19 Aug Small business Ideas, big business opportunities
Zap! Lightning has struck and you have just had your next big idea! An epiphany of sorts, or as Smee would say in the movie ‘Hook,’ “an apostrophe.” Congratulations! You have just identified a problem and found a possible solution. Better yet, you may have found a solution other people are willing to pay for. This idea may have come about when you were frustrated with something, or witnessed someone having trouble and thought of a way to relieve them of their struggle (also known as a PAIN POINT). Immediately, thoughts start running through your brain of different ways to build it and how much money you could make if the world bought your idea. You start thinking of friends and relatives that may be able to help you. As these thoughts continue to progress and sketches begin to emerge, you realize, this could get expensive. How much will it cost? Do I have the money to pay for it? Could I borrow money? Maybe I’ll take out a second mortgage? Should I get a loan? WOAHHHHH! Slow down.
There are some major considerations before thoughts of financing or production should ever be a concern. So take a deep breath and enjoy the new idea before you stress yourself into an early grave. Just keep reading and I will show you ways to analyze your idea to see if it may in fact be a business opportunity. Knowing the difference will save you time, money, and hair before investing into an idea that could lead to a financial dead end. I will show you some key elements that help determine whether you should pursue your idea as a business or let it go. We call this an Opportunity Feasibility Analysis. Now, let’s dive deeper into the difference between IDEAS and OPPORTUNITIES. Before considering financing your life away under the allure of potential riches, let’s ask a few level-headed questions first:
- Do other people have this problem?
- Is this a common problem?
- Do people know they have this problem?
- Do you have to educate people of the problem?
- Is your solution the best solution for the problem?
- Is the problem (PAIN) big enough for someone to pay money for a solution?
Seeing a pattern here? It all comes down to the problem for others and not just the inventors when turning an idea into a product for the marketplace. It can be very difficult to be objective about a subjective problem. It is important to understand the difference, and acknowledge that people are not frustrated by the same things in the same ways. Nor are people motivated in the same ways to make a purchase. So, as much as you may love your new idea, others may not agree with you. That is okay. That does not mean your idea does not have wings to fly. It very well could. That is why I am writing this blog today. It is to show you some ways to identify if your idea potentially has these wings to be a business opportunity instead of just a good idea. They are two very different things!
What’s the difference between ideas and opportunities?
To start, let’s first identify the difference between the words IDEA and OPPORTUNITY. According to Merriam-Webster’s dictionary, an IDEA can be defined as:
- a thought, plan, or suggestion about what to do
- an opinion or belief
- something that you imagine or picture in your mind
Notice that each of these definitions have very subjective language. “An opinion or belief” is obviously a biased view. “Something that you imagine or picture in your mind.” Again, this is an internal thought. Looking at these definitions and knowing what an idea is, you can see that it is a very personal, internalized concept. If businesses only sold products the way the inventors wanted, then more than likely they would not do well offering what the customer’s want or need.
Now, let’s look at the definition of an OPPORTUNITY:
- a favorable juncture of circumstances
- a good chance for advancement or progress
If you notice, the definition of an opportunity is very different. An opportunity considers more than itself, but considers outside factors and conditions as well. “A favorable Juncture of circumstances” considers other variables that make something opportune. “A good chance for advancement or progress” shows the consideration of odds based on a situation.
Now that we have identified the differences, let’s get back to your “million dollar” idea. YOU have found a solution YOU like, to a problem YOU have. That’s YOUR IDEA. As you think more about this idea, you feel it may be possible that others have the same problem and would buy your solution. That would make the idea an OPPORTUNITY in the marketplace. However, just because you FEEL that way (subjective), does not necessarily mean others do as well. Ideas happen all the time, while opportunities are much harder to come by. Opportunities, when talking about products or services, can lead to potentially staggering revenues and possibly leaving your day job behind. Business opportunities can make a positive difference in people’s lives, they can change the world, and they can create jobs and boost economies.
How to identify an opportunity
So, how do you know if your idea is a business opportunity? Well, you would perform what we spoke of earlier – an Opportunity Feasibility Analysis. To properly distinguish whether or not an idea is truly an opportunity, there are four qualities that need to be met; Attractive, Durable, Creates Value, and Timely. Let’s look at these a little closer:
- Attractiveness: First and foremost, your idea needs to be attractive to your target customers who will buy your idea. You first you need to identify who your target customers are for this idea to work. The idea must also be attractive in the industry in which it is going to compete. When I say “attractive” I do not mean just aesthetics and a cool look and feel. I am also referring to the idea itself. Does it create excitement? Does it have an attractive price point? Will the quality and ease of use meet or exceed the user’s expectations? Is it unique? Does it have attractive features and benefits? Basically, what about your idea would make people want to buy it?
- Durable: Durability of an idea from a business standpoint means that it can last as a business. A PRODUCT and a BUSINESS are two very different things. Businesses create products, but a whole business built around one product that has little scalability is pretty much a dead end. A scalable product can penetrate multiple markets and sometimes industries with many ways to grow. A perfect example is the invention of the microfiber textile. Some may see this as just a rag for cleaning – thus just a cleaning product. But it can also be cut into the shapes for clothing, embroidered with corporate branding, and BOOM! Now that same rag is sold in the clothing departments with minimal change to the textile’s manufacturing and production processes. If you ever watch Shark Tank, the panelists are notorious for calling people out for having a cool product, but not a scalable business behind it. If the product is not scalable, thus having no way to expand into new markets with new product lines, or have multiple branding opportunities, they often recommend to the inventors to enjoy the ride while it lasts, sell as much as possible, and then get out. The Sharks rarely invest in those product ideas because they are often not business ideas that can grow and last. If they do invest, it is because they know they have the means to expand the product’s potential that the inventor did not think of. Some other traits of durability include replicability. Is it easy to replicate for the competition? Can they easily mimic your product and steal your market share tomorrow putting you out of business? Can your product be patented to protect against such a thing (that’s a whole book in itself)? Also, is the idea purchased as a commodity, sensitive to economic conditions, or is it a necessity unaffected by the state of the economy and disposable income (inelastic demand)?
