There is more to business than just a great idea, but coming up with that great business idea is a solid start. If you’re looking for a profitable business idea, here are six ways to hatch ideas and separate the good ones from the future flops.
I have three simple criteria for my businesses:
- They have to be reasonably complex so they are not easily replicated,
- They need to be scalable beyond the limited number of hours in a day, and
- They need to have a steady cash flow.
1. Ideas rarely materialize out of thin air.
Occasionally you may be struck with inspiration from seemingly nowhere, but a good business idea needs more substance to it than shiny appeal. Sometimes your idea imitates a successful, easy-to-copy business concept, but then you may find yourself facing heaps of competition in record time.
I was able to identify which of my business ideas simply sounded good, and which ones had actual potential by applying the three criteria listed above. I knew I didn’t want to start a business that any entrepreneur could easily copy the minute my idea was up and running. I also didn’t want to use a business model that would limit my earnings to certain hours of the day or a certain selling season. The criteria worked—my first startup grew into a profitable small business.
After establishing a few more successful businesses, I eventually started Patriot Software (a Software as a Service or SaaS business). Patriot is an online accounting and payroll software company with infinite scalability and a subscription-based revenue model.
2. Failure can actually be good for your business.
You’re going to fail in business. Even if you start a business and it runs successfully overall, you will still have small setbacks. Failures will cause you to scratch your head and reevaluate what you’re doing and why. These are your best opportunities to learn and grow, so embrace them.
Failure is one of life’s best teachers. Not only does it expose the flaws in our ideas, but it also pierces that thick wall of ego that can build up around an entrepreneur as they experience success.
Good ideas germinate in an environment that has the right balance of confidence and skepticism. Failure helps you see that you are human, and your ideas need to be tested. And exercising the critical thought that spots errors and dissects other business models will help you create new ideas.
Don’t be afraid to fail; be afraid of not improving.
3. Iterate your ideas.
You can control your failures by planning for them. So, instead of fully implementing your great idea, you can test your idea in small sprints. That way you can learn what works, what doesn’t, and make changes accordingly.
For example, my company implements a form of project management that does sprints to develop ideas for new products—mapping them out, prototyping them, and then testing them. In some cases, it takes one workweek to come up with a functional prototype that can be used by testers. At the end of the five days, the product is far from complete, but the information gained from the process is invaluable.
Consider an alternative: taking months to develop a fully working product that ends up flopping because it wasn’t tested early or often enough. If you start with the mindset that failure is unacceptable, and refuse to test your ideas in small sections, you could end up building the Titanic when a toy boat could have told you what you needed to know.
4. Understand the impact of time.
A profitable business idea isn’t all that great if you don’t—or can’t—open the business quickly, and generate enough cash from customer demand to pay your bills. In truth, this is a common reason for failure among entrepreneurs. They come up with a concept for a business, but by the time the concept is turned into reality, it’s no longer a viable business idea or you’re out of cash.
For example, maybe you have an idea for manufacturing a remarkable smartphone case; however, a larger, updated version of that smartphone rolls out before you are ready to start selling your now-too-small cases. Oops.
When you come up with a business idea, understand the impact time has on an idea’s creation and implementation. The most revolutionary snow removal business would be off to a bad start if it opened in April in the Midwest. Time can either work for you or against you.
5. It’s not what you know, but whom.
One of the most important traits any modern entrepreneur can have is excellent networking skills. Having “connections” in your industry—people who have experience and insight—is an incredible asset. If you’re starting your first business, chances are there will be things you don’t know about the industry—or even business itself.
Having friends who are accountants, lawyers, insiders, and business veterans can help you avoid costly mistakes. You can learn from their expertise, and they may have suggestions for how to do things better.
But having friends in the business world who can offer advice is just one part of networking. Remember that you can have the best business in the world, but if your customers don’t know your business exists, it is not worth anything.
Many great business ideas go belly up because the startup wasn’t promoted. If you want to sell, people need to find you. As you flesh out your business idea, look at how you will promote it and who can help you.
Entrepreneurs come up with good, bad, and great ideas for new businesses. The challenge is figuring which are which. This list is one way to pan for gold in your bank of business ideas and find the nuggets most likely to be your next great idea.