There’s no feeling quite like being a successful entrepreneur. You have freedom, autonomy and the pride of owning and running your own business. But, how can you know if you have a successful business idea before you invest time and money into chasing it?
Having the enthusiasm and drive to start up a business is one thing, but having an idea that’s likely to succeed is another. If you can develop an idea that solves existing problems for your customers, solves them with economics and efficiency in mind, and adds something worthwhile to the market, then you’re off to a great start.
However, it’s not just about having a good idea. You need to ensure your idea is viable. If you don’t pay attention to the warning signs that your business idea might not be a good fit, you could be wasting precious resources on something that was never going to succeed from the beginning.
Fortunately, there are several potential signs to watch out for when you’re developing a new business idea. Here are ways you’ll know your business idea stinks:
I. Lack of Insight and Knowledge
A successful business starts with a good idea. It’s crucial that you have a thorough understanding of an industry and market before you dive in to create a venture in that field. No matter how enthusiastic you are about your idea, if you don’t have an in-depth knowledge of the sector, your business chances are slim.
In order to properly evaluate the feasibility of your idea, you need to understand the customer needs, how you could satisfy those needs, and how you’d stand out from the competition. Look closely at the sector you’re breaking into and ask yourself whether you have detailed knowledge of the marketplace or services that exist in it.
Further, a lack of insight into different aspects of starting a business can be a sign that your idea may need reevaluating. Consider the financial resources needed to implement the idea and the expertise required to make the business sustainable. If you don’t have the necessary skills or financial understanding, or don’t have a plan in place to acquire them, then it could be a sign that your plan isn’t thought out and may not be viable.
II. Vague Target Market
Without a clearly defined target audience, it’s impossible to determine whether or not you can offer enough of a value to capture the attention of customers.
Identifying the need you’re trying to fulfill is the foundation of any successful business plan. Once you know the need and understand who’s likely to value your proposed solution, you can tailor your efforts to target them. By performing both qualitative, such as focus groups and market research, and quantitative markets research, you can prove the value and relevance of your products or services to a specific set of buyers.
For a successful business idea, you must be able to refer to concrete data. If you can’t pinpoint who needs what you’re offering and how they’ll benefit from your offering, then it could be a sign that your concept isn’t fully realized.
III. Lack of Focus
Business ideas that require a lot of resources or a huge team may sound great, but they don’t necessarily guarantee success. If your idea has lots of components and you lack the resources or capital to manage it, then this is a big red flag. In order for your business idea to be successful, you need to focus on the particulars: the moment you start adding services or products you don’t have the ability to handle effectively, you dilute your idea and limit your chances of success.
Perhaps your idea requires lots of complex machinery or the recruitment of many staff members. Take a hard look at it and decide which components are absolutely essential and not just nice-to-haves. Think about what your goal is and determine if there are simpler and cheaper ways that you could achieve it, such as automation and offshoring.
Additionally, when starting a business you need to focus your efforts, learning to prioritize rather than spread yourself thin. You’re only one person and can only manage so much. Reduce complexity to maximize efficiency and don’t be afraid to lobby for external help or resources when you recognize it’s best for the business.
If you find yourself struggling with too many elements and not enough focus, or lack the funds or knowledge to manage them, then you might want to reassess the direction of the business.
IV. Poor Timing
Great ideas aren’t timeless. Some of the best business ideas come from entrepreneurial minds who identify a gap in the market that’s yet to be filled. They identify a problem that someone hasn’t yet solved and create a solution for this.
It could be that society is ready for something new, or that its needs have changed, either way, if you can’t improve the status quo, your great idea may be too ahead of its time or become irrelevant before you’ve had the chance to make it a success.
In order to have success with a new business idea, you need to time it correctly. You need to understand the current climate and the trends before you launch so you can adapt your product or service to fit the market’s needs. Spend some time researching the business landscape, asking yourself how current needs or opportunities could inform your future plans.
If you’ve found yourself trying to launch a seemingly great idea only to have it fizzle out, it could be a sign of poor timing. Consider whether your proposed solution is in line with the current market needs or is it out of date or irrelevant. If the latter is true, you’ll need to reassess your approach before taking further action.
V. Difficulty Generating Revenue
If you’re having difficulty generating profit, then you may need to reconsider your approach. The longer you focus on an idea that’s not generating return, the more resources you waste. Take a step back and look at your business idea objectively.
Assess the costs involved in developing and maintaining a viable business. Be honest with yourself: are you spending too much money or focusing too heavily on certain aspects (e.g. expensive marketing campaigns) or not prioritizing the right things (e.g. customer service)?
If you’re not generating enough returns to cover costs, then you won’t have a successful business. Consider if the cost to acquire customers is too high. Also look at how competitive the landscape is and whether you need to use more sophisticated lead generation tactics, or if there are competitive advantages you can offer to increase your rate of return.
If you’re struggling with profitability, then it could be a sign that your business isn’t as viable as you thought.
VI. Unsustainable Operating Model
You need to have a sustainable operating model if you’re planning to run a successful business. If you’re not able to offer financial stability to employees and vendors, if you can’t make use of proper operational processes, or if you’re not able to predict financial performance, then your operating model is incomprehensive.
To ensure profitability, your operating model must involve defining the end-to-end framework of your business idea – from how customers will find you, to how you fulfill orders and, in the process, generate revenue. Consider how and when you’re going to collect payments, when suppliers will get paid, how much staff you need to hire, how you’ll manage cash flow, and what your costs will be.
Additionally, a good operating model must focus on efficiency rather than simply output. If you’re not using the resources you have efficiently and continuously optimizing process, then your operating model isn’t helping you achieve the highest rate of profitability.
If any of these elements of an operating model are missing from your startup, then your business may fail before it has even began.
VII. Poor Quality and Services
No matter the size or sector of your business, true success relies upon one aspect: delivering great quality products or services. Quality is at the very heart of any good business idea.
Consumers can be incredibly unforgiving. If they encounter poor quality even once, they may abandon the product or service entirely. Plus, in this age of social media, poor quality products can damage your reputation and reach beyond just a one-off customer, so staying on top of quality — in everything from customer care to products — is essential to success.
It at times can be difficult to evaluate quality objectively, so ask for feedback from those who have used your products or services, such as customers, employees, investors and suppliers.
The longer it takes for the customer experience to improve, the longer it will take for businesses to gain the trust of customers. If your products or services fail to impress and you have difficulty changing things to improve the customer experience, then you might want to reconsider your business idea.
Having a great business idea doesn’t guarantee success. It’s essential that you have the insight, knowledge and expertise to make your idea a reality. If you don’t have proper research, a clear target market, an achievable focus, the right timing, a sustainable operating model and the capability to offer a quality product or service, then your business idea might end unviable.
However, don’t be discouraged when you realize that your business idea wouldn’t work the way you want it to.