- Creates Value: This is obviously one of the most important factors to generate sales. Your idea must create value in order for people to purchase it, thus generating revenue for your business to be sustainable. A big consideration here is the cost of the idea in relation to the value it creates for the customer. If it costs more than the value of the pain you are solving, then people will not want to buy it, aka willingness to pay. Recently, consumers have been facing this issue with high-end smart watches. They have a $700 phone in their pocket, so do they really want to spend another $200-$400 to read a text on their wrist? Is the time they save from having to pull their phone out of their pocket really worth $400? The watches do much more than that, but the mass market does not see things the same way as the innovators did. This is common in the early adoption stages, where products are looked at through a very simplified lens by the mass consumer. However, now that the prices have come down, more people are adopting this technology now that the price is beginning to match the perceived value. So, again, does your product create perceivable value that is affordable? Do some research and talk to people in your target markets. It’s amazing how much you can learn if you just ask the right people.
- Timely: Timely can get a little tricky as this is really an area of economics, demographics, psychographics, and various other externalities. Basically, this quality comes down to the question, “Is this the right time for my idea?” When analyzing this, it is always best to look at various trends. Major trends to consider are economic trends, social trends, technological trends, and industry trends. All trends can be looked up on google, but I will do a simple breakdown.
- Economic trends will be factors such as disposable income, unemployment rates, interest rates, spending, and other metrics that define how a country or region is doing financially. Obviously, it is hard to sell a premium commodity product to the mass market if the unemployment rates are high and people have little discretionary income. They will be more prone to buy the things they NEED and not the things they WANT.
- Social trends have to deal with things that are trending socially and culturally. This could be lifestyle trends such as a higher demand in organic products and a decrease in demand of fast food and processed foods. It could be clothing trends, exercise trends, yoga and smoothies, etc. There are TONS of trends, but often we observe them subconsciously and they become more apparent as we think about them in relation to our ideas.
- Technological trends are pertaining to both what technology consumers are buying, and what technological capabilities we have in society. For instance, James Cameron waited ten years to make Avatar because the technology wasn’t where it needed to be yet for the vision he had of his idea. A decade later when cinema technology was where it needed to be, Avatar was made, and became the #1 grossing movie of all time! Now that’s knowing the difference between an idea and an opportunity! 3D printers are another example of this. The technology for 3D printing has existed over 30 years now. However, it was not made affordable to the public until really the past 5 years when they were able to be less than $2000. The mass market and DIY communities did not have $10,000 – $1.5 million to spend on 3D printers. The technology improved, became more affordable and now the timing is right. Even Dremel makes a 3D printer now.
- Industry trends are very important to not only consider, but research heavily. To survive in an industry, you must know where the industry has been and where it is going to be. In business, people often, if not, overuse the corporate cliché Wayne Gretzky approach. For those of you unfamiliar, I’ll tell it, because it is good advice. For those who heard it 100 times I’m sorry. When Gretzky was asked in an interview how he always outperformed other hockey athletes even though there were many other players that physically tested better, Gretzky stated, “I skate to where the puck is going to be, not where it has been.” He would be where the opportunity was. You can look at industry trends and see what other major companies in the industry are talking about and where they are going to be. You don’t want to create a product in a dying industry, nor do you want to make a product that has some of the same mistakes the industry has made in the past. If you are the first in your industry, try to find out if other companies have thought of it but cancelled the project. Find out why if you can. Sometimes you may be lucky enough to have a new product that they have not thought of yet. It’s rare, but it does happen, regardless of what some skeptics say. Research is absolutely critical.
Research, Research, Research
In order to assess these qualities, much research has to be done. Don’t worry, it can be a fun process. Especially when I provide you with some great free resources to get you started. I would recommend using www.SBA.gov. More specifically you can check out the Small Business Administration’s marketing guide to help you get started with your market research. Some additional sources are:
- SBA.gov business data statistics
- US Census Data
- Census Fact Finder
- Federal Statistics
- SBA.gov Research and Statistics
- Bureau of Economic Analysis
I hope this has helped you get a grasp on how to identify if your next “million dollar” idea has the potential to be a full-fledged opportunity worthy of capitalizing upon. At Elite Innovations we help people every day on their path to turn ideas into opportunities, and those opportunities into real-life products. Helping our clients along this path at the right pace is a critical part of the process to help ensure their success (and ours for that matter). And remember, sometimes an idea on its own does not meet all the qualities of an opportunity, but with a few adjustments, the idea can have wings to fly and become a business. So go, young entrepreneur, and create your own opportunities. Entrepreneurship is not merely a replacement for your day job, but rather a way of life. It’s the difference between a pipe dream, and crossing off every last thing on your bucket list. I’m not saying it will be easy, but I can promise that it won’t be boring. And if you ever need a helping hand along the way, you know where to find us. Thanks for reading, and good luck!