Have you ever had one of those epiphany moments? The kind of moment that a light bulb should appear above your head like they do in the cartoons. You are so excited about your new idea that you completely abandon what’s currently on your agenda. After all, it’s so much fun to explore the possibilities of a brand new idea.
One of the reasons you love this idea is because you see dollar signs everywhere. You are positive that you can make money with your idea. Then, you enthusiastically share your idea with a friend only to be told, “that would never work.” Now, you are beginning to doubt whether your idea can even make money.
I’m afraid that same scenario happens to more of us than we care to admit. The real question is: how can we get away from emotions and get back to facts. At the end of the day, the facts are all that really matter.
How Do I Know If I Can Make Money with My Idea?
Let’s look at four filtering questions we can use to determine if our idea can be profitable.
1. Are other people already making money with your idea?
Most of us want to be a maverick. We want to be the entrepreneur who is the first to bring something into a market. The problem is most maverick ideas fail. The ones who do succeed had investors backing their idea for months and years in an effort to create a demand for their product or service.
You and I don’t have that type of leverage. It’s far better for us to pursue an idea in an already emerging market, a market that has already proven to make money. Contrary to popular belief, we want to find that our competition is doing well. A competition with a sustainable revenue model is proof that our idea can also be profitable.
2. Has it proven to be a consistent revenue earner for more than five years?
We also want to be sure that we are not pursuing a flash-in-the-pan business. We don’t want to put all of our energy and effort into fool’s gold. You don’t want to serve a market that is here today and gone tomorrow. Instead, we want to serve a market that has a steady demand for five years or more.
Again, we want to avoid getting too far out in front of a market. A classic example of a fad business can be found in the diet and weight loss niche. There is no shortage of crazy fad diets. A quick Google search will return fad diets like the Baby Food Diet, The Five-Bites Diet, and yes, even the Cotton Ball Diet.
This is why new ideas are so deceptive. We want to stand out from the competition. But in order to stand out, we think we must be new, cutting-edge, or extreme. You are better off sticking with a proven market. The key is in finding the “sweet spot.”
3. Is there too much competition?
In order to find the sweet spot, we need to find a market where the competition is not too big or too small. Serving a market that is too big is similar to being a small fish in the big ocean. There is a lot of dangerous sea life that you must battle daily. It’s hard to stand out from the competition simply because it is just too loud. Your only hope is to try and scream louder, which never works.
4. Is there too little competition?
Like we’ve mentioned earlier, you don’t want to be in a market with little or no competition either. If no one is making money with your idea that’s a bad sign, not a good one. The last thing we want to do is to try to sail our boat on a dry river bed.
The key is to become a big fish in a small pond: a nice balance between competition and opportunity. My first blog was a career coaching blog for accounting & finance professionals. One of the reasons I believe it was successful is because it met the sweet spot. There were fewer accounting career coaches, yet I could still find direct competition that was having solid success.
Let the four questions above be your guide as you move forward with starting a business. Relying on emotions alone can be a tricky proposition. These four questions will bring back facts and reasoning to your decision-making process.