth potential, even if they’ll likely be profitable. And never count on creating a new market from scratch–chances are there’s a reason it doesn’t exist.
Before you can dominate, you have to cover your development costs. “Most companies that fail do so because they are lacking capital,” says De Puy. The key here is honesty: However much you think you need to bring your product to market, figure in a healthy cushion.
Lasting businesses need a sustainable competitive advantage. What’s yours? If it’s technology, can you patent it? If it’s a commodity item, can you brand it?
If you’re still convinced you’re onto a real business opportunity, ask yourself one last question: How hard are you willing to work? According to the latest data from the Bureau of Labor Statistics, just two-thirds of new businesses make it past the two-year mark, while only 44% last four years–and that’s just survival, not success.
Photo by clix.
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