If you have even the smallest entrepreneurial bone in your body, chances are you’re constantly having great ideas for new businesses. And you probably have a hard time sifting through these ideas to figure out if they’re any good or not.Stopping the analysis of your idea at ‘is this a good idea or not’ is short-sighted however … and is an area where many serial entrepreneurs run into trouble. Assessing an idea for viability and worthiness needs to be a two-step process.
Step 1: Is this a good idea for a business?
To figure out if your business idea is viable or not, go straight to Josh Kaufman and his book The Personal MBA. In it he details five things every business must have in order for it to be a viable commercial venture (as opposed to a hobby … or a flop.) Kaufman says:
A business is a repeatable process that: 1. Creates and delivers something of value… 2. That other people want or need… 3. At a price they’re willing to pay… 4. In a way that satisfies the customer’s needs and expectations… 5. So that the business brings in enough profit to make it worthwhile for the owners to continue operation.
Number 5 is pretty critical as it’s the difference between something being a love job/hobby … and a viable business. Once you’ve determined your business idea satisfies all the above criteria, that’s great. You have a business that can make you money. But, you now need to take your deliberations one step further. You need to ask yourself:
Step 2: Is this a good business idea for ME
Anyone who has run a business knows how hard it is. The hours are long and the rewards sometimes take a while to be seen. If you intend to be a part of your business long-term (as opposed to cashing out as quickly as possible) then you need to consider the following before pressing the go button:
1. Is this business scalable?
For a business to be scalable it needs to be able to meet additional demand for its product or services without compromising on quality or price.
So a business where you’re selling adorable shoes for babies, and you’re making all the shoes by hand yourself, that’s not scalable because you can only make so many pairs of shoes in a day/week/year.
A business where you’re selling your time for money (ie consulting, design etc) is not scalable because you only have so many hours in a day to sell access to.
2. Can this business work without me in it?
John Jantsch sums things up really well here when he says:
In order to truly get free of your business in a way that will allow you to grow you must work to replace yourself in two key jobs – the doing of the actual work that makes money and the selling of the work that makes money… If the business relies on you to do either of those functions you don’t really have a business, you have a job!
If your business isn’t scalable, you’re creating an immediate ceiling for what you can earn from it. And most likely, it won’t work without you in it. If you are creating a business that can’t work without you in it, you’re simply creating a job for yourself. If you’re not actually looking for a job – then the business idea isn’t a good one for you.