If you’re thinking about starting a small business, you’re in luck, because as recent research has shown, the market hasn’t been this lucrative in years.
According to findings from the US Small Business Administration, there are almost 29 million small-to-mid-sized companies in the country, which employ almost 57 million workers.
With so much success stories, one would naturally assume that all you need is a good idea and a few investors to start a lucrative business.
However, as some of you already know, when things look like they are too good to be true – in most situations, they actually aren’t true.
How Can You Validate your Startup Idea?
Like most inexperienced entrepreneurs, you’re probably wondering do you really have a million-dollar-idea in your head or you’re stuck with an idea that has no actual potential for return.
This dilemma stops many aspiring businessmen in their tracks before they even take the chance with their potential ventures. But if you’re a confident, positive person, you might feel the urge to drop everything you have planned and jump on your idea right away.
First, however, you have to do is ask a couple of specific questions and do some research. But where should you start? Luckily, Marcus Lemonis from the CNBC show The Profit in a recent Time article compiled a short check-list of questions every would-be entrepreneur should ask himself before starting a new business:
- Would you personally buy the product you’re thinking about selling?
- Do you have enough industry connections to make this business a reality?
- What your close friends and family members think of your new idea?
- Do you have enough money to invest in your business idea?
A Great Idea Doesn’t Equal Instant Success
So you’ve decided that your idea is great after all and that you have enough potential clients to get things going… Unfortunately, you’ll still have to re-asses a few things…
While you may have enough resources to get your business off the ground but that still doesn’t mean your business will take off instantly or that it won’t crumble after a few years.
In order to illustrate our point clearly, here are a couple of brilliant startups that failed just after a couple of years, despite their originality:
At the turn of millennia, Webvan was possibly the first company that tried to make business out of selling groceries on the Internet. Back then the idea seem fresh and ingenious – Americans simply love getting things – including food – delivered at their front door.
The company’s CEO believed that by 2004, 35% of US consumers will order their groceries online, which is why he opened up a number of warehouses, bought tens of expensive PCs for his staff and even ordered a fleet of trucks. The problem was, those customers he expected simply didn’t come, and the company declared bankruptcy in 2001.
Founded 15 years ago, Pay-By-Touch did exactly what its name suggests – it enabled consumers to pay for their goods with a simple swipe of their index finger. At the time, the biometrics technology sounded really exciting and the idea was ground-breaking to say the least.
The founders marketed it as “the future of payment” – but while the startup was able to secure more than $340 million in funding, it still managed to crumble just five years later. In 2007, the company’s CEO, John P. Rogers, who was accused of drug possession, took the company money for his own use and destroyed the once promising startup.
This is actually the first startup that came up with the idea to combine the World Wide Web and television. WebTV came as a VCR-sized box, which promised to bring fast, reliable Internet to America’s living rooms without the use of a computer.
The main problem with WebTV was actually the price – it cost $425 – and the technology wasn’t advanced enough to encourage consumers to pay more than four hundred dollars only to check their email on a television set. The idea was simply too ahead of its time, unfortunately.
Does Originality Really Matter?
You have to admit, the business world has been quite interesting for the last couple of years, because the Internet has provided you with all the resources you need to succeed.
For instance, if you want to market your company properly, sites like Moz and Kissmetrics can help you learn everything you need to know about SEO, PPC, etc. Moreover, ecommerce platforms like Shopify can help you start an online retail business in a matter of hours.
On the other hand, with so many resources comes a lot of competition. In reality, someone has probably come up with a similar business idea to yours and is probably working on it as we speak. But in the end, as we’ve seen from examples above, it’s all about the execution.
So while you should always try to remain passionate about your ideas, your still can’t let yourself be too optimistic about one either. So don’t get ahead of yourself before validating demand.
Most biases stem from being overconfident about your biasness ideas, but you have to be careful of the price of overconfidence.
Because you could dedicate years and years of blood, sweat and tears to an idea, spend millions of dollars trying to get it off the ground only to realize that you’ve created something that a vast majority of people doesn’t want.
The key is to always assume that your idea might not be the right one and looking at it as objectively as you as can with as little bias as possible.