What Makes a Good Business Idea?
Ah….yes. Who doesn’t love ABC’s television show “Shark Tank”? There’s nothing like watching someone walk into a room, pitch their entrepreneurial dreams to investors, and then get completely crushed on national television.
Of course, that’s not exactly how the funding process goes. There’s quite a bit more due diligence and for the most part it’s not so brutal. But with that aside, let’s consider the companies that do receive funding. What is it that these companies have in common? Why do some companies receive millions and others get laughed out the door? What makes a good business idea?
When it comes to receiving funding, there are a few key elements that make an idea investment worthy. Be sure to add your insight on what makes a good business idea.
A good business idea provides a lot of value to a lot of people.
An investment-worthy business idea, at its core, has to be able to provide a lot of value to a lot of people. I say “..to a lot of people” because if there are only a hand full of people who are experiencing this problem, there isn’t a large market of potential.
Consider this lady’s idea for sticky notes; how valuable is this and how many people would actually buy it? Is this a good business idea?
- What problem does your business idea solve?
- What options currently exists that consumers can use to solve this problem? Are there any?
- Is there just a niche group of people that are having this problem? Or do all kind of people have this problem?
- Is this a problem that is solved once and that’s it? Or does your idea continually provide value to the same person?
- Do others think you have a good business idea? Or are they simply telling you that it is a good business idea?
A good business idea can be scaled.
Likewise, your business idea needs to be able to scale to a large level. If a lot of people are in need of your business idea but your business model doesn’t make it possible for you to help all of them, what good is it?
A good business idea is strategically priced.
If you have a business idea that solves a problem that a wide variety of people have, you are going to have to be strategic in pricing your product. In other words, you’ll have to be careful when considering pricing approaches to ensure that you appropriately price your product to appeal to your target market.
A good business idea is very profitable.
Determining your price should be done with your cost structure in mind. It’s not enough to simply sell a bunch of products; you need to make money from it so that you can continue to meet that demand and possibly future demands as well. A lot of people, especially new entrepreneurs, fail to see all of the costs behind their business idea.
If you can’t make a lot of money from your business idea, don’t do it.
There you go; the foundation of a good business idea. Of course, you could go a lot deeper into this subject. Businesses are unique creatures that have unique circumstances. On top of that, the people behind businesses are just as unique and have a tremendous impact on the final outcomes. A business idea may be good in one situation and not so good in another, so be sure to consider all the variables before launching your startup. You’ll be glad you did.
Would the sharks invest in your business idea?