It may come to you while you’re working late, talking to your friends, or even when you’re struggling to sleep at 2am, but there’s no mistaking the amazing feeling that hits you when you believe you’ve just come up with a great business idea - the “game changer" as it were. But how do you verify that this idea is indeed “great”? Well, to help you answer this question, here are 5 signs that you have a great business idea:
1. It solves a problem
Ensuring that your business idea solves a particular problem is single-handedly the most important part of any business. It is imperative that your business idea solves a particular problem or satisfies a need because that would mean that there is a market for whatever you are looking to provide or sell. If you have an idea in mind, there are two fundamental questions to ask yourself:
Question 1: Does this idea solve a problem (or satisfy a need)?
Question 2: Is the problem big enough for people to be willing to pay for a solution?
Answering these two questions is the starting point to formulating any great idea. Your idea needs to deliver a solution, so sought after, that it satisfies a sizeable number of people (“sizeable” is relative and dependent on your target market).
For example, WhatsApp solves the problem of communication across mobile platforms, Google satisfies our thirst for quick answers and Nigerian Breweries Plc satisfies the large demand for alcohol in Nigeria. All these businesses are successful today because the core of their ideas was based on solving a problem and satisfying a need.
2. It’s scalable
Scalability is the potential of your business idea to grow and be applied to an ever-increasing market. For your idea to prosper in the future, it needs to be scalable; and scalability is achieved through understanding the potential of your idea, identifying avenues for growth and planning ahead.
If I was to visualise scalability, I would depict it as a round core (•) that spreads out and increases in size as the business grows and gains customers. In order for your idea to be truly scalable, you will need to clarify what your ‘core’ is i.e. what the focus of your idea is. Without a focus, people will most likely be confused about what exactly your business is about. The core of your idea is key for scalability because it serves as a guide for how your business will grow and what your business’ brand message will be.
For instance, Facebook’s core has always been centred on connecting as many people as possible. Facebook started off connecting Harvard students then expanded to the universities of Columbia, Stanford and Yale, then to universities across the USA and Canada then in time, to communities around the world. Facebook today, is the gold standard for scalability with 1.86 billion monthly users worldwide.
3. It’s easy to understand
Your idea may solve a complicated problem, but you should be able to explain it as simply as possible. Andrew Hersch, Co-Founder of City Lunch Club, once said – “A key to knowing if you’ll be successful isn’t so much whether others like your idea, it’s if they can easily understand it with minimal explanation”. Being able to answer questions about ‘what your business idea is’, ‘why it exists’ and ‘what value it provides’ is a key element to attracting prospective customers and investors.
4. It’s hard to copy
Not every great idea needs to be one-of-a-kind; some successful businesses are based on old ideas, re-imagined. Now don't get me wrong, novelty is always welcome but whether your idea is new or not, it is imperative that HOW you execute that idea is unique and hard to copy. The execution of an idea is just as important as what the idea is; in fact, two businesses could be based on the same idea and perform very differently simply due to different execution strategies.
For instance, Apple and LG are both smartphone companies but Apple has the 2nd largest market share, in a tight battle with Samsung for the top spot, while LG lies below them in 9th. Apple’s success can be attributed to quite a few features but one major advantage Apple has over its competitors is its iOS software, which is hard to replicate. The harder it is for others to copy your execution, the more unique and valuable your idea is.
5. It’s financially viable
This is where things get real. Your idea could have all the four signs listed above, but if it isn’t financially viable then it’s not a realistic idea. You need to have the resources available to fund your idea as well as a clear vision of how you will bring in future revenues.
The first phase will require you to certify how your idea will make money. To do this, take the time to make a detailed financial plan for the first six months or year of your business. Calculate how much money you will have to invest and how you will realistically make a profit. Once you have made your detailed financial plan, you will be able to see whether your business idea is feasible or whether it will end up bankrupting you.
The next phase is the funding phase, here are four ways you can fund your business ideas:
- Through personal finances - This will probably require saving up for some time, but it is the safest and most advisable way to fund your business idea.
- Through equity - This is when a percentage of shares in the business is sold in exchange for capital to start your business.
- Through crowdfunding - This will involve pitching your idea (usually online) and raising capital from contributions from a large number of people.
- Through loans - Loans from a financial institution or even from close friends and family can be used to fund ideas. However, I would not advise this route because there are too many uncertainties when starting a business to add the certainty of paying back a loan.
If your business idea satisfies these 5 signs then it is very likely that you’ve got a great idea on your hands. It is important, however, to continuously test your idea to avoid overlooking any potential pitfalls. I would advise putting your idea in front of people who want to poke holes in it, to help you uncover any weak points, rectify them and make your business idea better than it was before. Good luck.
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