So You Think You Have A Brilliant Business Idea? Read This First
Business ideas are possessive.
Your heart beats faster whenever you think of it, and you often can’t find any sleep at night as your imagination runs and your mind explores the idea. If any of this sounds familiar, you’re not alone.
This is often the experience that kicks off the journey for most entrepreneurs.
While this feeling is great, it’s arguably responsible for the failure of many startup businesses.
Before you lunge forward to register that company, rent office space, build a beautiful website, or hire any employees, you need to set your emotions aside and apply the simple logical analysis I’ll share with you in this article.
I call it the “3M” filter.
It’s a simple analysis any entrepreneur can do, that will save you a ton of wasted time, money, energy, stress and tears.
The first “M” is about “Me”
When most people think about a business idea, it’s often about the amount of money that can be made, the impact and number of lives that could be positively touched, or the fame that could come with a ground-breaking innovation.
Interestingly, we often don’t think about ourselves until it’s a tad too late.
There may be a lot of money to be made in the restaurant business, but are you willing to give up your evenings, weekends, holidays and time with family for the business?
That breakthrough social impact idea you have could change a lot of lives in rural communities, but are you willing to travel around the country to those rural areas and work with them?
Are you willing to give up your comfort zone? Are you genuinely interested in helping poor people?
So, before you go ahead with that idea, ask yourself these questions:
- Can this business meet my personal needs of time, money, impact, comfort and freedom?
- Do I have any knowledge, skills, passions, interests, experiences or contacts that are relevant to this idea?
- Will I stick with this business if it goes the next 12 months without making any money?
Until you have satisfactory answers to these 3 key questions, you may be setting yourself up for frustration and failure if you go ahead to take on that business.
The second “M” is about the “Market”
Most people who start a business believe they’re offering something of value to the market and customers will pay for it with little persuasion.
This assumption is often wrong in reality.
According to a study by CB Insights based on a post-mortem of over 200 startup businesses that failed, almost half of them (42 percent) failed because there was no market need for their products.
These are all entrepreneurs who were convinced they had a great idea and went ahead to start a business. But the market proved them wrong.
The truth is, unless you have mastered the art of reading people’s’ minds, you really cannot tell, 100 percent, that there is a market for your business.
Before you take that leap, here are a few important questions to ask:
- What does the market really need or want?
- What do they like and dislike about the existing products, services and offerings in the market?
- Is the market small or large?
- Is it made up of established and fierce competitors?
And the best way to get credible answers to these questions is to actually go out there and ask questions. Don’t sit in a comfy chair and assume. Go out there and ask, and see things, for yourself.
The third “M” is about “Margin”
If your business is for-profit, then it’s very likely you have decent expectations to turn a profit.
The thing is, not every business idea becomes a profitable business. What I find is, in reality, costs are often much higher than we planned for, and the revenues are often lower than we estimated.
They may look really good when they’re ideas, but squeezing out a profit in real-life may require high trading volume, economies of scale, efficiency or very technical and specialised skills.
So, after your business idea has passed the first two filters, it’s important to start making estimates of your costs and revenues.
- How much could be required to make, market, sell and deliver the product?
- If your cost estimate to make the product is N100, 000, would you still make a profit if that cost is actually higher by 50 percent, or 100 percent?
These are hard questions no doubt. However, they’re best answered now than later when your money, time and energy are on the line.
So, you think you have a brilliant business idea?
The 3M filter I’ve shared with you in this article is a deliberate approach that transforms an idea, dream or vision into a real and ready opportunity.
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